China’s Zhaojin Mining investing in technology to get ‘smart’ in search for gold

The company will spend US$19 million to automate some mines as labour costs rise

PUBLISHED : Tuesday, 20 March, 2018, 7:00am
UPDATED : Tuesday, 20 March, 2018, 9:36pm

Zhaojin Mining Industry, one of China’s largest gold producers, plans to spend 120 million yuan (US$18.9 million) this year on technology to enable “smart and automated” operations at some of its mines, as part of a long-term strategy to counter rising labour costs.

The Hong Kong-listed company, based in the eastern province of Shandong, aims to make a return on the investment in equipment and software in five years, chairman Weng Zhanbin said in an interview.

“We have set aside a separate budget for information technology upgrades and innovation for the first time this year, with the aim of raising the quality of our entire production processes,” he said. “We are tackling everything from mining methods to ore smelting technology and the implementation of workerless smart mining.” 

“Mechanisation, automation, digitalisation and smart operations are four pillars of our strategy.”  

Zhaojin’s cash production costs, in which labour is a major component, rose 5.6 per cent last year to US$397.44 an ounce, after surging 5.9 per cent in 2016. Total costs, which also include materials, fuel and fixed costs such as plant and equipment depreciation, finance and administration, grew just 1.7 per cent last year and 2.5 per cent in 2016.

Asked if the strategy would result in staff cuts, Weng said: “Our plan is to maintain our staff numbers but increase output, partly by raising our efficiency through 24-hour operations.”

He added that big data technology would also be adopted through the collection of operating data to help management make better decisions.

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The company posted an 82.3 per cent jump in net profit to 643.9 million yuan for last year over 2016, thanks mainly to lower income tax expenses after some of its subsidiaries were classed as technology enterprises, granting them favourable tax treatment. Lower administrative, finance and distribution costs also helped. Pre-tax profit rose 11.1 per cent to 888.2 million yuan.

To help sustain growth, Weng said Zhaojin would step up efforts to find suitable acquisitions overseas, and had set a goal for overseas gold output and resources to make up roughly half its total within a decade.

It is zeroing in on potential targets in Canada and Australia where the “stable and mature” regulatory environment was attractive, as well as in South America where the resources potential was good, he added.

Zhaojin made its first overseas foray in 2016 when it bought controlling stakes in two exploration projects in Ecuador. Additional work was required before their commercial exploitation value could be ascertained, Weng said.

It has set aside 500 million yuan for mine acquisitions and exploration projects this year.

Meanwhile, Weng said China’s gold output – the world’s largest for 11 consecutive years – was likely to stabilise this year after falling for the first time in 18 years as the government moved to shut inefficient mines and those that caused environmental degradation.

“The impact from government policies on environmental protection and the elimination of inefficient mining capacity was the most severe last year as it was the first year of implementation,” he said. “This year we should be entering a stabilisation stage.”   

Zhaojin itself is targeting self-mined output of 620,000 ounces this year – five per cent lower than last year when output fell 0.4 per cent from 2016 – as it cuts output at some projects that encountered ores with lower gold content.