Zijin Mining aims to complete one or two acquisitions this year and warned that the unit production cost at its mainstay gold mine will continue to rise owing to the deteriorating grade of ore. Fujian province-based Zijin, the mainland's largest gold producer, sees acquisition opportunities arising as stock market valuations of firms in the industry remain depressed. "Many gold miners' shares have tumbled more than 50 per cent in the past two years although the gold price has not changed much," said Zijin chairman Chen Jinghe. "As long as prices are reasonable, we will strive to complete one or two acquisitions." The London spot gold price has risen 13.3 per cent over the past two years to about US$1,600 an ounce. Zijin's shares tumbled 39 per cent over the past two years, compared with a 35 per cent fall at China Gold International Resources and 41 per cent at Zhaojin Mining Industry. Chen said Zijin's shares are "undervalued" and the board would ask shareholders to vote on a proposal to allow the firm to buy back not more than 10 per cent of its issued shares. Zijin yesterday posted an 8.8 per cent drop in net profit to 5.21 billion yuan (HK$6.44 billion) for last year as falling ore grades eroded profit margins while sales, administration and finance expenses rose. Revenue jumped 21.7 per cent, mainly on higher output of refined copper. Although revenue from mine-produced gold grew 19 per cent on the back of a 15.5 per cent rise in sales to 33.16 tonnes and a 3 per cent rise in average selling price, gross profit margin slid to 63 per cent from 72.8 per cent. This was due to a 39.7 per cent jump in production costs to 120.8 yuan per gram. Chen said the ore grade at Zijinshan mine, the firm's largest, is expected to drop gradually from 0.59 gram per tonne when it was first mined to reach the entire mine's average level of 0.4 gram per tonne. He expected ore degradation to continue this year but said most of the drop would have been seen by the beginning of 2014. Environmental protection costs would also continue to rise this year, he said. Zijin plans to raise mine-produced gold by 2.9 per cent to 33 tonnes this year, and mine-produced copper output by 9.9 per cent to 115,000 tonnes.