Zijin Gold acquires control of Chinese rival for $2.6bn
The gold unit of Zijin Mining Group Co. will acquire a controlling stake in Chifeng Jilong Gold Mining Co. for 18.26-billion yuan ($2.64-billion), cementing the group’s status as China’s top miner of the precious metal.
Zijin Gold International Co. will buy existing Chifeng shares listed on the mainland, and new shares issued in Hong Kong, taking the group’s holding in the target to nearly 26%, according to statements from the companies.
Last year, Chifeng sold around 14.4 t of gold mined from five sites in China and one each in Ghana and Laos, whereas Zijin Gold’s sales were 46.6 t.
Zijin will get operational control of Chifeng, “further solidifying its position as China’s top gold miner", Bloomberg Intelligence analysts including Michelle Leung said in a note. The target company, meanwhile, will “benefit from Zijin’s expertise to boost mining efficiency,” they said.
Zijin is chasing higher gold output to capitalize on a rally that took prices to a record above $5 500 an ounce in January. Although the market has since softened, the medium to long-term trend is higher as monetary easing around the world supports bullion’s appeal as a store of value, Zijin Mining’s vice chairman, Lin Hongfu, said at an earnings briefing on Monday.
Zijin Mining has been on an acquisition spree, snatching up gold assets from Africa to Central Asia in recent months. On Friday, the miner reported a 62% increase in annual net income.
Chifeng’s shares in Hong Kong dropped as much as 26%, the most on record, to HK$31.20, close to the take-out price of HK$30.19. Zijin Gold fell as much as 5.5%, tracking a drop in international bullion prices.
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