Unlock Editor’s Digest Lock for Free
FT editor Roula Khalaf will select your favorite stories in this weekly newsletter.
Zijin, China’s largest gold miner, is expanding to “streaming” precious metals to ensure a greater supply of bullion at the time prices skyrocket.
Streaming is a type of mining funds that investors pay for the mine in exchange for a share of future production. The managing director of Zijin’s investment subsidiary hopes that the Chinese mining company’s first new streaming fund will trade in Africa and South America, expanding between $200 million and $400 million this year.
“We are trying to find quality resources that are underrated,” said Lisa Liu, managing director of Hong Kong-based Gold Mountains Asset Management. “We’re really bullish at gold prices,” she added.
Gold prices rose 27% this year, repeatedly setting new record highs as investors seek safe shelter assets amidst the chaos caused by US trade policies.
Supported by dual-listed states in Hong Kong and Shanghai, Zijin Mining Group is the sixth largest gold producer in the world and a key producer of copper, zinc and lithium.
The $68 billion market capitalization company has been making an international expansion drive in recent years.
He owns stakes in copper and gold mines ranging from Serbia to Colombia, Australia and the Democratic Republic of the Congo, and has recently invested in lithium in projects in Argentina.
Its asset management unit was established in 2013 and manages more than $5 billion. The unit signed its first streaming agreement last year, saying it would provide a “very attractive” rate of return while reducing some of the risks of operating the mine directly if gold prices are high.
Gold mining is not investing in new projects, Liu said he has expressed concerns about long-term supply due to declining gold concentrations in the ore.
“The lack of investment was a big problem… It’s really hard to find quality projects,” said Li, a geologist in the background.
“All the quality of gold mines is declining,” she added, but said Zijin’s mining expertise gave him an edge over other streamers, a traditionally dominated industry by Canadian groups.
Gold mines have a shorter reserve life than base metals (non-preferred metals such as copper and zinc), said Michael Widmer, head of metal research at Bofa. “Mineers are in the business of having to always fill up their reserves,” he said.
In October, Zijin partnered with streaming specialist Wheaton Precious Metals on a $825 million funding agreement for a mine in Ivory Coast, run by Montage Gold. They provided $125 million in finance and $75 million in gold streams.
In April, they also committed $25 million to a gold stream contract with Tongguan Gold, which involves a gold mine in central China’s Gans province.
Around the world, gold mining companies suffer from depleted lower grade ore. This is also a problem faced by copper miners.
Data from Consultancy Metals Focus shows Gollone Mined Gold production reached record highs last year, and is expected to hit another record this year.
