China’s Largest Gold Miner Sees Profits Jump on Higher Prices
What’s new: The revenue of China’s largest gold miner Zijin Mining Group Co. Ltd. (601899.SH) rose 26% year-on-year in 2020 to 171.5 billion yuan ($26.33 billion), with net profit spiking 51.9% year-on-year to 6.5 billion yuan, according to its latest annual report filed to the Hong Kong Stock Exchange Sunday.
Zijin’s gold business contributed nearly 70% to its revenue last year. Zijin’s gold price per unit increased by 22.97% to 365 yuan a ton from 2019 as investors hedged against risks heightened by the Covid-19 pandemic, and the company’s gold output picked up 4.58% year-on-year to 315 tons.
What’s the background: With the goal of boosting its gold and copper reserves, Zijin acquired stakes in two overseas mines and one domestic one in 2020 — Buriticá Gold Mine in Colombia and Aurora in Guyana as well as Julong Copper Mine in Tibet — for nearly $2 billion together, bringing the company’s total gold and copper reserves to 2,300 tons and 62 million tons, respectively.
But the debt burden that has accompanied its spree of acquisitions has weighed on Zijin’s financial performance. Its total debt amounted to 107.7 billion yuan, with a debt-to-asset ratio of 59%. The big three rating agencies all downgraded Zijin’s ratings between last July and August given its spiking capital expenditure.
Zijin responded to these downgrades in its annual report, saying that the elevated leverage was “temporary,” and that the release of new gold and copper capacity would generate strong cash flows and lower the company’s leverage.
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