State gold miner enters US arena via HK backdoor
China National Gold Group Corp, the country's biggest producer of the metal, hopes to strike it rich in California like the prospectors of 1848.
The state-owned enterprise, which produces 20 per cent of China's gold and controls more than 30 per cent of the nation's gold reserves, has indirectly invested in gold, silver, copper and iron mines in the United States through Hong Kong-listed Jackin International Holdings.
'It's very difficult for Chinese state-owned enterprises to buy US mines - this may be due to political reasons - so we decided to go through a Hong Kong-listed company,' said Zhou Yusheng, who was appointed executive director of Jackin on January 25.
Zhou is the chairman of China Gold Group Investment and China National Gold Investment Overseas Holdings, both controlled by China National Gold Group. Jackin is a loss-making company engaged in computer printing and imaging products.
Two months ago Jackin signed conditional agreements to buy three mines in Southern California from Cui Zhanlin, an independent third party, for US$9 million in cash and HK$762.5 million in shares and convertible notes.
China National Gold Investment will also get Jackin shares and convertible notes for consultancy services on the deal.
After the completion of the sale, assuming full conversion of the notes, Cui will become Jackin's largest shareholder with a 31.23 per cent stake, while China National Gold Investment will become the second largest with a 12.8 per cent stake.
At present, Cui and China National Gold Investment do not own shares in Jackin. The acquisitions are expected to be completed this year, said Jackin executive director Alvin Yip.
Jackin will spend US$20 million prospecting the mines for gold and silver this year, while iron ore production is expected to start next year, Zhou said.
The mines in California are estimated to contain 42.1 tonnes of gold, 46.6 tonnes of silver, 35,271 tonnes of copper and 306.6 million tonnes of iron ore, according to reports by a Chinese geological institute.
'After this year's exploration, the company believes the mines will have more reserves of gold and silver than the reports,' said a Jackin spokeswoman.
Zhou said the US mines were likely to yield revenues in excess of Jackin's current business in a few years.
In the first half of last year, Jackin posted a net loss of HK$12.5 million on turnover of HK$141.57 million.
Good prospects
Cash and share deals for California mines to be finalised this year
Amount of nation's gold reserves controlled by China National Gold: 30%
