Mining success abroad via M&A

Zijin steps up overseas shopping for mineral resources to boost production, profit

Zijin Mining Group Co Ltd, a Fujian province-based miner of metal ores and the country's largest gold producer, has been stepping up efforts in recent years to make acquisitions overseas to meet surging demand in the global market.

Formed in 1993, Zijin Mining specializes in the exploration and development of gold, copper, zinc and other mineral resources.

Canada's Continental Gold Inc said in a statement on Dec 2 that Zijin Mining is planning to acquire all of its outstanding shares at 5.5 Canadian dollars ($4.2) per share for about 1.4 billion Canadian dollars. Continental's board has approved the deal after receiving the go-ahead from a special internal committee of independent directors.

"The all-cash offer at a significant premium to market is an excellent outcome for our shareholders," said Ari Sussman, CEO of Continental who is also on its board of directors.

This was Zijin Mining's second overseas acquisition in 2019. On Jan 1 last year, it disclosed a plan to offer additional shares to public to raise no more than 8 billion yuan ($1.15 billion), which will go toward the 9.53 billion yuan needed to acquire the outstanding shares of Canada-based miner Nevsun Resources Ltd.

By Jan 8 last year, shareholders holding 92.4 percent of Nevsun's total issued equity had accepted Zijin Mining's offer, indicating that the latter's offer was successful.

"Our successful overseas acquisitions will increase the reserves and production of copper, gold and zinc significantly. These overseas projects will help drive the group's future growth and profits," said Chen Jinghe, chairman of Zijin Mining.

According to Zijin Mining, in the first half of 2019, its output of mined copper and gold surged. Gold output alone reached 11.2 metric tons, or nearly 59 percent of the total output. Overseas gold production grew 37 percent year-on-year.

"With the acquisition of new overseas projects, the production of the company's mineral products will see significant growth, laying a solid foundation for the robust growth of the company's profits and cash flow," Chen said.

Currently, Zijin Mining owns nine mines overseas. The first one it acquired was Australia-based Norton Gold Fields Ltd.

In Aug 2012, Zijin Mining's wholly owned overseas subsidiary acquired an 89.15-percent stake in Norton Gold Fields, becoming the first Chinese enterprise to successfully buy out a major gold mine overseas. In June 2015, Zijin Mining bought out the residual stake, thus making Norton Gold Fields its 100-percent subsidiary.

In later years, its mergers and acquisitions overseas included the Taldybulak Levoberezhny gold mine in Kyrgyzstan, the Porgera gold mine in New Guinea, the Kamoa-Kakula copper mine in the Democratic Republic of Congo, and the Rio Blanco copper mine in Peru.