http://new.dowjones.com/scoop/china-national-golds-president-says-longer-talks-ivanhoe-mines-african-investment/
Alistair MacDonald broke the news that China’s largest gold company, China National Gold, was no longer in talks with Ivanhoe Mines Ltd, the vehicle of famed mining entrepreneur Robert Freidland, and that it was in talks with Barrick Gold Corp. about potential partnerships. The story came through an exclusive interview with the company’s president, who also said he was actively talking to other companies about takeovers.
The story as it appeared on Dow Jones:
June 17, 2014, 10:56 AM EDT – China National Gold’s President Says No Longer In Talks With Ivanhoe Mines On African Investment
10:56 AM EDT: China National Gold President Says Talking To Barrick Gold About Potential Partnerships
10:56 AM EDT: China National Gold President: Chinese Gold Demand Likely To Be Slightly Lower In 2Q Vs 1Q
11:39 AM EDT: China National Gold Is Talking to Barrick About Potential Partnerships
By Alistair MacDonald
China’s largest gold-mining company, China National Gold Group Corp., is on the hunt for global acquisitions and partnerships, the company’s president said, in a move would make it a potential kingmaker in the beleaguered gold industry.
Xin Song said that he recently talked about potential partnerships with Barrick Gold Corp., the world’s largest gold producer. But he said talks about an investment in the African properties of another well-known mining name, Robert Friedland, aren’t currently active.
China is the world’s biggest consumer and producer of gold, giving the nation increasing sway when it comes to both its price and production. Last year, the country’s gold consumption grew to more than 1,176.4 metric tons, but its production was 428 metric tons, a dynamic which encourages overseas acquisitions, analysts say.
Mr. Song said he believed that demand for gold in China will remain strong even if the second quarter of this year sees a slight decline over the preceding quarter.
Acquisitions by China Gold would revive the mainly moribund market for gold mergers and acquisitions. Despite April’s acquisition of Osisko Mining Corp. and several assets sales by gold majors, deals in this sector have fallen as smaller companies struggle to raise finance and larger firms mainly steer clear of acquisitions after years of empire-building.
So far, Chinese companies have mainly been cautious. Mr. Song said that his firm is actively searching the world for opportunities in gold, silver and copper.
“The growing strategy is very clear, we are going out looking at things globally,” he told The Wall Street Journal. “On our hands we have a few opportunities, at different stages.”
Speaking through an interpreter, Mr. Song said the company’s current first preference is for assets in countries that border or are near to China, such as Mongolia, Russia and some of the Central Asian republics. It is also looking for acquisitions in developed countries, such as Canada, Australia and the U.S. As a third option, it is looking at opportunities in developing countries including those in Africa and South America. But “the political situation has to be stable,” he said.
The Wall Street Journal reported last September that China Gold had examined buying a stake or operating part of Ivanhoe Mines, which wants to mine copper and zinc in the Democratic Republic of Congo and gold, nickel and copper in South Africa.
Mr. Song said it hasn’t held talks recently and, in Africa, is currently focused on its properties in the Republic of Congo. The mining executive said that China Gold has a long relationship with Friedland, who is Ivanhoe’s founder and chairman.
“We keep a hotline” open with the entrepreneur, he said. “But we need to figure what the advantage points where we can work together. Just like a marriage we have to know the common benefit.”
Last week, Mr. Song talked to John Thornton, the chairman of Barrick Gold, who has set a key priority for his firm of establishing long-term relationships with Chinese partners.
“Both parties are looking for potential opportunities jointly,” Mr. Song said. “The possibility is there,” he said, though added that the two weren’t yet working toward any specific project.
That opportunity, though, is unlikely to include an investment in Pascua Lama, a massive mine on the border of Chile and Argentina that Barrick Gold has put on hold amid cost overruns and environmental demands from the Chilean government. Mr. Song said the project has several challenges, including its high elevation, its permitting troubles and high capital expenditure.
Chinese gold consumption increased by 41% last year as people took advantage of a fall in the price of gold to buy jewelry and gold bars. Growth tailed off in the first quarter of this year as consumers exited gold investments, in what analysts said underscores how an economic slowdown and constrained credit markets are reducing demand in China after a decadelong buying spree.
Mr. Song, who is also the president of the China Gold Association, said that he believed that the second quarter will be “a little bit lower” than the first quarter but long term demand should stay strong, not least as a younger generation buys jewelry online.
“The Chinese gold industry plays a very important role in the global gold industry,” he said.