Global View from a Chinese Operator

Canada Day at the recent Mines and Money conference in London included high praise for operating in the country from one of China's largest mining companies, Zijin Mining.

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Speakers on the final day of the recent Mines and Money (M&M) conference in London included George Fang, an executive director of Zijin Mining. The company is one of China's largest gold producers, the second largest copper miner and the country's third largest miner of zinc.

Zijin operates in ten countries but during his presentation Mr Fang emphasised the importance of the company's relationships with Canadian assets and companies, including Barrick Gold Corp., Nevsun Resources Ltd and Ivanhoe Mines Ltd.

Mining Beacon (MB) caught up with Mr Fang after the presentation and asked him what was the focus of Zijin Mining's activities?

George Fang (GF): We are focussed everywhere on gold and copper, with a particular emphasis on large deposits with high grades. However, the most important role for Zijin is as a responsible miner.

MB: How does being a 'responsible miner' manifest itself?

GF: Zijin seeks to be a leading mining company by creating wealth but this must be in harmony with society. It is important to strike a balance between the goals of corporate development, environmental protection, rewards for investors and employees, and the well-being of the communities in which we operate. 

MB: The company started with development of the Zijinshan gold and copper mine in 1993, what have been the main milestones since then?

GF: We completed a restructuring in 2000, which enabled us to expand the business across China, and listed on the Hong Kong Stock Exchange three years later. We started investing overseas in 2005 and listed on the Shanghai Stock Exchange in 2008. An important development was the acquisition in 2015 of a 50% stake in the Porgera gold mine in Papua New Guinea from Barrick, and the Kamoa copper mine in the Democratic Republic of Congo from Ivanhoe.

MB: So, did these acquisitions in 2015 mark a change in emphasis?

GF: Yes, in that year we announced that 'Going Global' was the focus of Zijin's development but we actually started investing overseas in 2006. Indeed, around 40% of our profit in 2017 was contributed by operations outside China.

MB: In the presentation you mentioned several 'green' ventures, can you provide more details?

GF: Zijin operates nine mines that have been designated as 'green', ie those that provide high levels of environmental protection. We also own and operate multiple National Mine Parks and a National Industrial Tourism Demonstration Site. Zijin has won three awards for its philanthropic work, which has included a US$30 million charity foundation.

MB: You reported revenue of US$14.6 billion in 2017 and an attributable net profit of US$540 million, are these numbers likely to be higher this year?

GF: Yes, we expect revenue of US$15.3 billion in 2018 and a net profit of some US$780 million. This means revenue will have almost doubled since 2011.

MB: What are your goals for the next ten years?

GF: Zijin has set clear strategic targets, which include becoming one of the major players in the global mining industry by 2020, with our gold and copper production ranking amongst the highest in the world. By 2030 we expect to have become an 'extra-large' international mining group, with high levels of technology and operating efficiency.

MB: During the second half of your presentation, you were effusive in praise of the Canadian mining sector. Does Zijin consider it the best overseas destination for mining investment?

GF: We've not examined every overseas destination, but Canada is certainly one of the most attractive mining jurisdictions. It has a well-developed mining market, geopolitically diversified asset portfolio and vigorous investment activities. Of the world's 50 largest mining companies, about half have assets, joint ventures or other economic interests in Canada.

MB: And South America?

GF: It is certainly an attractive continent. Based on the Fitch Solutions analysis, Canada is second to Peru in terms of competitive mining advantage. The US and Mexico are ranked in third and fourth place, respectively, but Panama, Chile and Argentina score well.

MB: You presented several slides on Canada's mineral wealth and strong business environment, one of which showed Canada as having one of the most attractive federal tax rates for miners. Is that what attracted Zijin to the country?

GF: Yes, but it was also the attraction of the particular assets in the Canadian companies in which we have conducted business; for example, the recent Nevsun takeover, and the Porgera and Kamoa transactions with Barrick and Ivanhoe.

MB: Can you summarise the Nevsun deal?

GF: In September this year we entered into an agreement to acquire Nevsun for C$1.84 billion. The company's assets include 60% of the Bisha zinc-copper open pit in Eritrea and the wholly-owned Timok Upper copper-gold project in Serbia. 

MB: Thank you.

Chris Hinde

Chief Commentator, Mining Beacon

Previously editorial director of Mining Journal, and more recently head of S&P Global Market Intelligence's metals and mining team, Chris is now Mining Beacon's editor-in-chief and lead commentator. He posts two blogs every week, one on Monday reviewing market conditions over the prior week, and a second on Thursday looking at issues on the global mining scene. There is also a quarterly blog on business opportunities in the sector.