CHINESE companies looking for overseas mining assets could benefit from the US credit crunch and the rising yuan, while before going global, unseasoned firms still have to do more to succeed as challenges intensify.

Spurred by a commodity price boom, mergers and acquisitions in global mining industry have been active with the participation of the world's largest mining companies and sovereign wealth funds.

But in another aspect, traditional resource-rich countries such as Australia, Canada, Brazil and Russia are becoming increasingly unwilling to sell as they themselves become wealthier due to protectionism.

Chinese firms, which have the blessing from the government to feed domestic demand with overseas resources expansion, have the opportunity to accelerate their outbound paces, said Vice Commerce Minister Fu Ziying during a recent forum.

According to accountancy and financial advisory firm Deloitte, a total of 66 overseas mining M&A deals were handled by Chinese companies in 2007 involving US$4 billion. And in the first quarter of this year, 16 outbound M&As worth US$903 million were accomplished.

Fu said the subprime mortgage which has tightened liquidation in US financial market, and the appreciation of the Chinese currency, could strengthen Chinese firms' muscle in their overseas M&A efforts.

Investments made by the Chinese mainland companies abroad rose to US$19.3 billion in the first quarter this year, exceeding the total for last year, according to media reports quoting Vice Commerce Minister Chen Jian.

"This underscores the strong enthusiasm in the outbound drive - but I have to pour some cold water on it," said Ronald Chao, a corporate finance partner at Deloitte.

"Chinese companies still have to do more homework before going global to familiarize themselves with local business and regulation environment as well as other customs and manners in foreign markets," according to Chao.

Deloitte has found that up to 70 percent of the worldwide completed M&A deals in all industries prove to be unsuccessful.

For mining M&As, Chao said Chinese companies should clarify their targets and learn how to choose. "You should make it clear why and for what use you buy it or invest in it.

"For small and medium companies, mineral resources development is an extremely high risk business as it's capital intensive."

Several large state-owned companies have made progress in overseas mining acquisitions this year.

In the most recent deal, the state-owned iron ore trader Sinosteel Corp won approval late last month from Midwest Corp's board to buy out the Aussie ore prospector after sweetening its offer. During the course, Sinosteel successfully turned a hostile offer to a friendly one, and Midwest's directors have recommended shareholders accept Sinosteel's revised offer.

The new offer values Midwest at A$1.36 billion (US$1.31 billion) that could lead to the largest overseas takeover in the metals industry by a Chinese company. The takeover has won the approval of Australia's Foreign Investment Review Board.

But purchases have become more difficult.

An Australian newspaper reported last month that at least 10 Chinese companies have withdrawn foreign investment applications to buy into Australian resource companies after pressure from the Australian government.

A Sinosteel official in Beijing also said to his knowledge several other Chinese companies' applications to buy into Australia's resources sectors have been deadlocked since early this year.

"Some were asked to resubmit applications especially after Sinosteel made some progress in its Midwest bid. Then they have to wait for a longer time," said the official who declined to be named because he is not authorized to speak to media. "I think Australia is tightening."

Although Australia's resources minister Martin Ferguson has reportedly said no Chinese firms had been told to withdraw applications in mining purchases, he stressed "as China makes investments, some will be rejected, some will be changed to meet our national interest test."

Deloitte's Chao said developed nations typically have their own systems to avoid foreign capital which would hurt national interests and that's the same case for China. "One should always make it clear what is the goal. To reach that goal, it is not necessary that you must buy something."