PDAC 2016: China’s Zijin Mining eyes further global growth after landmark deals last year

March 8, 2016

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TORONTO • While most of the global gold industry is retrenching, one of China’s leading producers continues to eye big global growth.

“We want to become a global leading company,” George Fang, executive director of Zijin Mining Group Co. Ltd., told an audience at the Prospectors and Developers Association of Canada (PDAC) conference in Toronto.

It was a rare public appearance outside China for a Zijin executive, even though the firm has been making headlines around the world due to its aggressive expansion strategy.

State-owned Zijin, formed in 1993, has been looking abroad for gold and copper acquisitions for more than a decade, but has been a very active buyer over just the past few years.

In December 2014, the company unveiled an $81 million investment in Canadian miner Pretium Resources Inc. And in May of last year, Zijin announced two very big investments in Canadian companies. It gave Barrick Gold Corp. US$298 million for a stake in the Porgera mine in Papua New Guinea, and gave Ivanhoe Mines Ltd. US$412 million for a stake in the Kamoa copper project in the Democratic Republic of Congo. Those transactions instantly made Zijin a significant global player.

The two deals come at a challenging time for Western mining companies to raise capital on favourable terms. Zijin is following in the footsteps of many other Chinese resource firms over the past decade, which took advantage of drops in commodity prices to invest billions of dollars in companies around the globe.

Many of those Chinese firms have run into problems with their overseas investments, in part because they have struggled to adapt to business environments outside China. Fang stressed that Zijin wants to learn from its partnership with Barrick in order to become a better global company. The two miners plan to co-operate on future investments.

Fang spoke as part of a China-focused session at the PDAC conference. One of the key themes was that Chinese firms need to adapt to the local environments in which they operate in order to succeed. Michael Laffin, a partner at Blake Cassels & Graydon LLP, said they should focus on retaining and empowering good local employees, delegating some authority and upholding best practices in the local country.

“Tackling the cultural issues is critical,” he said.

While Zijin is best known outside of China for its acquisitions, it has faced a lot of criticism within the country for its environmental practices. Most notably, it was blamed for a massive toxic spill in 2010 that reportedly released more than 9,000 cubic metres of acidic waste into a river.



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