① Yintai Gold plans to achieve doubling goals in terms of future production and storage targets. ② It is difficult to achieve the goal of “doubling” with existing resources alone, and external mergers and acquisitions may become an important direction for the company in the future; currently, the company is well-funded and has a more mature M&A and operation team, but it may still take some effort to select specific targets.
Financial Union, November 16 (Reporter Liang Xiangcai) Four months after being included by Shandong Gold (600547.SH), Yintai Gold (000975.SH) has finally launched a “big move” that has been anticipated by the capital market for a long time, achieving the strategic goal of doubling production and storage in the future.
A reporter from the Financial Association News Agency learned from the site of the company's strategy interpretation session that it is difficult to achieve the “doubling” goal with existing resources alone, and that external mergers and acquisitions may become an important direction for the company in the future; currently, the company is well-funded and has a more mature M&A and operation team, but it may still take some effort to select specific targets.
Ou Xingong, general manager of the company, is interpreting strategic goals Photo by a reporter from the Financial Association
Propose the goal of doubling production and storage
On the evening of November 14, Yintai Gold issued the “Outline Development Strategy Plan” announcement, which sets out clear planning goals for gold production and reserves. Among them, mineral gold production plans to achieve 12 tons, 15 tons, 22 tons, and 28 tons respectively by the end of the 14th Five-Year Plan, the end of 2026, the end of 2028, and the end of the 15th Five-Year Plan. In terms of gold resources and reserves, it has reached 240 tons, 300 tons, 500 tons, and more than 600 tons respectively during the same period. This puts forward multiplication requirements on the basis of 7.06 tons of production and 174 tons of reserves in 2022. Among them, mineral gold is planned to be increased in seven years The demand has nearly quadrupled.
On the day after the announcement was issued, Yintai Gold immediately held a related briefing in Beijing. A reporter from the Financial Association News Agency noticed at the conference yesterday that investors asked the most were questions about the “doubling” target of production and storage. Ou Xingong, general manager of the company, said that recently, the leading first-tier gold mining enterprises have all been released to a certain extent in terms of production capacity, and the company's goals for expanding production and storage are also in line with the general development trend of the industry.
Ou Xingong said at the conference, “The five mines under the company have good resource endowments, but the continuity of resources will be an area where efforts will be focused in the future.”
In fact, Yintai Gold's main gold mine is already showing signs of insufficient resource continuity.
Huacheng Securities mentioned in its October research report that the Dong'an Gold Mine (Dong'an Gold Mine is the core mine of Heihe Yintai), owned by Yintai Gold, is currently one of the highest gold grade mines in the country. In a normal year, gold production is about 3 tons per year (gold production in 2022 was 2.98 tons, accounting for 42.2% of the company's total gold output in that year). As of 2022, Heihe Yintai held 1,062,700 tons of resources and ore, including 8.99 tons of gold metal. This would mean that without further increases in reserves, Heihe Yintai's remaining gold resources may be exhausted in the next few years.
In addition, the company also stated in its research record sheet in early November that the company's overall cost of kagin in January-September did not change much compared to last year, and that the cost of Heihe Yintai increased slightly over the same period last year due to a decline in quality.
How to achieve the goal of “doubling”?
The reporter learned from the briefing session that in the future, Yintai Gold may mainly rely on “internal and external purchases” to achieve the strategic goal of doubling production and storage.
Ou Xingong said, “The company's existing mines definitely need to appropriately expand capacity and storage, increase prospecting efforts around the mine, and even expand the scope that can be radiated from the production, operation, and maintenance of current mines. For example, within a certain trucking distance, can the entire site collaborate, and can some related resources be collaborated within one region or even one province.”
A financial news agency reporter read through the Yintai Gold announcement and found that the company has gradually increased its prospecting efforts around the existing main mining area. In 2020-2022, the company's prospecting investment was 81 million yuan, 102 million yuan, and 123 million yuan respectively.
Ou Xingong further stated that the company is currently planning to build two major resource development bases, “one north and one south.” The “North” base should be built in an area similar to the Heilongjiang Dong'an Gold Mine and its surrounding area, because the mine is in a large metallogenic belt, and the amount of gold resources is particularly rich; the “southern” base should be built in an area similar to the one where the Huasheng Gold Mine in Yunnan is located, because the local resource endowment is relatively good.
In addition to extending to the surrounding area of existing mines, Yintai Gold also has plans for external mergers and acquisitions.
Ou Xingong admits, “With the company's existing resources alone, it is difficult to achieve strategic goals, so investment in mergers and acquisitions may be a very critical part of the future.”
An industry insider told the Finance Association reporter that for mining companies, generally, the three most important types of foreign mergers and acquisitions are nothing more than “money,” “people,” and “mines.”
In terms of “money,” at present, Yintai Gold has relatively abundant account capital. Ou Xingong said that as of the end of the third quarter, the company's monetary capital was about 2,888 billion yuan, accounting for about half of current assets, operating cash flow for the same period was 2,091 billion yuan, and has continued to increase in recent years; however, the company's balance ratio was below the industry average all year round. As of the end of the third quarter, the company's balance ratio was 17.58%, and there is plenty of room for capital operation in the future. In particular, after the state-owned Shandong Gold joined in, the total credit granted by banks increased from about 10 billion yuan previously to about 35 billion yuan.
On the “people” side, Ou Xingong said that Yintai Gold still maintains a relatively flexible decision-making mechanism and can quickly seize decision-making opportunities. In addition, the company has always had “genes” in mergers and acquisitions, and there are many employees who have work experience in international mining companies, making it easier to undertake overseas projects in the future.
It should be noted that in the current context of gold prices reaching new highs, the already scarce mining end is even more precious. Some people in the industry chain told reporters that it is currently almost impossible to buy high-yield gold mines in China, because most of these high-quality mines are concentrated in the hands of a few leading mining companies, and they won't let go easily; even gold mines with an annual output of about one ton have basically been manipulated by the industry.
Compared to long-term planning goals, field investors are more concerned about “the target after two years, where does the increase of 5 tons of gold come from?”
Ou Xingong explained at the conference: “The short-term goals were obtained through relevant estimates. The increase mainly comes from the increase in existing production capacity and production support from potential mergers and acquisitions.”