Gold producers going public in Hong Kong
By Gong Zhengzheng (China Daily)
Updated: 2004-05-24 08:43

Two gold producers in East China's Shandong Province are preparing for listings in Hong Kong.

The two companies are Shandong Laizhou Gold Mining Co Ltd and Zhaoyuan Gold Co Ltd.

Shandong Laizhou Gold Mining Co Ltd says it expects to go public in Hong Kong as early as next year.

The firm was launched last December with a registered capital of 90 million yuan (US$10.8 million) by Shandong Laizhou Gold Mining Corp and other four domestic investors.

At present, the firm has an annual production capacity of 2.2 tons.

Zhaoyuan Gold Co Ltd, a newly-formed joint venture in Zhaoyuan in Shandong, said it plans to launch an initial public offering on the Hong Kong Stock Exchange in October.

The joint venture was set up earlier this month with a registered capital of 530 million yuan (US$64 million).

Zhaoyuan Gold Corp controls a 55 per cent stake of the joint venture and the rest is held by Shanghai Yuyuan Tourist Store Co, Shanghai Fuxing Industrial Investment Co, Shenzhen Guangxin Investment Co in South China's Guangdong Province and Shanghai Laomiao Gold Co.

Zhaoyuan Gold Corp aims to double its gold output to 31 tons and become one of the world's top 30 gold producers next year.

"Listing is a new fund-raising channel for China's cash-starved gold industry," said Luo Pengfei, a metal analyst with CITIC Securities Co.

Currently, there are three listed companies in the industry - Zhongjin Gold Co Ltd, Shandong Gold Co Ltd and Zijin Mining Co Ltd.

Both Zhongjin, based in North China's Tianjin Municipality, and the Shandong gold firm went public in Shanghai last year.

Zijin, based in East China's Fujian Province, issued stocks in Hong Kong last year.

"The fragmented industry needs capital to produce more gold to satisfy mounting domestic demand for the metal and to create bigger conglomerates through mergers and acquisitions," Luo told China Daily.

Gold output in China reached 45.313 tons during the first quarter of this year, up 5.12 tons or 12.74 per cent from a year earlier, according to the China Gold Association.

Working from an industry blueprint, the government plans to create 12 internationally-competitive gold conglomerates through mergers and acquisitions by 2005.

These conglomerates are expected to control two-fifths of the total gold output in China and half of the industry's total profits by then.

Currently, there are some 1,200 small gold miners across China.

The gold industry's profits totalled 550.1 million yuan (US$66.42 million) from January to March this year, jumping 47.87 per cent from the same period of last year, the gold association said.

"We will assist more domestic gold firms to go public overseas to raise money for the industry's development," said Cheng Fumin, president of the association.

State investment in the industry has been declining as a result of the metal's dwindling weight in China's foreign exchange reserves and gold market deregulation.

Sources from the State Development and Reform Commission said that the central government will put 100 million yuan (US$12 million) into gold prospecting this year, which is down from 2 billion yuan (US$241.5 million) annually more than 10 years ago.

The industry was controlled by State investment in the past because the nation's foreign exchange reserves depended heavily on the metal.

China took a substantial step toward full deregulation of the gold market in late 2002 by launching a national gold exchange in Shanghai, the nation's financial centre.

Many Chinese gold producers now conduct spot transactions in the exchange, instead of selling all of their gold to the People's Bank of China, the central bank.

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