Silk Road Fund Said to Mull Bid for $2 Billion Glencore Mine

  • State-backed fund studies joint bid with China National Gold
  • Glencore mulling sale of Vasilkovskoye mine in Kazakhstan

China’s Silk Road Fund, a $40 billion pool set up to invest along the nation’s ancient trade routes with Central Asia, is discussing a joint bid for Glencore Plc’s gold mine in Kazakhstan, people with knowledge of the matter said.

The Silk Road Fund is partnering with state-owned China National Gold Group Corp. on a possible joint offer for the Vasilkovskoye mine, which could fetch about $2 billion, according to the people. The group is in discussions with Glencore, though there’s no certainty it will win the bidding, the people said, asking not to be identified as the information is private.

The Beijing-based fund may vie with Chinese gold producers Shandong Gold Mining Co. and Zijin Mining Group Co., which are also potential bidders for the asset, people familiar with the matter said last month. Chinese companies have announced $9.6 billion of mining acquisitions this year as commodity prices start to recover, a 36 percent jump from the same period in 2015, data compiled by Bloomberg show. 

“Chinese miners are competing to secure gold assets, because there’s a consensus that domestic demand will far outstrip local supply due to fast-growing investment demand,” Wang Rong, an analyst at Guotai Junan Futures Co., said by phone from Shanghai on Thursday. “The valuation of gold assets might still have potential to rise given the bullish outlook in the bullion market now.”

State Funding

China Molybdenum Co. agreed in May to buy control of Freeport-McMoRan Inc.’s copper mine in the Democratic Republic of Congo for $2.65 billion, following a $1.5 billion deal in April for Anglo-American Plc’s niobium and phosphate business. China National Gold said in April it will purchase Eldorado Gold Corp.’s Jinfeng gold mine in Guizhou province for $300 million.

The Silk Road Fund was set up in 2014 with backing from the nation’s sovereign wealth fund, state-owned Export-Import Bank of China and policy lender China Development Bank Corp., according to its website. The fund is focused on infrastructure and resource investments aligned with President Xi Jinping’s New Silk Road initiative, aimed at bolstering the nation’s economic clout across more than 70 countries in Asia, Europe and Africa.

China National Gold is the nation’s biggest miner of the metal by reserves. It is the largest shareholder of China Gold International Resources Corp., listed in Hong Kong, and Shanghai-traded Zhongjin Gold Corp. 

Representatives for China National Gold and the Silk Road Fund didn’t answer phone calls and e-mails seeking comment. A spokesman for Glencore declined to comment.

Gold climbed to more than $1,368 an ounce at 10:32 a.m. in Hong Kong as investors sought a haven from the turbulence in financial markets. The metal for immediate delivery hit a two-year high Wednesday, with UBS Group AG saying bullion is probably at the start of its next bull run.

The Vasilkovskoye mine produced 380,000 ounces of gold last year, according to an estimate from researcher CRU Group.

(A previous version of this story corrected the spelling of Beijing in the third paragraph.)

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