Recently, Zijin Mining, China's largest gold company, made a big announcement that it intends to participate in the bidding for exploration rights of the Huoshaoyun lead-zinc mine in Hetian County, Hotan Prefecture, Xinjiang through its wholly-owned subsidiary Zijin International Holdings Co., Ltd. The deposit for this auction is 400 million yuan, and the reserve price is 22.3 billion yuan. Zijin Mining admitted frankly that the Huoshaoyun lead-zinc mine has a large amount of equity and follow-up investment, which will put a lot of financial pressure on it.

According to reports, since October 2022, Zijin Mining has made frequent external moves, successively winning related rights and interests such as the gold mine in the northern waters of Sanshan Island, Laizhou City, Shandong Province, the Rosebel Gold Mine in Suriname, South America, and the Shapinggou Molybdenum Mine in Jinzhai County, Anhui Province.

The base price is 22.3 billion yuan

According to the official website of the Xinjiang Uygur Autonomous Region Department of Natural Resources, the Huoshaoyun lead-zinc mine is the largest in China and the seventh largest in the world. It was first discovered by the Eighth Geological Brigade of the Xinjiang Bureau of Geology and Mineral Resources in September 2011. The administrative division is under the jurisdiction of Hotan County.

Huoshaoyun mining area panorama

Zijin Mining said in the announcement that the entire mining area has 3 exploration rights in the first, second and third areas, with a total area of 292.19 square kilometers, and two rounds of general surveys have been completed. There are upper and lower ore-bearing layers in the mining area. The ore bodies are thick, shallowly buried, and high-grade. Most of them are hidden ore bodies, and there are occasional outcrops on the surface. Overall, the total ore volume within the scope of the three exploration rights exceeds 80 million tons, and the estimated lead and zinc metal resources are 19.23 million tons. The second area is the main mining area, with estimated lead and zinc resources of 18.81 million tons, with an average grade of zinc + lead of 27.97%, of which zinc is 23.37% and lead is 4.60%. What needs to be explained is that the three prospecting rights are sold as a whole package, and the prospecting right is valid for 5 years, and can be renewed according to law upon expiration.

The deposit for this auction is 400 million yuan, and the reserve price is 22.3 billion yuan. The winning bidder's first payment ratio is 30% of the total transfer proceeds, not less than 6.69 billion yuan, and the remaining part is paid on an annual basis within 10 years after the mining transfer. Zijin Mining said that lead-zinc ore is one of its main minerals. It now has 10.88 million tons of zinc (lead) resources and will produce 434,000 tons of zinc (lead) in 2021 (ranking fourth in the world). If it wins the bid and develops successfully, it will greatly increase its zinc (lead) resource reserves and production, and is expected to become the world's second largest zinc (lead) company, enhancing its position and voice in the global zinc (lead) industry.

However, the China Public Resources Trading Platform (Xinjiang) issued a relevant bidding announcement at the end of 2022, and put forward five requirements for the development progress and construction of the winning bidder:

The winning bidder must switch to mining within one year after obtaining the prospecting right;

Complete the exploration work in all areas within two years;

Within three years, according to the completion of green mines, the production and efficiency will be achieved, the mining scale will not be less than 2 million tons/year, and the smelting scale will be more than 600,000 tons/year;

Build a downstream deep-processing industrial chain in Hotan within five years, with an annual output value of no less than 15 billion yuan;

Employment of local people shall not be less than 50% of all employees of the enterprise.

Frequent purchase of mines in 2022

The auction has created greater financial pressure on it. According to public information, Zijin Mining is engaged in copper, gold, zinc, lithium and other metal mineral resources exploration, development, engineering design, and technology application research on a global scale, and moderately extends smelting, processing, trade and finance businesses, and has a relatively complete industrial chain. Taking the gold business as an example, in the first half of 2022, Zijin Mining produced 155.56 tons of gold, including 27.03 tons of mining gold and 128.53 tons of smelting, processing and trading gold. The sales revenue of gold business accounted for 33.73% of its revenue.

In addition to the existing mineral resources, Zijin Mining will make frequent investments in 2022. In October 2022, Zijin Mining successively issued announcements announcing that it would acquire a 30% stake in Shandong UBS Mining Development Co., Ltd. for 3.9845 billion yuan, a 95% stake in Class A shares of rosebel gold mines n.v. Class B Share Equity. Among them, UBS Mining's wholly-owned subsidiary holds 100% of the gold mine in the northern waters of Sanshan Island, Laizhou City, Shandong Province.

Chen Jinghe, Chairman of Zijin Mining

Not just gold mines, in late October 2022, Zijin Mining announced that it had obtained 84% of Anhui Jinsha Molybdenum Industry Co., Ltd. for 5.91 billion yuan through public delisting. It is worth mentioning that Jinsha Molybdenum holds the exploration rights of the Shapinggou molybdenum-polymetallic mine in Jinzhai County, Anhui Province, which is the largest molybdenum mine in Asia.

On the road of buying, buying, and buying, Zijin Mining also stated in the announcement of the proposed auction that the Huoshaoyun lead-zinc mine has a large amount of equity and follow-up investment, which will generate greater financial pressure on it. At the same time, Zijin Mining also stated that it has good operating financial indicators and net cash flow, and financial institutions have given it a comprehensive credit line of more than 200 billion yuan, which can provide the project with the funds required for bidding and construction.

Looking for opportunities to continue mergers and acquisitions in the future

Currently, Zijin Mining ranks 7th, 9th, 7th, and 9th in the world in copper, gold, zinc, and lithium resources, respectively, and ranks 6th, 9th, and 4th in the world in copper, gold, and zinc output. It is a large mining company with the fastest growing output of mine copper in the world. And Zijin Mining's ambitions don't stop there. In its 2023 New Year's speech, its chairman Chen Jinghe stated that in the next three years, he will find appropriate market opportunities and acquire large global mining companies to significantly increase its resource reserves and production capacity. Editor/He Yuting