Gold rush

Busy buying mines everywhere

Zijin Mining is in acquisition mode again. Much of its history is as a gold producer and it added another gold mine to its roster last month through the acquisition of the Rosebel mine in Suriname, with a proposed investment of $360 million.

In a busy few days it also celebrated the purchase of a 30% interest in the Shandong Ruiyin mine for Rmb3.98 billion, becoming the second-largest shareholder of the largest gold-only deposit in China.

Yet the Fujian-based firm now relies just as much on sales of copper, including a series of investments in new projects in Serbia, Tibet and the Democratic Republic of the Congo.

Zijin is following a similar path to mining majors like BHP and Rio Tinto in increasing its exposure to energy transition metals. It has actually been in expansion mode for some time, including international acquisitions that have seen its overseas copper and gold operations surpass their domestic equivalents in output and profit last year.

Back at home in China it signed another Rmb5.91 billion deal in October with Anhui Jinsha Molybdenum to acquire an 84% interest in the world’s largest molybdenum-only deposit.

The company seems well positioned for the ramp-up in demand from sectors such as electric vehicles and renewable energy generation, both of which are much more metal-intensive than their fossil fuel-based predecessors.

As part of the same strategy Zijin is investing in lithium production, including the purchase of Neo Lithium for $960 million in January, which was waved through by the Canadian government despite protests that the deal should be subject to a national security review.

It is caught up in a separate row over another lithium resource in the Democratic Republic of the Congo, although its purchase of an additional shareholding in the mine is being challenged by the Australian firm AVZ, a fellow investor.

The dispute is heading for the International Court of Arbitration, which is expected to hear the case next year.

Back in Anhui the bid for the molybdenum mine should proceed a lot more smoothly. Global supply of the metal last year was about 264,000 tonnes, while demand was 266,100 tonnes, according to CRU, a specialist in the metals and mining sector.

Higher demand is forecast from industrial customers because of molybdenum’s conductivity and resistance to corrosion. Again, the renewable energy sector looks like being a sweet spot for business, especially wind power and solar power, which requires 12 times the content in energy metals to produce the same unit of electricity as coal or gas-fired providers.

Zijin has funded much of its diversification plan from cashflows from its gold and copper operations. Analysts expect profits to pick up further after the completion of commissioning at three of its biggest copper mines, including the projects at Kamoa and Julong.

But financing requirements still sent the company to the capital markets last month, with news that it will issue Rmb10 billion of convertible bonds over the remainder of the year.

Zijin’s credit rating was upgraded this year by Fitch, partly on the basis of its broadening portfolio of metals, despite a warning that the immediate economic benefits of the diversification are likely to be limited.

But a crunch in energy metals isn’t too far ahead, the ratings agency adds, with some of the forecasts anticipating market deficits for green energy metals from as early as 2025. Supply isn’t going to be able to absorb the demand spike either, it reckons, because new mines typically have lead times of 17 years from discovery to production.

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