Zijin Mining Achieves Initial Success in Overseas Development

In the Guiding Policy for Overseas Investment jointly released by seven ministries and commissions on July 5, 2006, it is explicitly stated that “The State encourages and supports various kinds of enterprises with comparative advantages to invest abroad. The State encourages enterprises to fully utilize the domestic and international markets and optimize resource allocation through overseas investment, to boost their participation in the international competition and cooperation, and deepen exchanges and cooperation with various countries to seek common development.” China’s peaceful development strategy provides sound political assurance for Chinese enterprises to pursue the“go-out” strategy.

Acquiring resources by pursuing the “go out”strategy is in line with the national development strategy and caters to the need of the enterprises’ own development. Now, Zijin Mining Group has become a leading mining enterprise in China. Compared with most homegrown mining enterprises, it has solid financial and technical foundation. As competition for resources intensifies in China, the company must go abroad to acquire resources to fulfill its development strategy. In the new round of development, internationalization is the company’s priority and an inevitable choice for future development. Other priorities include extending projects and securitizing capital.

The underlying ideas of ZijinMining ’s overseas development strategy is as follows:

Prioritizing gold and engaging in multiple metals; focusing on mining, supplemented by extended industries; putting resources first, and stressing both acquisition and prospecting;putting operating results first and prioritizing expansion; fostering and carrying forward indigenous innovation and technological capabilities; keeping an inclusive mind to learn and draw upon others’ experience and lessons.

Shaping Zijin Mining into a super-large international high-tech mining group. The company’s key economic indicators will grow fast,with high internationalization degree and world-class technological capability. The company will remarkably improve its capital securitization, establish excellent international management team and model with the company’s own characteristics, and achieve its strategic goal of “ranking among leading international mining companies”.

To fulfill the above strategy of overseas development, Zijin Mining sticks to the following basic principles for overseas investment:

(1)In the overseas resource development, it is important to maximize interests, coordinate shareholders’ interests with others’ and promote the strategic thought of unified development.

(2)Focus on gold and copper, and also develop other precious metals and base metals.

(3)Focus on large projects. In overseas investment, Zijin generally consider projects with a minimum of 50 tons of recoverable gold resources and more than 700,000 tons of recoverable copper resources.

(4)Give priority to projects in advanced stages, including projects to be developed, and production projects, as well as primary prospecting projects that allow for equity participation at low cost or have the potential for acquisition.

(5)Prioritize target areas in resources: countries with projects in operation, China’s neighboring countries, less developed countries and developing countries with rich resources, such as countries in Africa and South America.

Zijin Mining underwent a process of step-bystep exploration in overseas investment. From 2005 on, the company invested in projects in Tajikistan, Kyrgyzstan, Russia, Mongolia, Peru, Myanmar, Australia and Africa. Through seven years of investment practices and exploration, as of the end of September 2012, Zijin Mining had invested a cumulative USD l.04 billion or so in overseas projects. At present,most projects are in good condition. Based on estimation of international investment banks,the international mining M&A market and listed companies’ stock prices, the cumulative equity value of the several major projects invested by Zijin Mining is worth some USD 1.58 billion, and investment in the projects has risen by about 51.8% in value.

Compared with its domestic counterparts, Zijin Mining has achieved good returns from overseas investment overall. Overseas resources acquired by the group at a relatively low cost take up nearly 40% in the group’s total resources. It has garnered useful experience in international investment, and fostered a number of professionals well-versed in international practices, laying a foundation in both mineral resources and HR for its future development.

Major projects directly invested by the company over the past few years mainly include the following:

(1)In June 2007, Zijin Mining acquired a 75% stake in Tajikistan’s ZGC gold mine for USD55.10 million, thereby controlling about 171 tons of gold resources. The gold mine is in production. Currently, it is undergoing technological transformation. Upon completion of the technological transformation, annual gold output is expected to come to some 4 tons.

(2)In December 2006, Zijin Mining acquired a 70% stake in Russia’s Tuva lead-zinc mine project for 270 million yuan, thereby controlling some 11.50 million tons of lead and zinc metals, accompanied by copper, gold and silver. Currently, the project is under construction, and is expected to be put into production at the end of 2013.

(3)In April 2007, Xiamen ZijinTongguan Investment Co., Ltd. (with Zijin holding a 45%stake)was set up jointly by Zijin Mining, Tongling Nonferrous Metals and Xiamen C&D Inc., to acquire British listed company Monterrico Metals. Eventually, Zijin Mining holds a 79.9% stake in Rio Blanco project located in Peru, controlling 7.16 million tons of copper metal and 280,000 tons of molybdenum metal.At present, the project is in the phase of feasibility study.

(4)In August 2011, Zijin Mining acquired a 60% stake in Kyrgyzstan’s Taldy-BulakLevoberejny field for USD 66 million,controlling 75 tons of gold reserves. At present,the project is under construction. It is expected to be put into production in the first half of 2014 with an annual gold output of 3.75 tons.

(5)In September 2012, Zijin Mining acquired an 89.15% stake in Australia-based Norton Gold Fields Limited for some USD l89 million,controlling 185 tons of gold resources. At present, the annual gold output is 4.7 tons.

(6)In March 2012, Zijin Mining acquired a 87.5% stake in a gold mine project located in Li County in Gansu Province held by Australian firm Dragon Mountain Gold Limited for AU$ 175 million, controlling 133 tons of gold resources. After the acquisition, the gold mine in Li County will be consolidated with the current gold mine of ZijinMining ’s Gansu Yate Mining. When the consolidation is over, a large gold mine with an annual output of more than 5 tons is expected to be completed.

(7)In 2011, by acquiring a 45% stake in JinYou Mining Investment Limited, Zijin Mining started to indirectly own a 45% stake in Xietongmen Project in Tibet. Under the project,total resources include 3,335,700 tons of copper and 242.92 tons of gold. Currently, the project is under construction.

(8)In 2010, Zijin Mining spent USD 200 million subscribing convertible bonds issued by Glencore International AG.

(9)On March 19, 2013, Zijin Mining signed an agreement with a Canadian-listed firm Sprott Inc. and Americas Now Resources Investment Management Corp. Under the agreement, the three companies would set up a joint venture offshore mining fund, which was to raise USD 500 million, mainly for investing in equity and debts related to gold, other precious metals,copper and other minerals.

(10)In April 2013, Zijin Mining announced that it subscribed convertible bonds issued by NKWE for AU$20 million.

(11)On April 17, 2013, Norton Gold Fields Limited, which is ZijinMining ’s subsidiary in Australia, signed an agreement with another Australian-listed firm Kalgoorlie. Under the agreement, through friendly OTC tender offer,Norton Gold Fields Limited would acquire all outstanding shares of Kalgoorlie for AU$14.93 million. In July, the company announced that approval from Australia’s Foreign Investment Review Board (FIRB)had been obtained for the acquisition.