China's Zijin Mining Invests Abroad as Gold Shines

Zijin Mining, China's top listed gold producer, plans to invest CNY1bn ($146m) in a gold mining project in Tajikistan and awaits approval for another in the Philippines, as it expands abroad to ride sky-high prices.

Zijin is also seeking new projects to mine silver and zinc in Tajikistan and is in talks to buy a gold mine in Africa. But the company said it is becoming more selective after adding 11 exploration licences and seven mining licences in the past year, amid concerns metal prices may start turning around soon.

The price of gold, which accounted for 64% of Zijin's total sales in the first six months of this year, has risen by nearly $100 per troy ounce, or 12% from the beginning of the year, to $930.25 a troy ounce on Tuesday.

Zijin reported a 45% rise in first-half profits, to CNY1.74bn ($255m).

"We will consider projects only if they can create more value from the current values as prices are already high. We will not buy regardless of prices," Chairman Chen Jinghe told Reuters on the sidelines of an investor conference on Tuesday in Hong Kong.

"For now, it is hard to predict the outcome of the African project as we are quite apart on the price."

But Zijin is keen on projects in Tajikistan, where the government is friendly to Chinese firms. It plans to inject more funds to upgrade the technology and boost output at its existing gold project in the country, which includes two mines.

"We paid $50m to buy 75% of the Tajikistan company. We are going to put another CNY1bn to boost production," Chen said. The remaining 25% stake was owned by the Tajikistan Government.

He said the Tajikistan company controlled the two gold mines and Zijin's investment would boost gold production to up to five tonnes a year in the next three to five years, from one tonne now.

Zijin planned to send a delegate to the central Asian nation to select new investment projects, which likely would be zinc and silver.

Shares in Zijin closed down 1.7%, in line with a 1.9% fall in the broader Hang Seng Index.

PHILIPPINE PROJECT

Zijin is confident of obtaining approval from China and the Philippines for a gold-copper mining project in the Philippines before the end of this year, Chen said.

The initial plan of the project is to mine more than one million tonnes of copper and 100 tonnes of gold, half of the site's total reserve, he said without providing details.

Last year, Philippine mining group Lepanto sold a 20% stake in the gold-copper project in Benguet, in the north of the country, to Zijin.

Zijin is also expanding in South America.

Chen said the building of the Rio Blanco copper-molybdenum project in Peru would start in 2010 with annual production of 150,000t-200,000t of copper.

Zijin was revising the $1.4bn investment plan of Rio Blanco to save costs and have more environmental friendly operations, he said.

Three towns in northern Peru voted last year against the project amid fears it would pollute rich agricultural lands, forcing Zijin to modify the plan and delaying the start-up.

Zijin produced 26.71t of gold in the first six months, up 19.9% on the year.

Copper output rose 12.3%to 23,995t in the first half, while zinc output fell 12.2% to 69,182t due to low prices.

Currently Zijin holds reserves of 663.25t of gold, up 4% from the first quarter.

By Polly Yam, Reuters