Zijin Mining : Fujian Daily: "Go Global, Zijin Is Creating Its Overseas Legend"

22 August 2015

On August 20th, Fujian Daily reported a front-page headline "Go Global, Zijin Is Creating Its Overseas Legend", covering a comprehensive story about Zjin's overseas development in recent years.

The article reads, Zijin Mining Group Ltd. released an announcement on late August 6th, saying its wholly-owned subsidiary Norton Gold Fields Ltd. will offer about RMB 205 million to take over all the issued shares of Phoenix Gold which Zijin does not own yet.

So far Zijin has investments in 12 countries, and this acquisition will further strengthen its position as a Chinese enterprise possessing largest amount of gold and nonferrous metals resources abroad.

Mr. Chen Jinghe, Chairman of Zijin, believes that "Mineral resources are key to industry's long-term development and enterprise's competence. Due to an increase in labor cost and decrease in resources, costs in mining industry are getting higher. In order to keep its core competence and make a world-leading mining enterprise, "Go Global" seems to be an inevitable option for Zijin."

Zijin started as a state-owned mining enterprise, getting more and more mature after years of development. Especially after being listed onShanghai Stock Exchange in 2003 and Hong Kong Stock Exchange in 2008, Zijin gained substantial cash flows. But in the meantime, the company's core mine, Zijinshan Gold and Copper Mine, has to face the issue of resource decline. If Zijin only sticks with Zijinshan, which really had abundant resources at that time, decades later, there would be no mineral resources left to be mined.

Mr Chen said, "No matter how well-developed and strong Zijin is in domestic market, it is still a partial success. Only if ZIjin can be a viable player in international market, it would be a real success. So after we had sufficient cash flows, the first thing came into my mind is Zijin needs to 'Go Global'." In Chen Jinghe's perspective, mining industry is a typical resource- oriented industry, and mineral resources are the core assets. Along with the development and exploitation, the company will have to deal with resource exhaustion situation. Hence, mining enterprises have to enrich their reserves and resources, laying foundation for their sustainable development.

Zijin's internationalization strategy began in 2005. With specialized geological exploration team and professional judgment and decision-making ability, Zijin made some achievements with its overseas strategy.

As of May, 2015, Zijin's overseas investment totaled RMB 13.45 billion (about US$2.2 billion), involving some major mineral resources as gold, platinum, copper and zinc. In accordance with the equity method, Zijin has indicated resources include 823 tonnes (or 26.5Moz) of gold, 473 tonnes of silver, and 16.9 million tonnes of copper, also 0.91 million tonnes of zinc. The investment projects spread over 12 countries, covering the ancient Silk Road: Tajikistan, Kyrgyzstan and Russian Republic of Tuva; and the Maritime Silk Road: South Africa, DR Congo, Australia, Papua New Guinea and Peru.

"In a booming market, some companies take big projects at all costs, but they might get stuck when the market changes. Our 'Go Global' strategy is deemed as a low cost expansion, which will become a competitive advantage for Zijin's future development." Mr. Chen added.

In August of 2014, some mining companies offered 7 billion dollars to take over a copper mine in Peru which had 17.4 million tonnes of copper at a grade of 0.7%, and had already been in commercial production. However, in 2015, Zijin acquired 49.5% shares of Kamoa Copper Mine in DR Congo with RMB 2.5 billion (about US$412 million). Kamoa has about 24 million tonnes of copper resources at a grade of 2.67%. Given the larger amount of copper resources, the higher grade and lower purchase price, Zijin's investment is obviously more profitable, even the project has not started yet.

For mining enterprise, possessing sufficient resources is the first step of "Go Global". But how can these projects bring benefits in return? To this end, Zijin customized management plan and different strategy for each project according to its resources condition and its actual circumstances of the country, aiming to bring benefits as soon as possible.

Zeravshan, a joint-venture set up in 2007 in Tajikistan by Zijin and the Republic of Tajikistan, has paid more than RMB 450 million taxes. It is awarded as major taxpayer in town, where taxes has become the main source of local fiscal revenue.

Norton Gold Fields Ltd., wholly-owned by Zijin in Australia, has improved its situations after Zijin's acquisition, reducing its production cost from AUD1239 per ounce in 2012 to AUD888 per ounce by the end of 2014. After all these adjustments, Norton Gold Fields is developing healthily and rapidly.

Taldybulak Levoberezhny Gold Mine project that Zijin invested is the largest investment Chinese enterprises ever made in Kyrgyzstan. It is designed to produce 3.7 tonnes of gold annually and create an output value of USD150 million.

Also the Tuva Tashturk Polymetallic Mine that Zijin acquired in Russian Republic of Tuva, is the biggest mining and minerals processing enterprise in Siberia, recognized as the earliest and most successful Sino-Russian cooperation model on mining industry.

By the end of 2014, Zijin has over 5000 staff abroad. With bold and steady steps, Zijin, as a Chinese enterprise, is creating its own legend of "Go Global".