China gold-mine deals at record after price plunge

Published: 10:06 PM, August 21, 2013
Updated: 1:50 PM, August 22, 2013

BEIJING -- China’s gold mining companies went on a shopping spree this year as the metal’s steepest quarterly drop in more than nine decades slashes mine values and sidelines Western rivals laden with debt, the Bloomberg news agency reported.

Takeovers and asset purchases by producers based in China and Hong Kong rose to a record US$2.24 billion (S$2.86 billion) this year, beating last year’s record US$1.96 billion, according to Bloomberg data.

Zijin Mining Group, the world’s seventh-largest gold company by market value, and Zhaojin Mining Industry are among companies looking to strike after the share prices of targets fell an average 53 per cent since bullion peaked in 2011.

“The gold declines are good for key Chinese producers to buy overseas assets,” said Mr Chen He, head of overseas resources development at Zhaojin Mining, China’s fourth-largest producer. “This year our main task is to closely watch potential targets as prices in 2014 are forecast to be lower.”

Bullion’s spiral into a bear market in April provoked a buying frenzy in malls and shops in China, a culture that traditionally acquires the metal for brides, babies and strongboxes. There will be about 6.6 million brides in China this year alone, according to the World Gold Council.

At a national level China, with the world’s largest foreign exchange reserves of US$3.497 trillion on June 30, is likely to increase gold holdings to diversify from the dollar, according to the Official Monetary and Financial Institutions Forum.

Net imports into China more than doubled in the first half to 493 metric tons, from about 239 tons a year ago, according to Bloomberg calculations based on Hong Kong customs data.

Gold consumption in China jumped 54 per cent to 706.36 metric tons in the first six months, the China Gold Association said this month. Per capita gold holdings in China are little more than 5 grams, compared with the average 20 grams in developed countries, meaning there’s huge potential as long as the economy is growing, the association said in June.

“China’s appetite for gold is virtually insatiable,” said Mr Jon Price, managing director of Phoenix Gold. “They have a large bank account with which to work, and a lot of US dollars that they perhaps would rather see turned into physical assets. I can see them being a dominant player.”