China’s Zijin targets Australian gold miner in M&A spree

SYDNEY: Zijin Mining Group has launched a bid for Australian gold explorer Phoenix Gold, the Chinese company’s third planned acquisition of a foreign mining asset in less than a month.

Long-dormant merger and acquisition (M&A) activity in Australia and other mining-intensive countries is showing signs of a rebirth, with Zijin the most acquisitive to date and with the deepest pockets.

“The company is open to opportunities around the world,” Zijin executive director and vice-president George Fang told Reuters. “It is a goal to find more gold or other assets.” In May Zijin announced it was issuing shares to raise 10 billion yuan (US$1.61bil) for acquisitions.

Before launching its A$47mil (US$36.55mil) offer for Phoenix, it accumulated a 17.9% interest in the company.

Zijin, one of China’s largest gold mining companies, unveiled two acquisitions in May for more than US$700mil, one in Papua New Guinea and one in Congo.

Zijin already mines gold next door to a Phoenix deposit after paying A$240mil for another Australian miner, Norton.

“Gold is our game,” Fang said. “Our team has the experience in gold mining.”

Until Zijin started shopping around, Chinese interest in the Australian sector briefly flickered after ChinaMolybdenum Co paid US$820mil in 2013 for Rio Tinto’s stake in the Northparkes gold and copper mine, but it soon died out.

But now, a weakening currency and cheap labour is putting polish back on Australian gold miners.

Gold bullion denominated in US dollars has fallen around 38% since a late 2011 peak, while Australian dollar gold hit a two-year high in February.

Gold output in Australia – the world’s second-biggest producer after China – reached a decade high last year and is tipped to rise further in 2015.

The S&P/ASX All Ordinaries Gold index tracking Australian gold producers has risen more than 30% this year.

Evolution Mining last month paid Barrick Gold US$550mil for an Australian mine, instantly making it the country’s second biggest gold producer listed on the Australian Securities Exchange.

A bidding war for the mine attracted 17 parties, according to people familiar with the sales process. — Reuters

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