Zijin Mining Expands Control with Chifeng Gold Acquisition

Zijin Mining, recognized as China’s largest gold producer, has made a significant move in its expansion strategy by acquiring controlling shares in Chifeng Jilong Gold Mining for 18.26 billion yuan (approximately US$2.64 billion). This acquisition, announced in a Hong Kong stock exchange filing, follows Zijin's recent proposal to purchase Canadian Allied Gold for 28 billion yuan, indicating a robust global expansion initiative. The transaction is structured in two main tranches: Zijin will acquire 242 million A shares from Li Jinyang, the controlling shareholder of Chifeng Gold, and Zhejiang Hanfeng Venture Capital at a price of 41.36 yuan per share, which is a 1.3 percent premium over the last closing price. Additionally, Zijin will subscribe to 311 million newly issued H shares of Chifeng Gold at HK$30.19 per share. Upon completion, Zijin’s stake in Chifeng Gold will increase to 25.85 percent, granting it effective control and enabling full financial consolidation of the company. Chifeng Gold operates six gold mines and holds reserves of 583 tonnes of gold.

South China Morning PostZijin Mining responds to the acquisition of Chifeng Gold: The logic for further gold price increases remains unchanged

Following the announcement, shares of Zijin Mining experienced a decline of 4.7 percent, trading at HK$32.6, while Chifeng Gold's shares plummeted by 24 percent to HK$31.88 before the noon trading break in Hong Kong. This market reaction reflects investor concerns regarding the immediate financial implications of the acquisition amid fluctuating gold prices.

South China Morning Post

Lin Hongfu, Vice Chairman and President of Zijin Mining, provided insights into the strategic rationale behind the acquisition during a performance briefing. He noted that while gold prices may experience short-term volatility, the long-term outlook remains positive due to unresolved fundamental issues such as global governance and excessive issuance of fiat currencies. Lin emphasized that this perspective is a crucial factor in Zijin's investment and acquisition decisions. He reassured stakeholders that Zijin will not transition into a purely investment platform, affirming that core assets will remain under the company's control.

Zijin Mining responds to the acquisition of Chifeng Gold: The logic for further gold price increases remains unchangedSouth China Morning Post

Despite the strategic intentions outlined by Zijin Mining, market analysts have expressed concerns regarding the timing and financial viability of such acquisitions in a fluctuating gold market. The sharp decline in share prices for both Zijin and Chifeng Gold post-announcement indicates a level of skepticism among investors about the immediate benefits of the acquisition.

Zijin Mining responds to the acquisition of Chifeng Gold: The logic for further gold price increases remains unchangedSouth China Morning Post

• “Investors can rest assured about this.” — Lin Hongfu, Vice Chairman and President of Zijin Mining

Zijin Mining responds to the acquisition of Chifeng Gold: The logic for further gold price increases remains unchanged

This acquisition marks a pivotal moment for Zijin Mining as it seeks to solidify its position in the global gold market while navigating the complexities of market fluctuations and investor sentiment.

Zijin Mining responds to the acquisition of Chifeng Gold: The logic for further gold price increases remains unchanged