China National Gold Said to Weigh Investments in Ivanhoe Assets

China National Gold Group Corp. is considering investing in mines owned by Robert Friedland’s Ivanhoe Mines Ltd. (IVN), including the Platreef project in South Africa, a person with knowledge of the situation said.

China’s largest gold producer values the Platreef platinum and copper mine at about $1 billion, said the person, who asked not to be identified as the information is private.

State-owned China National Gold has also looked at other Ivanhoe projects located in the Democratic Republic of Congo and Gabon, though prefers more developed countries like South Africa, the person said. No terms for a purchase of the Platreef mine have been finalized, and China National Gold could instead consider buying a stake in Ivanhoe itself, the person said.

China National Gold, which ended talks in January to acquire Barrick Gold Corp. (ABX)’s African unit for about $2.3 billion, is also exploring opportunities to buy gold and copper assets in Canada and Australia, the person said.

Chinese metal producers are seeking to take advantage of commodity price declines to buy assets overseas. The biggest global mining companies are selling their higher-cost projects and writing down asset values after almost $1 trillion of acquisitions in the sector over the past decade.

Wu Zhanming, a spokesman for Beijing-based China National Gold, declined to comment, as did Bob Williamson, a spokesman for Ivanhoe.

Japanese Investment

The Wall Street Journal in September reported that China National Gold had talked to Ivanhoe about buying assets or a stake in the company. Ivanhoe said Sept. 23 that was in discussions with private and state-owned mining companies that had expressed interest in investing “both at the project and corporate levels.”

Ivanhoe owns 90 percent of the Platreef mine, located 280 kilometers (174 miles) northeast of Johannesburg, according to its website. A group of Japanese companies including Itochu Corp. (8001) spent $290 million in 2010 and 2011 to acquire a 10 percent stake in the project.

The Platreef project contains platinum, palladium, nickel, copper and gold resources, according to Ivanhoe’s website. The company, which changed its name in August from Ivanplats Ltd., has a market value of C$1.62 billion ($1.54 billion) after a 50 percent drop in its shares since the start of 2013.

RBC Capital Markets in Toronto values Platreef at $1.7 billion, according to analyst Fraser Phillips.

The price of platinum, used in jewelry and catalytic converters that reduce car emissions, fell about 15 percent since the end of June 2011 and traded at $1,467.38 an ounce as of 10:50 a.m. in Singapore today. Copper for three-month delivery has dropped about 24 percent to $7,140 a metric ton in London Metal Exchange trading.

African Barrick

China National Gold began talks last year to acquire a majority stake in African Barrick Gold Plc (ABG), which mines in Tanzania, in what would have been the largest gold-company takeover involving a Chinese company. The talks ended in January without an agreement.

The company’s Hong Kong- and Toronto-traded unit, China Gold International Resources Corp., sees South Africa as the focus of its African strategy, the unit’s Chief Executive Officer Song Xin said March 26.

Ivanhoe said June 10 it applied to the South African government for mining rights for the Platreef project. The company expects to complete a scoping study by early next year for a mining operation with as much as 12 million metric tons of annual production, according to its website.

After receiving the rights, Ivanhoe will own 77 percent of Platreef, a company presentation shows.

To contact the reporter on this story: Zijing Wu in Hong Kong at zwu17@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net

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