Chinese firm Zijin Mining Group buys US$710m gold and copper assets

Mainland mining group plans 10 billion yuan placement to finance deals with Canadian firms

PUBLISHED : Wednesday, 27 May, 2015, 12:33am
UPDATED : Wednesday, 27 May, 2015, 12:33am

Zijin Mining Group will buy US$710 million worth of gold and copper mining assets from two Canadian companies in the Democratic Republic of Congo and Papua New Guinea with funds raised through a private placement in the Shanghai stock market.

Zijin told the Shanghai and Hong Kong stock exchanges on Tuesday it would buy a 49.5 per cent stake in the Kamoa copper project in the Democratic Republic of Congo from Ivanhoe Mines for US$412 million.

Zijin already owns 9.9 per cent of Ivanhoe, which recorded a net loss of US$52.9 million last year following a net loss of US$80.6 million in 2013.

Fujian-based Zijin will also pay Barrick Gold Corp US$298 million for a 49.5 per cent interest in the Porgera gold mine in Papua New Guinea.

The two companies have also entered into a strategic agreement to collaborate on future projects.

"We are excited to leverage our competitive strengths together, to start with at Porgera, while exploring additional joint opportunities for the future," Zijin chairman Chen Jinghe said in a statement.

"Substantial synergies and value may be realised by bringing to Barrick the expertise and relationships that Zijin offers, including low-cost capital from Chinese institutions, leading Chinese engineering and construction skills, and Chinese machinery," Toronto-based Barrick said.

To fund the acquisitions, Zijin would issue up to 2.4 billion new shares in a private placement on the Shanghai stock market, raising up to 10 billion yuan (HK$12.5 billion), the company said.

The proceeds will also finance the construction of Zijin's two existing copper mines, as well as replenish working capital.

The deals come on the heels of Beijing's unveiling of a 100 billion yuan gold fund in support of Chinese firms' overseas investments in the precious metal in countries along the "Silk Road".

China is the world's largest gold producer, accounting for 14 per cent of global production, according to the World Gold Council.

About 21 per cent of output comes from Africa, with Central Asia and eastern Europe contributing 5 per cent.

The three regions are encompassed in Beijing's Silk Road Economic Belt and Maritime Silk Road strategy.

China also overtook India in 2013 as the world's top consumer of the metal. The World Gold Council predicts that demand from China's private sector will increase 20 per cent to at least 1,350 tonnes per year from the current level of 1,132 tonnes by 2017.

Bucking the industry trend as a result of stagnant gold prices, Zijin clocked up 2.3 billion yuan in net profit last year, and netted 415 million yuan in the first quarter of this year.