Zijin to spend US$1.6 billion/y on deals, expansions

Zijin Mining Group Co, China’s biggest gold producer by market value, aims to spend as much as Yu10 billion (US$1.6 billion) a year on acquisitions and expanding mines as global growth concerns drive down valuations.

“The prices of mining assets have returned to reasonable levels,” Chen Jinghe, Zijin’s chairman, said in an interview at a conference in Tianjin. The company will target gold, copper and other metals that are in short supply in China, he said.

There may be an acceleration of mergers and acquisitions in the gold mining industry, BlackRock Inc, which manages US$36 billion in natural resources fund, said last month. The Bloomberg World Mining Index has dropped about 16% this half as Europe’s debt crisis drags on global recovery.

“The 2008 crisis passed away very quickly as governments imposed stimulus plans to save the market,” Chen said yesterday. ‘Now, the bullets have been used up.’’

Zijin’s shares gained almost 1% to HK$3.58, its highest since Sept 1, at the close in Hong Kong trading. The gold producer has fallen 26% this year, outpacing the 15% drop on the benchmark Hang Seng Index. Gold has climbed 25% this year, heading for an 11th consecutive annual advance.

The company aims to spend between Yu5 billion and Yu10 billion a year on acquisitions and expansion to sustain “normal growth,” Chen said.

Overseas investments face “hurdles” in getting approval from the Chinese government because it “may fear deals would lose money,” Chen later told reporters. The government should ease control and support companies seeking deals, he said.

Zijin’s two overseas acquisition attempts were thwarted last year after it spilled acid-laced waste into a river in Fujian province. It cancelled its plan to buy Australia’s Indophil Resources NL because of delays in gaining Chinese approval and copper producer Platmin Congo after the Congo government objected.

The company in September spent US$95 million to buy 17% of Australian copper and gold miner Norton Gold Fields and a 60% stake in Altynken Limited Liability Co, a Kazakhstan-based company which has access to a gold mine in Kyrgyzstan.

Shandong Gold Group Co, parent of China’s second-biggest gold producer by value, is looking at investing in gold, iron ore and others metal resources overseas to help ease a domestic shortage of raw materials, Chairman Wang Jianhua said yesterday in an interview in Tianjin.

The company is also seeking copper, nickel, zinc and lead assets, he said, without giving details, though has yet to start talks on iron-ore investments. It’s also looking to trade its shares on the Hong Kong Stock Exchange, he said, without elaborating.

Nov 7 (Bloomberg)