On the morning of June 18, Zijin Mining announced that it had raised US$2.5 billion in the Hong Kong H-share market from global investors. The issuance, which includes US$2 billion in convertible bonds and US$500 million in share placements, is Zijin’s largest equity financing since its establishment in 1993. The shares were priced at a 5% discount, while the convertible bonds were issued at a 1% coupon and a conversion premium of 28% relative to the share placement price.
Multiple records in the capital market
Launched soon after the closing of H-share trading on June 17, the issuance set records in multiple respects. Both convertible bonds and shares were oversubscribed several times, driven primarily by esteemed global long-term funds and hedge funds. This marks the largest equity financing in Zijin’s history. It is also the largest overseas convertible bond issuance among companies listed both in Shanghai and Hong Kong, as well as among mining companies in Asia Pacific. Additionally, it sets a record for the lowest discount in a new Hong Kong share placement worth over USD 50 million by a mining company since 2008.
While technology and internet companies listed in both Chinese and US capital markets often provide terms allowing for the swap between Hong Kong shares and US stocks, Zijin’s issuance in the H-share market offers relatively weak liquidity. However, the issuance was an overwhelming success, underscoring the company’s growing recognition in the global capital market.
Balancing risk control and strong growth
The refinancing boosted Zijin’s cash flow and strengthened its foundation for future growth, balancing risk management and business development. Unlike the issuance of A-share convertible bonds in the mainland, the conversion price of Hong Kong-issued convertible bonds may be set at a relatively high premium. If the bonds were converted into shares, fewer shares would be diluted. The conversion premium for the $2 billion convertible bonds Zijin issued is about 28%, with the conversion price at HK$19.84. Assuming that all bonds are converted into shares, combined with the newly placed shares worth $500 million, the potential dilution rate for existing shares is only 4%.
The successful issuance will enhance the company’s asset and liability structure and profitability. The proceeds, which will be used to replace high-interest debt denominated in US dollars, will save the company nearly RMB 1 billion annually in financial expenses.
Boosting growth drivers for the next five years
Mr. Chen Jinghe, Chairman of Zijin Mining, is pleased to note that “Zijin Mining is in a new phase of development, with high-quality development being a basic requirement”. In its new development journey, Zijin will build global competitiveness for high-quality, green and sustainable development. In this process, it will place more emphasis on organic growth, tailored systems and policies, and risk control.
In mid-May 2024, Zijin Mining released its “Five-Year Development Plan”, targeting a 50% growth in both mined copper and gold production by 2028 compared to 2023 levels. According to the plan, the company will strive to produce more than 1.5 million tonnes of copper, more than 100 tonnes of gold, and over 250,000 tonnes of lithium carbonate equivalent by 2028, taking the lead in the global metals mining industry in terms of output growth.
As one of the world’s mining companies with the best growth prospects, Zijin Mining will need to make significant capital expenditures. Given the high interest rates in the US, replacing US dollar debt through a US$2.5 billion refinancing program will substantively reduce the company’s financial expenses and optimize its asset and liability structure.
Translator: Li Yuanxing Reviser: JIAN Editor-in-Chief: Wang Jie