Zhaojin Mining in talks to acquire gold assets
Eric Ng in Beijing
Zhaojin Mining Industry, the second-largest Hong Kong-listed mainland gold miner by reserves, is in talks to acquire gold mines or stakes in Australia and Canada in an effort to attain its goal of making the world's top 10 producers in two to three years.
The listed subsidiary of Shandong-based Shandong Zhaojin Group is conducting due diligence on companies and mines in resource-rich nations, chairman Lu Dongshang said in an interview.
'We have several target companies and several target mines but we will consider only projects or companies with more than 20 tonnes of proven reserves,' he said.
As of the end of June, it had 132.13 tonnes in gold reserves and aims to raise that to 160 tonnes by year-end.
The mainland may overtake the United States as the world's second-largest gold producer this year, according to the China Gold Association. With output of 240 tonnes last year, the country ranked fourth after South Africa, the US and Australia.
Mr Lu said Zhaojin plans to raise output by 15 per cent next year. In this year's first half, output grew 26.11 per cent to 9.36 tonnes from last year, of which 4.59 tonnes were produced by the company's own mines and the rest from smelting for other gold miners.
The company acquired three small mining operations from its parent in July, which added 8 per cent to its output and 6 per cent to reserves, according to a CLSA report.
It has since diversified from its home market, buying three exploration operations in the Xinjiang autonomous region and Gansu province and is scouring for projects in the Inner Mongolia Autonomous Region, as well as the provinces of Shanxi and Hebei.
As the H-share company is close to its Hong Kong listing anniversary of December 8, Mr Lu said it is studying the feasibility of issuing A shares upon passing that threshold. Rival Zijin Mining has plans to issue one billion A shares.
Mr Lu expects gold to remain high, despite a correction in recent days to just over US$800 an ounce, after the metal neared a 28-year high of US$845.84 on November 7.
'With a depreciating US dollar, geopolitical instability and strong demand from investment and industrial sources, gold prices will remain high,' he said.
Zhaojin Mining kept more inventory than in the first half to take advantage of anticipated firmer prices in the second half. It had a stockpile equivalent to 20 days' output at the end of June.
Mr Lu said the company had sold down some of the inventory since July but did not give any figures.
The company's share price eased 5.9 per cent to HK$34.80 yesterday.