(Jan 27): Zijin Gold International Co, a unit of China’s largest precious metals miner, surged to an all-time high after agreeing to buy Allied Gold Corp to boost output and reserves, with prices of the commodity near a record.
Shares in the Zijin Mining Group Co affiliate rose as much as 19% in Hong Kong after the US$4 billion deal was announced on Monday (Jan 26). Canadian-registered Allied owns mines in Africa that produced about 12 tonnes of bullion last year.
Gold has staged a powerful rally over the past three years, hitting successive peaks as investors seek haven in non-sovereign assets. The surge has boosted incentives for bullion-mining executives to ramp up output from existing assets or to pursue mergers and acquisitions to expand their footprint.
“Against a gold bull market, the company is focusing more on acquiring relatively mature mining assets or existing production capacity,” parent Zijin Mining said in a statement. The target projects also have scope to increase reserves through exploration and technology upgrades, it added.
Shares of Zijin Mining have nearly tripled in the past year to put the company on par with its top global peers Rio Tinto Group and BHP Group Ltd in market value. The company’s stock also rose in Hong Kong following the deal.
Successful conclusion “would be a major milestone for Zijin Gold”, Morgan Stanley analysts led by Rachel Zhang said in a note. The targeted sites are close to the Akyem mine in Ghana and, separately, the Bisha project in Eritrea owned by Zijin Mining, which could bring synergies, they added.
See also: Gold smashes beyond US$5,000 as global upheaval fans demand frenzy
The acquisition price is attractive at current gold prices, according to Citigroup Inc, which maintained Zijin Mining as its top pick.
Spot gold topped US$5,111 an ounce on Monday to set a record. The metal is up by almost a fifth in January, after surging 65% last year, the best annual performance since 1979.
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