Chinese Firm Snares Indonesian Gold Mine

Shanghai-listed mining conglomerate Pengxin International Mining Co. Ltd. said it plans to buy Singapore’s Agincourt Resources Pte. Ltd. for up to $1.1 billion in cash in a move that will give it control over of one of Indonesia’s richest gold mines.

Pengxin’s overseas acquisition is the latest in a string of mining and commodity deals by Chinese mining firms that began in 2016 to capitalize on weak global prices. Gold fell on Friday to $1,239.6 per ounce, its lowest level since December 2017.

The Martabe mine holds reserves of 8.8 million ounces of gold and 72 million ounces of silver, according to Agincourt’s website, and is considered one of the most promising mineral sites in Asia, according to industry publication Mining Technology.

Although 2017 was a relatively quiet year for foreign deals due to a government crackdown, Chinese companies’ activity has picked up this year. Last week, Shandong Gold Group said it will further develop the Veladero Gold Mine in Argentina as part of its joint venture with Canada’s Barrick Gold Corp. In June, Chifeng Jilong Gold Mining Co., Ltd. acquired the Laotian gold and copper operations of MMG Australia Ltd. for $275 million.

Speculation has been growing for several months that the Martabe mine on Indonesia’s western island of Sumatra was up for sale, and Pengxin’s name had been linked with the deal. The company said in May it was planning to buy the mine’s owner, Agincourt, which holds a 95% stake and is a subsidiary of a consortium led by EMR Capital, an Australia-based specialist private equity fund that purchased the holding in 2016.

Pengxin, whose shares have been suspended since mid-April pending a major asset restructuring, plans to pay cash for the deal, which will be made through a special purpose vehicle in Hong Kong, according to the company’s filing with the Shanghai Stock Exchange on Monday.

It did not provide the commercial rationale for the purchase, but Chinese media reports said the mine will increase its international nonferrous platform in support of the Belt and Road Initiative, China’s plan to strengthen trade ties and develop infrastructure across Asia, Africa and Europe. Pengxin also owns the rights to the Hituru copper mine in Congo and the Oni Gold Mine in South Africa, according to its website, and has interests in the real estate, agricultural, and financial sectors.

Contact reporter Ke Dawei (daweike@caixin.com)