Zhaojin Mining’s global operations
Zijin News - On November 6, Zijin Mining announced that it will acquire 654,078,741 unrestricted H shares of Zhaojin Mining Industry Co., Ltd. Upon completion of the transaction, Zijin Mining will hold a 20% interest in Zhaojin Mining and become its second-largest shareholder.
The deal marks the establishment of a partnership between the two leading Chinese gold miners. The shares, held by a subsidiary of Fosun International, will be bought through Zijin Mining’s affiliate Gold Mountains (H.K.) or another wholly-owned subsidiary.
Zhaojin Mining owns 942 tonnes of JORC-compliant gold resources, of which 391 tonnes are reserves. It is the No.4 gold producer in China with an annual gold production of around 20 tonnes.
Based on a 20% equity interest in Zhaojin, Zijin Mining will add 188 tonnes of attributable gold resources following the transaction, bringing its total gold resources to approximately 3,000 tonnes.
Its attributable gold production will grow by about 4 tonnes upon completion of the deal. After the Haiyu Gold Mine commences production, Zijin Mining will see its attributable gold output increase by another 6.6 to 8.8 tonnes on a 44%-project basis.
The stakes to be acquired by Gold Mountains (H.K.) are currently held by Shanghai Yuyuan Tourist Mart Co., Ltd, the second largest shareholder of Zhaojin Mining and a subsidiary of Fosun International.
The acquisition price of HK$ 6.72 a share or approximately RMB 6.15 a share is at a 1.75% discount to HK$ 6.84 a share, Zhaojin Mining’s close on the last trading day. In total, Zijin Mining will pay HK$4.395 billion (RMB 4.063 billion) for the deal.
A 44% attributable interest in China’s largest pure gold mine
Zhaojin Mining is a leading gold producer and one of the largest gold smelting companies in China. It is also one of the few Hong Kong-listed Chinese companies that are principally engaged in the gold business.
The company has grown through a series of consolidation, exploration, mergers and acquisitions, and now owns a number of high-quality gold assets in China and abroad.
Zhaojin Mining’s flagship project is the Haiyu Gold Mine in Shandong province, the largest gold-only mine in China. The mine hosts 562 tonnes of gold resources grading 4.2 g/t on average. It has all the necessary licenses, with its mining permit granted in July 2021.
Construction of the 3.96 Mtpa project is underway and the project is scheduled for production in 2025. After it reaches its nameplate capacity, the Haiyu Gold Mine will produce approximately 15 to 20 tonnes of gold per year, which will position it as the largest gold project in China.
It is worth noting that, in addition to Zijin Mining’s previously announced acquisition of a 30% interest in the mine, the company will have a 44% attributable interest in the project following this deal. The synergy between the two companies will become stronger, which will help fast-track the construction of the Haiyu Gold Mine.
Expanded gold portfolio following partnership with a major miner
Zhaojin Mining has 25 mines in China, including 23 gold mines and 2 copper mines. It also owns three smelters that refine gold or copper. In addition to the Haiyu Gold Mine, Zhaojin Mining’s Chinese portfolio also includes the Dayingezhuang Gold Mine, the Xiadian Gold Mine and the Jinchiling Gold Mine in Shandong, the Zaozigou Gold Mine and a 2,000t/d gold smelter in Gansu.
The Dayingezhuang Gold Mine and Xiadian Gold Mine are both large gold mines with over 100 tonnes of gold resources. In particular, the Dayingezhuang Gold Mine is one of the largest single-shaft, underground mines in China, with 234 tonnes of gold resources and an annual throughput of 1.14 million tonnes.
Zhaojin Mining also owns stakes in international assets - an 80% interest in Goldking Mining Company S.A. of Ecuador, and a 9.9% interest in Sabina Gold & Silver Corp.
Zhaojin Mining is headquartered in Zhaoyuan, Shandong province, one of the largest gold production bases in China. Its projects in Zhaoyuan enjoy significant cost advantages thanks to their huge combined reserves, high grades and mature operations.
In 2021, the company’s production was affected by a brief suspension due to safety inspections. However, it managed to resume production within the year and its gold output in 2022 is expected to recover and reach 14.72 tonnes. In addition, its production capacity will grow further upon the commissioning of the Haiyu Gold Mine.
Leapfrog growth in gold business
Gold is a preferred hedge against financial risks.
The period from 2020 to 2022 is the first phase in Zijin Mining’s push to meet its 2030 strategic goals in a three-step approach. Over the past three years, Zijin has achieved better-than-expected growth in its copper and lithium segments. Its gold business has also experienced leapfrog growth.
In 2021, several gold projects of Zijin Mining were put into production, such as the Liba Gold Mine in Longnan and the Upper Zone of the Čukaru Peki Copper-Gold Mine in Serbia. The Buriticá Gold Mine completed its expansion program.
In 2022, Zijin Mining’s production capacity has increased further thanks to technical upgrading and expansion programs at the Binduli Gold Mine of Norton Gold Field in Australia, Shanxi Zijin and other operations. By the end of September 2022, Zijin Mining has produced 41 tonnes of mined gold, exceeding its gold production in 2020.
In recent years, gold assets have been undervalued. Zijin Mining seized the opportunity to acquire quality assets in China and neighboring countries. Over the past two years, it has announced several transactions, including deals to buy stakes in the Yinchang Gold Mine of Sichuan Pingwu Zhongjin Mining, a 70% interest in the Sawaya’erdun Gold Mine in Xinjiang, a 95% interest in a world-class gold mine in Suriname, a 30% interest in the Haiyu Gold Mine, and a 20% interest in Zhaojin Mining.
These deals will boost the company’s attributable gold resources, which are expected to increase by approximately 60% from the 1887 tonnes in early 2020. With such a resource base, Zijin Mining will remain among the top 10 gold miners in the world.
As newly-acquired projects gradually come online and existing operations ramp up production, Zijin is well on track to achieve its goal of producing 80 to 90 tonnes of gold in 2025.
Translator: Lin Xindi Reviser: Li Yuanxing Editor-in-Chief: Wang Jie