Gold firms still optimistic about overseas moves

Global price slump causes market capitalization to shrink to record low

Chinese gold mining companies say they remain cautiously optimistic about potential merger and acquisition projects in the overseas market, even as a global gold price slump has caused many mining firms' market capitalization to shrink to a record low.

Stakeholders in the global gold industry - gold-mining firms, banks, jewelry makers - gathered in Beijing on Thursday at the China Gold Congress & Expo 2014 to discuss and exchange ideas about issues covering technological development, environment, design and consumer awareness.

The global gold price has dropped from around $1,900 per ounce in the second half of 2011 to around $1,200 per ounce in September 2014.

However, many companies attending the meeting said they are maintaining a positive approach to overseas projects.

Wang Daqing, a manager with Shandong Gold Group Co, a major gold mining firm in China, said his company is taking a cautiously optimistic stance on overseas expansion now.

"There are many offerings on the market with really low prices. But we stick to projects whose risks are deemed manageable, and we restrict our business to countries and regions that have a good investment environment where investors' interests will be fully protected by the law," Wang told the Global Times on Thursday.

Shandong Gold now has projects in Australia, Canada, and Mongolia, and is closely watching potential opportunities in Chile and Peru, according to Wang.

"For this year so far, our company has not been involved in any mergers and acquisitions," Wang said.

A manager with Fujian-based Zijin Mining Group Co, who declined to be named, told the Global Times that her company will carry out thorough economic feasibility studies, which usually take several years, before settling on any overseas projects.

Two projects in Russia and Kyrgyzstan respectively will begin operation later this year, she said.

Zijin Mining began making overseas purchases in 2005, and so far, has two mines in operation, two infrastructure projects, and two expansion projects across five countries and regions overseas, the manager said.

Wu Chenhui, a metal analyst with industry consultancy website chinaiol.com, warned of caution as the price for mining assets could still keep falling.

"The US is behind a lot of the conflicts around the world, and as it turns its focus to national economy building, there will be less warfare in the near future and that will reduce gold's safe haven appeal, causing the gold price to continue to drop," Wu told the Global Times on Thursday.

Nonetheless, China will still see a strong growth in demand for gold, with an additional 200 million people set to enter the ranks of the middle class in the next few years and a gold-buying culture, Aram Shishmanian, CEO of US-based World Gold Council, a market development organization for the gold industry, told the Global Times Thursday.

China produced 428.16 tons of gold in 2013 and was the world's largest gold producer for the seventh consecutive year, figures from the China Gold Association showed.

China also surpassed India in terms of gold consumption in 2013, with 1,176.4 tons of gold.

In mid-April 2013, a great number of middle-aged Chinese women who handle the money in their families shocked the global market with a gold-buying rush when global gold prices dropped to about 370 yuan ($60) per gram from about 410 yuan per gram at the beginning of that year.

This reportedly resulted in 300 tons of gold being purchased during a short period of 10 days in that month.

However, the gold price has further retreated to around 300 yuan per gram currently.

Addressing these consumers, Shishmanian advised them to buy gold for the long term, and save them for education costs and pension.

"If you are looking for a two- or three-year investment period, you have to look carefully at whether gold is right or not. But if you look at the longer term, then gold does have a very important role to play, among other assets," Shishmanian told the Global Times, "Having a small portion of savings being gold is wise.