Shandong Gold Mining Co. plunged by a record in Shanghai trading after the company said it plans to buy about 13 billion yuan ($2.1 billion) of assets from its parent and four other parties.
Shares of China’s second-largest gold company by value plunged the daily limit of 10 percent to 28.77 yuan. That’s the most since the stock began trading Aug. 28, 2003. Shandong had been suspended since April 3.
Shandong Gold will fund the purchase of the production and mining assets through a 9.98 billion yuan share swap, it said in an exchange filing on June 28. It will raise as much as 3 billion yuan through a private share sale to 10 unidentified investors to fund the remainder, it said.
The assets to be acquired were valued at 313.01 yuan a gram ($1,588 an ounce) based on the average spot gold price on the Shanghai Gold Exchange between Jan. 2010 and March 31 this year, Shandong Gold said in the statement. The spot price for 99.99 percent pure gold last traded at 251.76 yuan a gram on the exchange and is down 21 percent since Shandong Gold shares were halted in April.
“There’s concern the assets have been overvalued as they used average prices between 2010 and March 2013 to measure the resources, while gold has extended its drop after that,” Ming Lufa, an analyst at Founder Securities Co., said from Beijing. “Shandong Gold also dropped to catch up the recent declines in the broader stock market.”
The Shanghai Composite Index has fallen 12 percent since Shandong Gold’s stock suspension amid a cash squeeze in China’s banking system that spurred Goldman Sachs Group Inc. and China International Capital Corp. to cut their 2013 growth forecast for the second-largest economy. The benchmark stock index fell 0.8 percent today.