Zijin budgets 5b yuan for foreign acquisitions

Zijin Mining Group, China's largest gold producer by output, whose war chest has been bolstered by a recent bond issue, has budgeted 5 billion yuan (HK$6.06 billion) to acquire overseas assets.

The privately owned firm raised US$480 million last month from the issue of bonds backed by a standby letter of credit from Bank of China.

With the state bank as its guarantor, Zijin pays only 4.25 per cent interest on the bond, instead of around 10 per cent that mainland private firms typically pay when the credibility of their balance sheets are under scrutiny after several accounting scandals.

Speaking after Zijin unveiled a net profit of 3.15 billion yuan for this year's first-half, chief financial officer Lin Hongying said it planned to spend 5 billion to 6 billion yuan on new projects this year. It also budgeted 5 billion yuan for overseas acquisitions - with Central Asia and Australia as prime targets, he said.

The fund-raising comes as the miner faces declining output after a toxic-waste-water spill at its mainstay Zijinshan mine in its home province of Fujian.

Chairman Chen Jinghe said Zijin prefers to expand in nations close to China because it reduces the distance ore needs transporting. It has projects in Tajikistan and the Russian Republic of Tuva in Central Asia.

In an announcement on the bond issue, Zijin said the cash raised would help buy copper concentrate for a new smelter, and pay for overseas acquisitions. Chen declined to say how the proceeds will be split, but plans were subject to market conditions.

Zijin's first-half profit was 8 per cent higher than analysts' consensus forecasts and its share price rose 6.6 per cent to HK$3.71. But the firm's gold-mining and -smelting operation, which contributed two-thirds of its profit, saw gold output fall 8.1 per cent in the first half to 33.73 tonnes, and copper production dropped 4.8 per cent to 44,956 tonnes, due to the suspension of some facilities at Zijinshan for modifications after the pollution incident.

2,000

The amount of fish, in tonnes, poisoned by last year's leak of 9,000 cubic metres of waste water from Zijin's Zijinshan mine