Zijin Mining Group

Zijin agrees deal to buy Australia's Norton Gold

PUBLISHED : Saturday, 02 June, 2012, 12:00am
UPDATED : Saturday, 02 June, 2012, 12:00am


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Shares in Zijin Mining Group, China's biggest gold producer by value, jumped yesterday after it unveiled an agreement to increase its stake in an Australian gold mine.

The Fujian-based mining company said on Thursday night that it had agreed to buy the shares of Norton Gold Fields it did not already own for about A$180.3 million (HK$1.36 billion).

Zijin, which currently owns 16.98 per cent of Norton, made a general offer to all shareholders of Norton at 25 cents a share, a 35 per cent premium to the 18.5 cents closing price on 29 March, the last trading day before Norton suspended trading.

Robin Tsui, mining analyst for BOC International, said: 'The offer price is very reasonable as the acquisitions on gold fields were on average at a 46 per cent premium [to the closing price] over the past two years.'

Shares in Zijin rose 2.8 per cent to HK$ 2.53 yesterday, while the Hang Seng Index dropped 0.38 per cent.

Zijin has been expanding its global investments, and last year paid a combined US$95 million for the stake in Norton and a 60 per cent holding in Altynken, a Kazakhstan-based firm which has access to a Kyrgyzstan gold mine. Buying Norton gives Zijin 1 million ounces of gold reserves at the Paddington development project in Western Australia.

Zijin said in a statement after the market closed on Thursday: 'The acquisition will help to enhance the company's expansion' overseas and increase its gold reserves, and 'will provide the company with a good platform and foundation for further global expansion'.

Norton reported A$20.5 million in comprehensive income last year, against a A$25.4 million loss a year earlier. Tsui forecast that the acquisition could push up the earning per share for Zijin by 2 per cent in 2012.

Helen Lau, an analyst at UOB Kay Hian, said the acquisition could only contribute limited earnings to Zijin and the offer price was 'a bit higher than expected'.

'The gold price will be in a range-bound trading for some time until more good news shore up the demand on gold,' Lau said.

Zijin plans to spend as much as 10 billion yuan (HK$12.22 billion) a year on acquisitions as global growth concerns drive down valuations, targeting gold, copper and other metals.

Two of Zijin's overseas acquisition attempts were thwarted in 2010 after it spilled acid-laced waste into a river in Fujian province. Zijin cancelled its plan to buy Australia's Indophil Resources because of delays in gaining Chinese approval, and that of the copper miner Platmin Congo after the Democratic Republic of Congo's government objected.


How much, in Australian dollars, that Zijin is paying for the remaining shares in Norton it does not already own