Zhaojin Mining hunts for overseas bargains as valuations fall 30pc

Zhaojin Mining Industry is in talks over potential overseas acquisitions as lower gold prices have brought down the value of international resources by more than 30 per cent this year, making them cheaper than domestic ones, according to its chief.

The company was in talks to buy both exploration and producing assets in North America and Australia, chairman Lu Dongshang said on the sidelines of the China Mining conference.

Lu noted some overseas-listed gold miners' valuations have fallen more than 70 per cent from their peaks to "severely undervalued" levels.

"The domestic market has a lower level of understanding of how markets work," he said, explaining why overseas assets are now more attractive.

Lu said this did not mean Zhaojin would give up looking for domestic acquisition opportunities but potential asset sellers required more convincing to let go of their projects.

He said Zhaojin, a unit of one of the nation's largest gold miners Shandong Zhaojin Group, was interested in domestic projects with at least 20 tonnes of reserves and overseas ones with over 50 tonnes. For underground mines, it would prefer the domestic reserves contain more than 2gm of gold per tonne of rocks, while the hurdle for overseas reserves was 5gm.

The more stringent requirements for overseas targets reflect higher mining and environmental protection compliance costs, resident resettlement costs, and political and regulatory risks overseas.