How much gold has been "plundered" from the Zijin Mining Group (601899.SH)? The issue of illegal mining may be difficult to solve in the short term.

On November 15, the news from Caixin Society reported that more than 3 tons of gold from Zijin Mining Group (601899.SH) overseas was robbed, and the suspicion has not been cleared up. The company's announcement last night did not indicate how much the long-term stolen gold from the Buritic gold mine in Colombia had lost, but it is certain that this issue may be difficult to resolve in the short term. Zijin Mining Group started from a small county in Fujian province and has entered the ranks of the world's leading non-ferrous metal mining enterprises through a series of large-scale domestic and international acquisitions. However, as the prices of non-ferrous metals continue to reach new highs, the company's rapid pace of acquisitions has made investors begin to pay attention to the feasibility of its acquisition prices. Of particular concern is that currently, nearly half of Zijin Mining Group's mining and other assets are located overseas, with most of them in underdeveloped regions with weak political and economic stability and high external operating risks. The cloud of suspicion over the 3 tons of gold stolen overseas has yet to be cleared On November 14, news spread in the market that the Buritic gold mine in Colombia owned by Zijin Mining Group was looted by a drug trafficking group, resulting in the theft of 3.2 tons of gold worth 200 million US dollars (approximately 1.5 billion yuan). As the market's attention increased, the news quickly rose to the top on several social media platforms. In the evening of the same day, the company made a statement on its official website regarding the incident, but did not specify how much gold was lost. Zijin Mining Group stated that there have been illegal mining activities around the Buritic gold mine for a long time. After the company completed the acquisition in March 2020, Continental Gold (a subsidiary of the company, the owner of the Buritic gold mine) signed a security agreement with the relevant government departments of Colombia to ensure the safety of the mine. Since the second half of 2022, due to insufficient on-site law enforcement and police presence, illegal mining incidents have increased significantly. The statement indicated that due to historical reasons and site conditions, the Buritic gold mine has been controlled and partially mined by illegal mining organizations, causing certain losses to Continental Gold. The exact amount of the loss of resources still needs to be verified. The company remains committed to combating illegal mining activities, and although the mine has been affected by illegal mining, safety remains under control and gold production continues to increase. According to the company's statistics, Continental Gold produced 6.1 tons, 7.7 tons, and 8.3 tons of gold in 2021-2023 respectively, and had produced 7.5 tons of gold by the end of the third quarter of 2024, achieving 87% of the annual production target of 8.6 tons. In the current high gold price environment, the company's production has achieved good operating performance. Regarding how to solve the long-standing problem of illegal mining in the area, the company stated that it has been continuously reporting the situation in the mine area to the Colombian Ministry of Defense and national and local military and police, actively seeking assistance, and condemning illegal mining activities through various channels; at the same time, as the Colombian government has failed to provide comprehensive security protection for the project according to its international treaty obligations, the company has filed for arbitration with the International Centre for Settlement of Investment Disputes (ICSID). In fact, before acquiring the Buritic gold mine, Zijin Mining Group had conducted an understanding of the external operating environment in the area. In a December 2019 announcement, the company stated: The Buritic gold mine is located in a region of complex security situation in Colombia. After on-site investigations by the company team and hiring two international security consultants for due diligence, it was believed that the security risks faced by the project could be effectively controlled through the establishment of a security system and the development of a security plan. After the transaction was completed, the company attached great importance to security issues and implemented practical and effective, comprehensive security measures during mine construction and production operation to ensure the safety of employees and property. However, in 2023, an incident of casualties occurred at the Buritic gold mine. According to the announcement on the Zijin Mining Group's official website, on the afternoon of May 17, 2023, local time in Colombia, the Buritic gold mine operated by Continental Gold was hit by a terrorist attack. The incident resulted in the deaths of 2 personnel from Continental Gold's external security company and labor service company, as well as injuries to 14 people, including 4 Colombian national police officers, with no injuries to Chinese personnel. Preliminary investigations showed that the attack was carried out by a local illegal mining organization. Chairman Chen Jinghe of the company has also expressed concern about the above incidents. He stated at the company's annual shareholder meeting held in May this year: The ore grade of the Buritic gold mine in Colombia is high, and the quality is also very good. It is the backbone mine of the company, but there are illegal mining organizations following behind drug trafficking groups, and the situation is somewhat serious. In terms of production and operation, in the first half of 2024, the Buritic gold mine produced about 5 tons of gold, ranking first among the company's eight producing gold mines included in the statistics and accounting for 14.13% of the company's production during the same period; as of the end of 2023, the mine had reserves of 91.94 tons, reserves of 312.3 tons, and a remaining mine life of 13 years. Nearly half of the overseas assets According to the 2024 interim report, Zijin Mining Group's overseas assets amount to 171.1 billion yuan, accounting for 46% of total assets. The company stated that it has implemented a global strategy, operating a batch of important mining investment projects in 15 countries overseas, covering major minerals such as copper, gold, and lithium. The resource reserves and mineral production of these projects have exceeded those of domestic ones, making overseas regions an important area for the company's profit growth. Currently, the company's 11 major overseas mines, except for those located in Australia and Serbia, are mainly concentrated in developing countries or some of the least developed countries in the world. Most of these underdeveloped countries have weak political and economic stability and significant external operating risks. As of the first half of 2024, the operating data of Zijin Mining Group's main overseas mines Source: Company announcements, official website In fact, this year, against the backdrop of record highs in non-ferrous metals represented by gold and copper, Zijin Mining Group has continued to make large-scale overseas acquisitions. Specifically, in January 2024, the company signed a share subscription agreement with Solari's, and in October announced the acquisition ofAnnouncement of the Akyem gold mine project, the acquisition of the La Arena gold mine and Phase 2 project in Peru will be released in November, with prices of approximately 690 million yuan, 7.071 billion yuan, and 1.739 billion yuan respectively. The main mines of these three targets are located in underdeveloped countries.It cannot be denied that Zijin Mining Group started out from Shanghang County in Fujian. Over twenty years ago, it changed its name from Shanghang Mining Company to Zijin Mining Group, and subsequently listed on the Hong Kong and A-shares. A series of domestic and foreign mergers and acquisitions have propelled it into the ranks of the world's leading non-ferrous metal mining companies. The continuous large-scale mergers and acquisitions have also attracted investors' attention. In May of this year, at the Zijin Mining Group's 2023 Annual Shareholders' Meeting, an investor asked about how to determine the feasibility price when the company engages in related mining acquisitions in the industry where long-term copper price consensus is optimistic. In response, Chairman Chen Jinghe said that the company will not set a very high price, and the price set internally is relatively conservative. "Including some resources that are currently being packaged for sale, there must be some flaws." "If there are no flaws, and you think you can make a lot of money in one day, it is not possible to sell," However, it is necessary to see if there are potential increments that the previous owners did not discover according to their previous operation mode after the related projects are taken over by the company, "This, is an ability." This article is reprinted from "Cailiansheng", GMTEight Editor: Liu Xuan.