Gold producer Zhaojin Mining Industry saw net profit surge 40 per cent last year and says it expects gold prices to continue to climb this year with developed economies maintaining their low interest rate environments. Net profit rose to 751.33 million yuan (HK$854.56 million) from 538.12 million yuan in 2008 as revenue increased 30 per cent to 2.8 billion yuan. The firm acquired 7.4 square kilometres of mining area last year, taking its total to 61.01 sq km, while newly acquired exploration area increased 90.3 sq km to 1,345 sq km. Its key mines are in Shandong, Xinjiang and Gansu. Zhaojin, the country's largest gold smelter, said its average sale price of gold last year was 221.56 yuan per gram, or US$1,009 per ounce, a 14.68 per cent rise from the year before. Chairman Lu Dongshang expects gold prices to rise this year as low interest rates look set to continue in developed economies and investors diversify from US dollar and euro-denominated holdings. However, he warned that prices could be more volatile than in 2009 and that for every 1 per cent that gold fluctuates, it affects Zhaojin's gross profit margin by about 2.04 per cent. Zhaojin's gross profit margin rose from 50.16 per cent in 2008 to 51.82 per cent last year. Taifook Securities analyst Robin Tsui said that even stripping away the effect of rising gold prices, earnings per share could see double-digit growth this year as production is likely to increase 25 per cent. He forecasts gold prices will see a correction in the second half of the year. Earnings per share grew 40.5 per cent year on year to 52 fen. Zhaojin said capital expenditure this year will reach 1.56 billion yuan, with the plan to increase gold mining resources by 38 tonnes, or 1.22 million ounces, on top of the 2009 total of 337.8 tonnes, or 10.86 million ounces. CLSA analyst Richard Leung said there are some concerns about cost control this year, in particular excavation costs relating to the Canzhuang mine in Shandong, and that 'choppy' gold prices mean the commodity presents only a short-term trading opportunity for 2010. Zhaojin declared a final dividend of 22 fen per share.