The king of gold, netting 2 billion per month

Business figures

2024-05-10 22:21Posted on the official account of Beijing Business People

Author: Chen Simei

来源：商业人物（ID：biz-leaders）

The market is sluggish, but there are always people who are making a fortune. Chen Jinghe is one of the "lucky ones".

The company he was in charge of won the cycle and caught the wealth of the sky, earning 21.1 billion last year and 6.2 billion in the first quarter of this year.

Chen Jinghe, 67 years old, a native of Longyan, Fujian, is slightly inferior to his fellow countrymen Zhang Yiming and Wang Xing. But when it comes to Zijin Mining (601899.sh, 02899.HK) behind him, many people will be instantly familiar. It is a mining company with 15 major gold mines, 11 major copper mines, 9 major silver mines, 2 major iron mines, 3 major lithium mines, and 6 major zinc (lead) mines in the world.

It is also a regal mass manufacturing machine. From 2019 to the present, Deng Xiaofeng, chief investment officer of Gaoyi Assets, has earned more than 10 billion yuan because of his heavy position in this company. When Deng Xiaofeng bet, Zijin Mining's A-share share price was only about 3 yuan, and the company's stock price has exceeded 18 yuan, with a market value of about 480 billion. 4 years and 6 times, many retail investors and well-known fund managers have made a lot of money because of investing in this company.

Most legendarily, it also created two of the richest people in the region. In 1992, Chen Jinghe, who was originally a local state-owned enterprise (Shanghang County Mining Company), resigned from his position as a senior engineer at the Fujian Provincial Bureau of Geology and assumed the position of general manager of the company, successfully turning the small factory with an annual profit of only 30,000 yuan, and the profit increased by 600 times in a few years. Later, in order to finance and expand his business, Chen Jinghe began to call for restructuring.

At that time, Chen Fashu and Ke Xiping, who were suppliers of Zijin Mining's earthwork works, were granted equity as creditors. Subsequently, the two invested in the company's share reform. Among them, Chen Fashu's "Xinhuadu Department" invested a total of 33.59 million yuan to become the second largest shareholder of Zijin Mining, and Ke Xiping held 5% of the shares through Xiamen Hengxing.

By the time Zijin Mining was listed on the A-share market in 2008, the market value of Chen Fashu's personal and company's holdings reached 15.529 billion yuan, and Ke Xiping's initial investment of 10 million yuan was already worth 7.4 billion yuan. This huge income has become the "cash cow" that Chen Fashu and Ke Xi will invest in the future. Chen Fashu became the richest man in Fujian in 2009, and Ke Xiping has also been the richest man in Xiamen many times.

The topic returns to Chen Jinghe. As the chairman of a company with a market value of 100 billion yuan, Chen Jinghe rarely appears in front of the stage, and in recent years, he is most talked about by the public for a marriage with a significant age difference - four years ago, at the age of 63, he married Ms. Qian Bing, who was 25 years younger than him, and it became a hot topic on social media.

Based on his personal entrepreneurial experience, he obviously has the character traits of Fujian businessmen who gamble hard and are good at observing the times. The courage to mine low-quality mines is a great weapon for him to walk the mining industry. Purple Mountain, the birthplace of Zijin Mining, was originally a poor mine that was not favored, but Chen Jinghe opened the door to this golden mountain by using more than 1,000 tons of explosives to directly level the useless mountain. Behind the generosity and boldness, the early Zijin Mining was also labelled as a barbaric growth, and it was mired in environmental issues and public opinion controversy.

The boldness and courage to bet are another major characteristic of Chen Jinghe. Zijin Mining's ascension to the throne of mining kings is inseparable from its keen merger and acquisition strategy, especially during the period of low resource prices. According to incomplete statistics from relevant media, since 2009, Zijin Mining has launched more than 20 mergers and acquisitions, with a transaction value of more than 54 billion yuan. Years of global mergers and acquisitions have made it a veritable "king of Chinese mines". According to the data, Zijin Mining's copper, gold and zinc output ranked fifth, eighth and fourth in the world respectively last year, making it the fastest growing mining company in the world.

In 2014-2016, when copper and gold prices were declining, Zijin Mining swept almost the world through the rocks, acquiring many minerals (some of which are project stakes) overseas, such as Kolwezi Copper, Kamoa-Kakula Copper in the DRC, Buritika Gold Mine, Barrick New Guinea Company, Phoenix Gold Company and Norton Gold Fields.

In 2022, when gold prices were sluggish, Zijin Mining acquired a 95% stake in the Rosebel mine in Suriname, a 20% stake in Zhaojin Mining and a 30% stake in the Haiyu Gold Mine. According to the financial report, this fiscal year, Zijin Mining's transaction value exceeded 30 billion.

In China, Zijin Mining is a major lithium mine second only to Tianqi Lithium and Ganfeng Lithium, with many minerals such as Xiangyuan hard rock lithium mine in Hunan Daoxian County, Lagoco Salt Lake Lithium Mine in Tibet, and 3Q lithium salt mine in Argentina.

With a large number of low-cost mineral sources that are not envied by peers, and catching up with the sharp rise in gold this year, Chen Jinghe has naturally become one of the big winners in this gold price feast. However, in an objective evaluation, Zijin Mining's performance cannot be blamed only on boldness and lack of money. In addition to mining, hedging risks can also be regarded as a trick.

Both gold and copper are known to have strong cyclical fluctuations. Chen Jinghe's multi-product layout allowed him to hedge some cyclical risks. According to the company's financial report, gold and copper business revenue will account for 42.09% and 25.21% respectively in 2023. In other words, although gold has helped it make a lot of money, copper is also an important pillar, contributing more than 70 billion in revenue, not to mention, and the gross profit margin is also quite high, exceeding 47%. Gold and copper support each other, and can effectively hedge against price fluctuations when it is bad, and resonate cyclically when it is lucky, which is really a win.

Of course, as an upstream mining resource company, Chen Jinghe can't escape the fate of the asset-heavy industry. The scale of its liabilities has been criticized by investors, and last year, the company's capital expenditure reached a record high of 30.4 billion yuan in the same period as its net profit hit a record high. At the same time, due to the expansion of financing scale and the increase in foreign currency borrowing interest rates, the company's long-term borrowings have reached 77.53 billion, and financial expenses have also surged a lot. According to the financial report, Zijin Mining's asset-liability ratio in 2023 has reached 59.66%.

So although the company's hematopoietic capacity is very strong, the funds are still not abundant. Fortunately, due to the increase in production and prices, cash flow is not a problem for the time being. In addition, Zijin Mining's overseas minerals are mainly located in some underdeveloped countries in South America and Africa, and there have always been some hidden concerns in terms of investment security and economic policy risks.

Of course, in the short term, frequent geopolitical conflicts and global economic uncertainty are increasing the attractiveness of gold as a safe-haven asset. Chen Jinghe's mine idea should be quite imaginative. This splash of wealth that has benefited company operators, investment institutions and many shareholders should continue for a while.

*Header Picture | Visual China

View original image 57K

•