Zijin First-Quarter Profit Rises 40% on Higher Prices

Zijin Mining Group Co., China’s largest gold producer, said first-quarter profit climbed 40 percent on higher production and metal prices.

Net income rose to 1.28 billion yuan ($188 million), or 0.088 yuan a share, in the three months ended March 31, from 912.4 million yuan, or 0.063 yuan, the company said in a statement to the Shanghai stock exchange today. Sales expanded to 6.31 billion yuan from 4.95 billion yuan.

Chairman Chen Jinghe is benefiting from a gold price that is on course for a decade of gains driven by demand for bullion as a hedge against inflation and a weakening dollar. Zijin, which agreed to pay A$545 million ($508 million) for Indophil Resources NL in December, plans to boost gold and copper output this year.

“We expect 2010 profit to rise significantly from 2009 on expectation gold prices and copper production will increase,” Heng Kun, a Shanghai-based analyst at Essence Securities Co., wrote in a March 31 report. Heng expects Zijin’s earnings per share to rise to 0.38 yuan this year from 0.24 yuan in 2009.

The stock rose 0.8 percent to close at HK$6.34 in Hong Kong today. In Shanghai trading, the shares gained 1.8 percent to 8.46 yuan. The first quarter earnings report was released after the market closed.

Consumption Rising

Zijin plans to raise gold production 1.5 percent and copper output 18 percent this year, the company said in March. Gold consumption in China may double in the next 10 years, boosting prices as supplies fail to keep pace with demand, the World Gold Council said March 29.

Gold spot prices averaged $1,110.16 an ounce in the first quarter, 22 percent higher than the $909.47 an ounce average a year earlier. Average copper futures in Shanghai in the first three months were more than double the level in the year-ago period.

Bullion accounted for 73 percent of Zijin’s profit last year, and copper 22 percent. The company also produces zinc and iron ore. Zijin said in March it will seek to complete one or two “major” overseas acquisitions this year to increase reserves.

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