$ZIJIN MINING (02899.HK)$ The doubts surrounding the theft of over 3 tons of gold overseas remain unresolved. In the company's announcement last night, it did not specify how much was lost from the Colombia Buriticá gold mine, which has been continuously subjected to illegal mining, but it is certain that this issue may be difficult to clarify in the short term.

Zijin Mining Group originated from a small county in Fujian and has entered the ranks of the world's leading nonferrous metals mining companies through a series of large-scale mergers and acquisitions both domestically and internationally. However, as the prices of nonferrous metals continue to reach new highs, the company's rapid pace of large-scale mergers and acquisitions has led investors to begin paying attention to the feasibility of the acquisition prices.

It is particularly noteworthy that currently, nearly half of Zijin Mining Group's assets, such as mines, are located overseas, with most of them situated in underdeveloped areas where the political and economic environment is less stable and external operation risks are greater.

The doubts surrounding the theft of over 3 tons of gold from overseas mines await clarification.

On November 14, news circulated that Zijin Mining Group's Columbia Buriticá gold mine was raided by a drug trafficking group, resulting in the theft of 3.2 tons of gold worth 0.2 billion dollars (approximately 1.5 billion yuan). As market attention increased, it topped the charts on several social media platforms.

That evening, the company provided related explanations for the incident on its official website, but did not disclose how much gold was actually lost.

Zijin Mining Group stated that illegal mining activities have long existed around the Muritikaka Gold Mine. After the company completed the acquisition in March 2020, Continental Gold (the company's controlling subsidiary, which owns the Muritikaka Gold Mine) signed a security agreement with relevant departments of the Colombian government to ensure the safety of the mine. Since the second half of 2022, illegal mining incidents have significantly increased due to inadequate enforcement and police presence.

The report indicates that due to historical reasons and site conditions, the Muritikaka Gold Mine has been controlled and illegally mined by illegal mining organizations in shallow areas, resulting in certain losses for Continental Gold, with the exact amount of lost resources yet to be verified. The company remains committed to fighting against illegal mining activities; although the mine has been affected by illegal mining, safety is still under control, and gold production continues to rise.

According to company statistics, Continental Gold produced 6.1 tons, 7.7 tons, and 8.3 tons of gold in 2021, 2022, and 2023 respectively, and by the end of the third quarter of 2024, it had produced 7.5 tons, completing 87% of the annual production plan of 8.6 tons. Against the backdrop of high gold prices, the company's operations have achieved good performance.

Regarding how to resolve the ongoing illegal mining issue in the area, the company stated that it has continuously reported the situation in the mining 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, regarding the Colombian government's failure to provide comprehensive security protection for the project according to its international treaty obligations, it has submitted an arbitration request to the International Centre for Settlement of Investment Disputes (ICSID).

In fact, before acquiring the Muritikaka Gold Mine, Zijin Mining Group had already understood the external operating environment of the area. In a related announcement in December 2019, the company stated that the Muritikaka Gold Mine is located in a region of Colombia with a complex security situation. Through on-site research and hiring two international security consultants to conduct due diligence, the company believes that the safety risks faced by the project can be well managed through the establishment of a safety system and safety plan.

After the transaction was completed, the company placed great emphasis on safety issues, implementing effective and comprehensive safety measures during the construction and operational process of the mine to ensure employee and asset safety. However, in 2023, there were casualties at the Muritikaka Gold Mine.

According to the official announcement from Zijin Mining Group's website, on May 17, 2023, local time in Colombia, the Muritikaka Gold Mine, a subsidiary of Continental Gold, suffered a terrorist attack involving an explosion. The incident resulted in the deaths of two individuals from the security company and labor company contracted by Continental Gold, and 14 people, including four Colombian national police officers, were injured, with no Chinese personnel injured in the attack. Preliminary investigations indicate that the attack was carried out by local illegal mining organizations.

The company chairman, Chen Jinghe, also expressed concern about the aforementioned incident. At this year's annual shareholder meeting in May, he stated that the ore grade of the Muritikaka Gold Mine in Colombia is high, and the quality is also very good; it is a backbone mine for the company, but there are illegal mining organizations that follow drug trafficking groups, making the situation somewhat severe.

In terms of production operation, in the first half of 2024, the Wulitika gold mine produced approximately 5 tons of gold, ranking first among the eight gold mines under operation that are included in the statistics, accounting for 14.13% of the company's production during the same period; by the end of 2023, the mine's reserves were 91.94 tons, with a resource amount of 312.3 tons and a remaining exploitable lifespan of 13 years.

Overseas assets account for nearly half.

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 is implementing a global strategy, operating a number of significant mining investment projects in 15 overseas countries, covering major minerals such as copper, gold, and lithium, with resource reserves and mineral product output surpassing those domestically, making it an important growth area for the company's profits.

Currently, among the 11 major overseas mines in operation, apart from those located in Australia and Serbia, the remaining major minerals are concentrated in developing countries or the world's least developed countries. Most of these underdeveloped countries face issues with weak political and economic stability, posing significant external operational risks.

In fact, since the beginning of this year, amid the backdrop of record highs in nonferrous metals represented by gold and copper, Zijin Mining Group has continued to carry out significant overseas mergers and acquisitions.

Specifically, in January 2024, the company signed a share subscription agreement with Solaris, announced the acquisition of the Akyem gold mine project in Ghana in October, and announced the acquisition of the La Arena gold mine and Phase II project in Peru in November, with the involved prices of approximately 0.69 billion yuan, 7.071 billion yuan, and 1.739 billion yuan respectively, all of which are primarily located in underdeveloped countries.

It is undeniable that zijin mining group started in the remote Shanghang County of fujian more than twenty years ago, when Shanghang Mining Company was renamed zijin mining group, and subsequently listed on the Hong Kong Stock Exchange and A-shares. A series of domestic and overseas mergers and acquisitions enabled it to enter the ranks of the world's leading nonferrous metals mining companies. The continuous large-scale mergers and acquisitions have also attracted the attention of investors.

In May this year, during the 2023 annual shareholder meeting held by zijin mining group, an investor asked about how to determine the feasibility study price when the industry has a bullish outlook on long-term copper prices, in the event that the company pursues related mine acquisitions.

In response, the company's chairman, Chen Jinghe, indicated that the company will not set a very high price, and that the internal price set by the company is relatively conservative. "Including some resources that are now to be packaged and sold, there are certainly issues," he said. "Without issues, it would be impossible to casually calculate how much profit could be made in a day. However, it is important to see whether there are any potential increments that the original owners, following their previous operational models, did not discover after the company takes over relevant projects. That is a skill."

Editor/Rocky