Zijin Mining, which just a week ago paid nearly $4 billion for gold mining assets in Laizhou, Shandong province, is on the move again.

On the evening of October 18, the company announced that it would invest 360 million US dollars (about 2.559 billion yuan) through its wholly-owned subsidiary Silver Source Group Limited. Acquire 95 per cent of Class A shares and 100 per cent of Class B shares in Rosebel Gold Mines N.V. held by IMG, which owns the Rosebel gold project in Suriname, one of the largest gold mines in operation in South America.

Since October last year, Zijin Mining has been attacking everywhere to open the "buy buy buy" mode, and the company has purchased mines and related assets at least six times in the past year, in addition to gold mines, there are a number of lithium mines and other projects. It is worth mentioning that, unlike the previous acquisition of the board of directors meeting unanimously passed, this South American acquisition of gold mining matters appeared a director to abstain from voting.

The project is one of the largest gold mines in South America

According to the announcement, Zijin Mining signed the Share Purchase Agreement with IAMGOLDCorporation(hereinafter referred to as "IMG"), a listed company in Toronto, Canada, on October 18, 2022. The company will invest 360 million US dollars (about 2.559 billion yuan, based on the central parity rate of RMB 1 US dollar to RMB 7.1086 yuan announced by China Foreign Exchange Trade System on October 18, 2022) through its wholly-owned subsidiary SilverSourceGroupLimited. To acquire 95% of Class A Shares and 100% of Class B Shares in RosebelGoldMinesN.V.(" RGM "or the" Target Company ") held by IMG.

As of December 31, 2021, RGM had total assets of $707 million, total liabilities of $368 million, net assets of $339 million, and realized sales income of $277 million and a net loss of $141 million for 2021 (due to changes in resource volume and reserve estimates and mine service plans). RGM recorded an impairment of $191 million). RGM owns the Rosebel gold project in Suriname (comprising the Rosebel and Saramacca mines).

The Rosebel gold mine is one of the largest working gold mines in South America. Since 2019, due to the under-stripping of the main mining area, the COVID-19 epidemic, heavy rain and other factors, the production of the project has decreased year by year, and the gold production of the project according to 100% equity in 2019-2021 is 265,000 ounces, 245,000 ounces and 188,000 ounces (about 8.2 tons, 7.6 tons and 5.8 tons), respectively. Production and operation have improved significantly since 2022, with actual gold production of 112,000 ounces (about 3.5 tons) in the first half of this year.

Due to a series of factors such as reduced production, increased capital expenditures such as divestitures, and rising prices of bulk raw materials, the unit cost of projects has also shown an upward trend since 2020. Total unit maintenance costs for the first half of 2020, 2021 and 2022 are $1,224 / oz, $1,859 / oz and $1,832 / oz, respectively.

It is worth noting that the total maintenance cost of $1,832 / ounce is already significantly higher than the latest international gold price, which as of press time was quoted by COMEX gold at $1,657 / ounce.

A director abstained from voting

According to the announcement, the transaction was reviewed and approved by the 15th provisional meeting of the seventh Board of Directors of the Company in 2022, and 12 directors of the company participated in the voting, 11 votes in favor, 1 vote abstention, and no negative vote.

The abstention came from Li Jian, a non-executive director, who gave the reason for "abstaining from voting on the acquisition due to overseas investment risks".

According to the data, Li Jian was born in June 1976 and graduated from Yangen University majoring in international finance. He has successively served as department manager, marketing director and deputy general manager of Longyan Sales Department of Xingye Securities Co., LTD., and general manager of Shanghang Sales Department. Since January 2013, he has been the general manager of Minxi Xinghang State-owned Assets Investment and Management Co., LTD. He is currently a non-executive director of Zijin Mining Group Co., LTD. It is worth mentioning that Minxi Xinghang State-owned Assets Investment and Management Co., Ltd. is the largest shareholder of capital mining at present.

The Company believes that the transaction consideration is based on the company's careful evaluation of the target company on the basis of due diligence, and reached in accordance with general commercial principles after full consultation by the parties involved in the transaction.

The company said that as one of the largest gold mines in South America, the company's acquisition of the project can not only increase gold resource reserves and rapidly increase gold production, but also the company believes that the project has room for improvement in production and operation, especially mining, and is expected to have a quick return on investment. The acquisition of the project is in line with the company's development strategy. However, the company also said that the project has good resource potential and operational improvement potential, but there may be high mining dilution rate resulting in lower production grade than planned and higher operating costs, which will bring uncertainty to the project profitability.

The transaction is subject to the necessary approvals, filings or consents from the relevant authorities and other customary closing conditions for transactions of this nature.

This is the mining giant in the past year at least the sixth time to buy mining related assets, mainly gold, including lithium, a total cost of more than 20 billion yuan.

A week ago on October 11, 2022, the company signed the Equity Transfer Agreement with Shandong Bowen Mining, and the company invested 3.984.5 billion yuan to acquire 30% of UBS Mining held by Bowen Mining. Ubs Mining owns 100 per cent of Ruihai Mining, which owns 100 per cent of the gold mine in the northern waters of Sanshan Island in Laizhou, Shandong province. The gold mine is the largest gold mine in China in recent years, with gold resources of 562.37 tons and an average grade of 4.2 g/ton.

