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Zijin Mining Posts Lowest Profit Since 2006 on Gold Slump

Zijin Mining Group Co., China’s biggest gold miner by market value, posted the lowest first-half profit since 2006 after bullion and copper prices dropped and production costs increased.

Net income fell 54 percent to 1.1 billion yuan ($180 million), from 2.4 billion yuan a year earlier, the Shanghang, Fujian province-based company said in a statement yesterday, citing Chinese accounting standards. The company last month said interim profit would probably decrease by 45 percent to 55 percent. Sales increased 24 percent to 26 billion yuan.

That’s the lowest first-half profit since 2006, when the company reported interim net income of 662.1 million yuan, according to data compiled by Bloomberg. Gold slumped 21 percent this year, entering a bear market in April, and headed for its first annual decline since 2000.

The “gold price is likely to stay around the current level in the second half,” Chairman Chen Jinghe told reporters today in Hong Kong. The “full-year result will see a relatively large fall from last year as I don’t see any factors that could fundamentally improve our businesses in the second half,” he said.

The company recorded 332.1 million yuan in impairment losses in the first half after declines in gold and other metal prices trimmed the value of inventories, compared with 375 yuan a year earlier, it said in yesterday’s statement.

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Zijin dropped 1.6 percent to 2.53 yuan in Shanghai trading as at 3:05 p.m. local time, compared with a 0.3 percent fall in the benchmark Shanghai Composite Index. The stock in Hong Kong was down 1.1 percent to close at HK$1.84 yesterday as the local stock market was suspended from trading today because of a typhoon.

Global mining assets have dropped to a “very low” level because of precious metal prices, and some acquisition opportunities may emerge in the next few years, Chen said.

Still, Zijin’s first-half cash flow dropped around 30 percent because of lower profit, Chen said today. The company will maintain its capital expenditure this year and 2014 at last year’s level, he said, without elaborating.

Gold for immediate delivery was little changed at $1,321.50 an ounce as of 3:33 p.m. in Singapore. The metal dropped to a 34-month low in June.

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