Zijin Mining Group Co. (2899), China’s biggest gold miner by market value, is studying a move into shale gas and will target buying “super” mines after falling bullion prices and rising costs cut its earnings.
The company will explore entering new energy markets, including shale gas, “while continuing to focus on gold and copper mining,” Shanghang, Fujian province-based Zijin Mining said in an exchange filing March 29. Net profit dropped 59 percent to 2.13 billion yuan ($342 million) last year, it said in a separate statement.
China, which holds the world’s biggest shale gas reserves, has drawn investment from the nation’s biggest oil companies including Sinopec and PetroChina Co. Zijin Mining will spend about 8 billion yuan to buy mining companies or mines, targeting “super large mines,” it said, without giving a timeframe.
“Given what has happened in the U.S., shale gas has a bright future in China and we are willing to give it a try and see what may happen,” Chairman Chen Jinghe told reporters at a briefing today in Hong Kong. Zijin would seek partnerships with companies that already hold shale assets and that it would take “at least three to five years before we can see any meaningful results from shale gas business,” Chen said.
The company is looking to buy gold projects with more than 100 metric tons of metal reserves, and copper projects with more than 1 million tons of such reserves, he said.
Zijin declined 0.6 percent to close at HK$1.65 in Hong Kong, compared with a 0.4 percent gain in the benchmark Hang Seng Index. The stock has shed 36 percent in the past 12 months.
China holds 25.08 trillion cubic meters of exploitable onshore shale-gas reserves, the Land and Resources Ministry said in March 2012. The U.S. has 13.65 trillion cubic meters of technically recoverable gas from shale formations, its Energy Information Administration said in January that year.
The Asian country has set a national output target of 6.5 billion cubic meters by 2015, and as much as 100 billion cubic meters by 2020. The goals are meager compared with U.S. output of 266 billion cubic meters in 2012.
Bullion last year slumped the most since 1981. Average prices for spot gold in London fell 15 percent last year, while copper dropped 7.9 percent, Zijin said in its earnings statement.
“Gold is expect to fluctuate at low levels, while bulk commodities have risks of falling further,” creating opportunities for acquisitions, the company said.
Zijin plans to invest 4 billion yuan on infrastructure for its mining projects this year, it said. It will raise the capital through bank loans, mid-term bills and its own cash, it said.
The company will also set up a commercial bank to “create synergies” with its mining business, it said, without giving a timeframe.
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