Saturday, July 4, 2015

China sets up largest gold sector fund for nations along ancient Silk Road

China sets up largest gold sector fund for nations along ancient Silk Road

May 25, 2015

China has set up a gold sector fund involving 65 countries along the ancient Silk Road. It has been set up in China’s northwest Xi’an city during ongoing forum on investment and trade.

The fund will be led by Shanghai Gold Exchange (SGE) and is expected to raise 16.1 billion dollars in three phases. It should be noted that it is the largest fund set up by China in the gold sector.

Around 60 countries which fall along the routes of 21st-Century Maritime Silk Road (MSR) and Silk Road Economic Belt have invested in the fund.

This fund will facilitate gold purchase for the central banks of member states to increase their holdings of the precious metal. It will be also invested in gold mining in countries along the Silk Road and also to increase exploration in countries such as Afghanistan and Kazakhstan

At present, China is the world’s largest gold producer and also a major importer and consumer of gold. But its share in international gold trade is very small and does not have a big say in gold pricing.

By setting up this fund China is seeking to increase the influence of its domestic currency Renminbi (RMB) in the international gold pricing by opening the domestic gold market to international investors.

Copper Bars

China Launches Offshore Gold Fund

Zijin Mining Group Partners with Sprott Inc.

By Swagato Chakravorty

Friday, March 22nd, 2013

Zijin Mining Group of China, a copper and gold mining company, has reached an agreement with Sprott Inc. (TSX: SII) and Americas Now Resources Investment Management Corp. (based in Toronto) to establish an offshore copper and gold investment fund.

The fund will be worth $500 million, reports Platts, and the deal was reported to the Shanghai Stock Exchange yesterday. As of now, the proposed fund is still subject to regulatory approval in both Canada and China.

An initial cooperation agreement was reached back on March 19, which outlined in general terms the trio’s intent to establish an offshore mining investment fund featuring significant investments in copper, gold, and other precious metals, in addition to equities and bonds relating to mined products.

The terms of the agreement provide for Zijin supplying capital in the amount of $100 million. Sprott will contribute $10 million, while Americas Now will provide technical support and marketing services. Other investors (primarily based in China) will also contribute funds.

Per Bloomberg, Sprott will also provide a minimum of 5 percent of all capital contributions, in addition to the $10 million mentioned earlier.

Bloomberg also notes that as of February 18, Zijin’s unaudited net income for the full year was at $833 million, or 5.2 billion yuan. That’s a bit of a drop from 5.7 billion yuan ($917 million) a year earlier—a drop from 0.262 yuan per share to 0.238 yuan per share.

A likely reason for this is the increases in production costs being seen across the mining and metals sector, combined with the falling prices for the ores required. However, for Zijin, this is the first decline in profit for a full year.

According to Nasdaq, Sprott’s shares were down 5 cents after the deal emerged, at $3.43.

Zijin has had some breakthroughs recently. It received an approval on March 13 from the Development and Reform Commission of Xinjiang Uygur Autonomous Region to go forward with development of the Phase I project in Xinjiang Qitai County Heishantou Coal Mine of Zhundong Coalfield.

That coalfield is one of the four largest such fields in Xinjiang, and it is also the largest integrated coalfield in the world. It measures 220 kilometers by 60 kilometers, and covers nearly 13,000 square kilometers. The field comprises the mining areas of Wucaiwan, Dajing, Jiangjunmiao, Xiheishan, and Laojunmiao.

According to Zijin’s press release marking the occasion, the field’s estimated resources are about 390 billion tons. That is equivalent to roughly 17.8 percent of Xinjiang’s total coal reserves (2.19 trillion tons). It’s also equivalent to nearly 7 percent of the total coal reserves at present in all of China (5.56 trillion tons). However, proven reserves amount to 213.6 billion tons.

A late February release also reveals that Zijin Mining Group invested as much as 450 million yuan ($71.68 million) over 2012 and made expansive discoveries of ores. To wit, the company uncovered 60.45 tons of gold, 408,000 tons of copper, 2,046,700 tons of lead and zinc, 17,200 tons of molybdenum, 161,400 tons of tungsten, 126.4 tons of silver, and 1,185,700 tons of iron ore.

At the same time, the total mining rights Zijin won over the year amounted to 5 billion yuan (about $796.44 million). Ultimately, the likely value of newly-proven resources Zijin uncovered over 2012 amounts to 100.2 billion yuan, or nearly $15.96 billion.

More than 60 percent of Zijin’s resources come from its own exploratory operations, and the company made significant investments in expanding its exploration strategies through 2012. In fact, that year’s exploration cost equals more than half the company’s total investments in a 3 year period.

From the press release, quoting Zijin’s exploration institute President, Zhang Shunjin:

“The input-output ratio in our exploration is the highest, according to the current situation, the increase in copper resource and reserve in Zijinshan in the next several years are estimated to reach 4-5 million tonnes, which equals to half of the planned increase in copper in next three years in China.”

And Zijin plans to continue its expansions. As China’s twelfth five-year plan gets underway, Zijin intends to invest as much as 2 billion yuan ($318.58 million) into exploration and development, aiming to increase gold and copper production by 300 tons and 3 million tons, respectively.

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