Zijin close to buying Australian mine

Zijin Mining Group, China's largest gold producer by output, will consolidate its position in the country's gold sector if it is able to conclude a $212 million takeover of Norton Gold Fields Ltd in Australia, insiders and analysts said yesterday, as the company's acquisition plan drew attention of investors over the weekend.

If successful, the takeover will help expand Zijin's gold reserves and capacity, which will strengthen its leading position, said Liu Shan'en, analyst with the Beijing Gold Economy Development Research Center, warning, however, that the company should be vigilant to mounting investment risks.

"Besides ensuring the quality of the mining resources, companies eager to expand their presence overseas including Zijin need to prioritize cost control on transportation, infrastructure and human resources in foreign countries so as to avoid additional investments," said Liu.

Zijin, a listed company on A- and H-share markets, already holds a 16.98 percent stake in Norton, and is proposing to buy the remaining shares of the Australian company for about A$180.3 million ($174 million), said Zijin's filing late Friday.

Following Zijin's unsolicited approach in April, Norton finally signed a takeover "bid implementation deed" on Thursday, said the statement. And Zijin now needs to submit its bidder's statement in six weeks.

The deal is pitched at A$0.25 per share while shareholders will receive a special dividend of A$0.02 per share once the bid is declared free of conditions, which include Zijin acquiring a minimum 50.1 percent of Norton, Dow Jones Newswires reported Saturday.

Company executives at ASX-listed Norton have unanimously recommended shareholders to accept the off-market cash offer, Norton revealed at a press conference on Friday in Perth, capital of Western Australia.

But the bid remains in its "early stages," with the companies yet to discuss detailed terms, Norton's Managing Director Andre Labuschagne said, according to a statement posted on the company's website Friday.

The takeover still requires approval from Australia's Foreign Investment Review Board and Chinese regulators. Under the terms of the deed, it is also a requirement that the spot price of gold doesn't drop below $1,400 a troy ounce for a 72-hour period of trading in the coming six months.

"These factors potentially add to uncertainties about the company's revenue and profit targets from the deal," said Zhu Zining, a senior stock investor closely following Zijin.

Meanwhile, Norton secured a A$38 million loan facility from Zijin to repay a A$48 million debt from Merrill Lynch, said Labuschagne.