Despite the bearish state of the global mining sector, participants at a conference in Shenzhen this week said mainland and Hong Kong investors are snapping up mines around the world.
One of them is Samuel Chan Wing-sun, vice-chairman of YGM Trading, a Hong Kong-listed garment firm, who acquired 59 per cent of Crater Gold Mining about 12 months ago and was appointed Crater Gold chairman in February, John Hung, an adviser to Crater Gold, said at the Global Resource Investment Conference.
Crater Gold is an Australian-listed firm with gold mines in Papua New Guinea and a metals mine in Australia.
Stewart Cheng Kam-chiu, a nephew of Hong Kong tycoon Cheng Yu-tung, had agreed to co-underwrite an ongoing rights issue of A$2.1 million (HK$14.8 million) for Crater Gold, Hung said.
“Before Sam came in, the company suffered from a lack of funds,” he said. “At the moment, it is very difficult to raise funding in Australia because market sentiment is very soft for gold mining companies. The decline in gold prices has forced cutbacks in global gold production. We aim to buck the trend with financial backing.”
Crater Gold managing director Greg Starr said the company was not profitable, but its main gold mine in Crater Mountain, Papua New Guinea, would start production in six months.
John Gravelle, global mining leader at Big Four accounting firm of PwC, said falling commodities prices meant “investors no longer want to invest in mining shares”.
The HSBC Global Mining Index fell 33 per cent between January last year and August this year, while the gross profit margins of gold mining companies fell from 49 per cent in 2010 to 29 per cent last year, Gravelle said.
Mining companies’ revenues stopped growing last year but costs did not stop increasing, he said, so there was a dramatic drop in profits, while the world’s 40 biggest listed mining companies had combined write-downs of US$45 billion (HK$349 billion).
The poor market conditions are not deterring Bullman Minerals, a Toronto-listed mining company which is 60 per cent owned by private Hong Kong and mainland investors.
Bullman plans to buy gold mines in Guinea and neighbouring countries in West Africa to expand its gold ore resources to more than 500 tonnes from 60 tonnes at present, said Peter Yue Shi, its mainland-born chief executive. The cost of acquiring the mines would run into tens of millions of US dollars, he estimated.
China Shouguan Mining, listed on the US OTC Bulletin Board, plans to buy gold mines in Australia, North America and Southeast Asia, company chairman Zhang Feize said. Shouguan is 40 per cent owned by mainland investors, with the rest held by international investors including Hong Kong investors
Through its acquisitions, Shouguan hoped to raise its gold ore resources to 100 tonnes in five years from its current 40 tonnes, Zhang said.
“Gold is an eternal business,” he said. “We think in one or two years, gold will recover.”
Barry Dawes, head of resources at Paradigm Securities, an Australian stockbroking firm, said the mainland would import 1,200 tonnes of gold this year, while worldwide production was 2,800 tonnes.
Shenzhen Zhongjin Lingnan Nonfemet, a Shenzhen-listed company, is seeking to acquire nonferrous metal mines around the world, preferably in developed countries, senior manager Zheng Daling said.
Colt Resources, a Toronto-listed company, is seeking investors and strategic partners on the mainland, its chief executive, Nikolas Perrault, said. Colt’s other shareholders are in Europe and the United States.
Colt, which is not profitable, owns gold and tungsten mines in Portugal. Perrault said Colt’s gold mines would start production in 2015 and its tungsten mines would start production in 2016.
In July, Worldlink Resources, a Hong Kong firm, paid C$5 million (HK$36.6 million) for a 9.5 per cent stake in the company.
Another Toronto-listed company, Northcliff Resources, will spend C$579 million on a tungsten and molybdenum mining project in New Brunswick, Canada, its chief executive, Christopher Zahovskis, said. Northcliff’s shareholders include private mainland investors.
The New Brunswick project holds one of the world’s largest undeveloped tungsten reserves with 334 million tonnes of ore, Zahovskis said. The mine will probably go into production by 2017, he added.
Mainland companies would also want to invest in iron ore companies to boost production and reduce iron ore prices, Gravelle predicted. “Urbanisation in China will continue, so we have a long road to go in metals usage in China,” he said.