Zijin has golden year despite pollution woes

PUBLISHED : Friday, 01 April, 2011, 12:00am
UPDATED : Friday, 01 April, 2011, 12:00am


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Gold miner Zijin Mining Group, which was embroiled in a major pollution incident last year, says its net profit rose 36 per cent, thanks to higher prices for the precious metal.

The country's largest gold producer by output, which also mines copper, zinc and iron, expects its gold output to reach 29.76 tonnes this year, an increase of 2 per cent from 29.18 tonnes in 2010 but lower than the 30.65 tonnes in 2009. The production target set for copper is 87,800 tonnes, 2.8 per cent lower than last year's 90,287 tonnes.

The decrease in copper output is due to its Zijinshan mine's failure to resume normal production after a pollution spill. Gold output from that mine would also decrease 5 per cent this year from 17 tonnes to 16 tonnes, according to vice-chairman Lan Fusheng.

The production of copper at Zijinshan mine was stopped after the incident last July when the miner was found dumping toxic waste into Fujian's Ting River, killing a large number of fish. Zijin has paid out 10 million yuan (HK$11.85 million) as compensation and according to a verdict of a Fujian court in January, it still needs to pay another 20 million yuan in fines.

It was also deprived of its 'new hi-tech enterprise' designation and would not be able to apply again in five years, according to government regulations. The consequence is Zijin has to pay a higher tax rate of 25 per cent, rather than the 15 per cent rate enjoyed by new hi-tech enterprises.

Lam said Zijin had been paying tax at the higher rate since the latter half of last year.

However, helped by a bullish gold price, Zijin reported a net profit of 4.83 billion yuan in 2010, compared with 3.54 billion yuan the year before.

Lan forecast that the gold price would stay stable and high in 2011, helped by market liquidity, and instability in the Middle East. But he said the margin might not be as strong as last year. 'It will be pretty good if the price reaches US$1,500 per ounce at the end of the year.'

Last year, Zijin bought US$200 million of transferable bonds of Glencore International, the largest commodities trading company in the world. Lan said Zijin would convert the bonds into shares if the Switzerland-based company was listed in Hong Kong and London. 'We will convert all the bonds. What we are looking for is a long-term partnership [with Glencore],' he said.

Lan said the company would keep acquiring gold, copper and silver mines in Southeast Asia this year to increase future output. 'In respect of acquisitions, capital expenditure will be between 3 billion and 4 billion yuan,' Lan said.

The company would spend 5.4 billion yuan on construction and exploration this year and Lan said Zijin would issue bonds in Hong Kong to fund the expenditure.

The company said refined zinc production was expected to fall to 200,000 tonnes in 2011 from last year's 223,822 tonnes.

Revenue of Zijin rose 36 per cent to 28.54 billion yuan last year. The board declared a final dividend of 10 fen a share.