On July 14, 2022, Zijin Northwest Company, a wholly-owned subsidiary of Zijin Mining, acquired 100% of the equity of Weifu Mining held by Alex through an agreement transfer, and the equity transfer price was 462 million yuan. At the same time, it invested 38.2361 million yuan to purchase the creditor's rights of Weifu Mining and Tae Mining held by Alex and other creditors. A total investment of 499 million yuan. Upon completion of the acquisition, the Company will hold 70% of the equity interest of Cognate Mining and RMB263 million of the creditor's rights to Cognate Mining, which holds 100% of the interest in the Savayalton Gold Mine in Wuqia County, Xinjiang.

On June 30, 2022, the company announced that Hunan Houdao Mining holds 100% of the mining rights of Xiangyuan Lithium polymetallic mine, and the original owner mainly mines vein minerals such as tin and tungsten. After re-evaluation, the mine is a large dolomite low-grade lithium deposit, which can be large-scale open-pit mining. The company invested 1.8 billion yuan to acquire 71.1391% shares of Houdao Mining through agreement transfer.

At the same time, the company signed the "Cooperation Development Framework Agreement" with the shareholders and actual controllers who hold the remaining 28.8609% equity of Houdao Mining, in which the two parties agreed to set up a mine development company on the basis of the original Houdao Mining, and jointly set up a new lithium smelting company. After the completion of the above transaction, the company will lead the development, construction and operation of Xiangyuan lithium polymetallic mine in Daoxian County, Hunan Province, and participate in downstream smelting companies.

On April 30, 2022, Zijin Mining signed the "Cooperation Agreement" with Dunan Holding Group and Hangzhou Branch of Zheshang Bank. The company intends to purchase four asset packages of Dunan Group (including 70% rights and interests in Tibet Alila Goco Salt Lake Lithium Mine, etc.), and the total value of the underlying assets of the transaction is 7.682 billion yuan. The 100% equity of Zhejiang Jinshi Mining held by Dun 'an Group, valued at 4.897 billion yuan, is the core asset of the acquisition. Goldstone Mining holds a 70 per cent stake in Tibet's Alilago Resources, which owns the lithium mine project in the Lagoso Salt Lake in Aligeze County, Tibet.

On October 11, 2021, the Company disclosed the "Announcement on the Cash Acquisition of New Lithium Company of Canada", in which the company invested approximately C $960 million in cash to acquire all issued and outstanding ordinary shares of New Lithium Company listed on the Growth Enterprise Board of the Toronto Stock Exchange of Canada. The core asset of the new Lithium company is the TresQuebradas(" 3Q ") Salt Lake project located in the province of Catamarca in northwest Argentina.

3Q project is located in the famous "lithium triangle" in South America, according to the latest research, has a total lithium carbonate equivalent resources of about 7.63 million tons (lithium ion concentration boundary grade 400mg/L), of which: the reserves of 1.67 million tons, accounting for 31% of the proved + controlled resources, the average lithium ion concentration of 786mg/L. The company said, "the amount of project resources, high grade, low impurities, good development conditions."

In the first half of the year, the revenue exceeded 100 billion and the net profit exceeded 10 billion

At present, Zijin Mining has not released three quarterly reports for 2022, nor has it released a performance forecast. Judging from this year's semi-annual report, its performance is good.

In the first half of 2022, the company's revenue was 132.457 billion yuan, an increase of 20.57%, and the net profit attributable to shareholders of listed companies was 12.63 billion yuan, an increase of 89.95%. Net profit after deducting non-recurring gains and losses was 12.02 billion yuan, up 96.71% year-on-year. Zijin Mining's semi-annual results maintained high growth, mainly due to the greater contribution of copper and gold mineral business.

In the first half of this year, the company's mineral copper production reached 410,000 tons, an increase of 70.5%; Mineral gold output reached 27 tons, up 22.8% year-on-year. Mineral copper revenue of 19.69 billion yuan, an increase of 55.6%; Gross profit reached 12.96 billion yuan, an increase of 56.7%. The revenue of mineral gold business reached 10.47 billion yuan, an increase of 40.0%; Gross profit was 5.34 billion yuan, an increase of 48.5%.

Huaxin Securities forecast that the company's net profit from 2022 to 2024 will be 266.61, 289.30 and 32.37 billion yuan respectively, and the earnings per share will be 1.01, 1.10 and 1.23 yuan respectively. If the current latest market value is 210.6 billion yuan (the closing market value on October 18), Its P/E ratio will be only 7.9 times, 7.28 times and 6.5 times.

Zhongtai Securities research report believes that the company enters the field of new energy and increases the reserves of new energy mineral resources. It is expected that the company will have resources of 11.93 million tons of lithium carbonate equivalent and equity resources of 10.0646 million tons of lithium carbonate equivalent. The company continues to expand its investment in the field of new energy, or will effectively resist the risk of different metal prices, or will expand the future incremental space, in order to become a "green high-tech super first-class international mining group."

After a wave of surge in 2020, the company's stock price shook for about a year from the first quarter of last year to the first quarter of this year, and continued to correction from the second quarter of this year, falling by more than 30%.

Article source: China Fund News