With China's obsolete, unsafe and environmentally unstable mines in desperate need of modernization, Ontario's mining services companies should be lining up to do business with the Chinese.

Not so, says Dick DeStefano, executive director of the Sudbury Area Mining Supply and Service Association (SAMSSA).

Instead, Ontario's mining services companies face a dilemma.

They have the technology China needs to fix its outdated mines, but gaining access to the market is cumbersome and slow. And some Ontario companies fear the Chinese will take their technology and leave them out in the cold.

Dick DeStefano

"The Chinese market is immeasurable," DeStefano said in an interview. "We hear there are somewhere between 10,000 and 100,000 mines in China. You're dealing with the unknown. The potential for business seems vast."

But he added: "There is a fear, an apprehension that once we sell to the Chinese, how long before they copy what we do? Some businesses are asking: 'How much do we give away, when five years later they're doing what we did. We're not going to give up anything that can be duplicated.' " SAMSSA was formed last year to help northern Ontario mining services and product companies tap into the expanding global market. There are about 750 mining services companies in the Sudbury-North Bay region that serve the domestic mining operations of such companies as Inco Ltd., Falconbridge Ltd. and Noranda Inc., DeStefano said.

Since 2002, China's economy has grown by about nine per cent per year, pushing its mining sector beyond its production capacity. The outdated Chinese mining sector cannot keep up with the domestic demand for coal, minerals and metals.

As a result, China has gone from a net exporter of natural resources to a net importer. The Chinese are now scouring the world for natural resources and the technology needed to increase mine productivity, improve mine safety and reduce environmental hazards.

The bid by Chinese government-owned China Minmetals Corp. last September to buy Noranda, Canada's largest mining company, set off a storm of protest about China buying up Canada's resources and technology.

Cal Hayes

"There's a concern they're not really buying Noranda resources, but buying Noranda's patents," DeStefano said.

In November, Noranda announced it would not extend the negotiating period with MinMetals and that it expected the transaction to be completed or terminated within the next few months.

DeStefano said there isn't the same concern among his members about doing business in other mining countries, including Argentina, Peru, Chile and Mexico.

Business dealings with the Chinese involve government agencies since the government owns the natural resources.

"When you're dealing with a private company, they're usually fairly silent about plans and operations," DeStefano said. "With the Chinese government involved, people are concerned about where the information goes."

Jon Baird, managing director of the Canadian Association of Mining Equipment and Services for Export, said these concerns are understandable because of the restrictions on foreign companies wanting to develop China's natural resources.

"There is a fundamental unfairness" when it comes to exploitation and acquisition of natural resources, he said. Chinese companies can buy foreign companies such as Noranda, but foreign companies cannot buy Chinese companies.

"But China is changing. China is now part of the World Trade Organization," Baird said. Mining service companies are not subject to ownership restrictions.

"These are big markets already and they are going to get bigger and open more," he said. "Canadians should have their eye on them."

Some Ontario companies have not been held back by the cumbersome Chinese bureaucracy or by concerns about losing their technology.

"The opportunities are so great in China that if there were two of me, we would have a plant there," said Cal Hayes, vice-president of sales and marketing for Sudbury-based Elasto Valve Rubber Products.

Although he won't reveal his company's China sales, "business in China has meant we have added four to five new employees each year since we started doing business in China.”

Elasto Valve has been selling its products to Chinese mines and water-treatment plants since 2002.

Hayes is pragmatic about the Chinese copying Canadian technology. "I firmly believe that is going to happen. I don't think you or anyone can stop that. Right now, let's make as much profit and as many sales as we can until their technology catches up to ours.

"The Chinese despise the fact that they are considered a Third-World country," Hayes said. "They don't want that stigma. That's why they wanted the (2008) Olympics. This applies to everything, including mining."

Elasto Valve's formula for accessing the China market isn't complicated, he said. "You work through a local person well connected to the government institutions. It takes about six months to build a relation with the Chinese. It's not the way we do business. But don't try to reinvent how to peddle a bike. For years and years, they have been doing things a certain way. You're not going to change it."

Mine Radio Systems Inc., based in Stouffville, has been selling underground communications systems to Chinese mining companies since the late 1990s.

Paul Cote, vice-president of finance, said the barriers to selling in China, especially expensive communication systems, are formidable.

"We're not selling McDonald's to every single Chinese person, our market is much smaller. It's very difficult to make a sale because of changing government policies. But we're selling a few new systems every year. And we'll do better next year," Cote said. He added that Chinese sales represent less than one per cent of his company's worldwide sales.

Like Elasto Valve's Hayes, Cote said his company doesn't spend time worrying about the Chinese copying his company's technology. "That will happen. It is part of life.

"Our competition comes from all over the world. They're just behind the door all the time. As soon as we develop the product, the competition is in your backyard. They let you open the market and then they move into the market because you were successful," Cote said.

(Charles Wyatt can be reached at wyatt@businessedge.ca)