Yangtze River Business Daily news ● Yangtze River Business Daily reporter Cai Jia
Chifeng Gold (600988.sh) expands its overseas "nugget" territory.
On the evening of November 1, Chifeng Gold disclosed the asset acquisition announcement that Chijin Hong Kong, a wholly-owned subsidiary of the Company, intends to acquire 62% of all issued and circulated common shares of Venus Resources for 1.862 billion yuan. The purchase price was $3.91 per share, representing a 24.13% premium to Venus Resources' share price on the New York Stock Exchange.
Venus Resources is an international gold exploration and production enterprise, and its core asset is the wassa gold mine in Ghana. As of fiscal 2020, the WASSA mine has produced a total of 2.4 million ounces of gold, with a total of 11.72 million ounces of resources. The company's target can produce more than 4.5 tons of gold in 2022.
The reporter of Changjiang Business Daily noted that under the strategy of "gold-based", Chifeng Gold has carried out drastic reforms in recent years, focusing on the mining and smelting of gold and gathering high-quality gold mining resources at home and abroad. In 2018, Chifeng Gold acquired the Vientiane Mining Sepon Copper-Gold Mine, the largest mine in Laos, taking the first step towards internationalization. Vientiane Mining has become an important support for the company's performance. As of the end of the first half of the year, Chifeng Gold's overseas assets totaled 4.724 billion yuan, accounting for 68.49% of the total assets.
The realization of the target is listed in three places
On the evening of November 1, Chifeng Gold disclosed its external acquisition plan, in which the Company intends to acquire 62% of all issued and circulating ordinary shares of Venus Resources in cash at a price of US$3.91 per share through its wholly-owned subsidiary, Chijin Hong Kong, for a transaction consideration of approximately US$291 million, or approximately RMB1.862 billion. Chifeng Gold provided a parent company guarantee guarantee for chijin Hong Kong's transaction. The third party contribution ratio is 38%, that is, US$179 million, or about RMB1.141 billion, and each party obtains the corresponding proportion of the target company's shares according to the proportion of capital contribution.
According to the data, Venus Resources is a company incorporated and existing under Canadian federal law, headquartered in London, England, and its shares are listed on the Toronto Stock Exchange (tsx:gsc), the New York Stock Exchange (nyseamerican:gss) and the Ghana Stock Exchange (GSE:GSR).
The core asset of Venus Resources is the Wassa Gold Mine in Ghana, which currently holds 90% of its shares, with the other 10% held by the Ghanaian government. The wassa Gold Mine is a large, young gold producing mine located in the Ashanti Gold Belt, Ghana's largest gold-forming belt. By the end of 2020, the mine had a total resource of 11.72 million ounces (364.8 tons) at an average grade of 3.53 g/t, of which 3.537 million ounces (110 tonnes) were proven+ controlled. As of fiscal 2020, the WASSA mine has produced a cumulative 2.4 million ounces of gold.
According to PwC's audit, in 2020 and the first half of 2021, the target achieved operating income of US$272 million and US$129 million, respectively, and net profit of US$18.28 million and US$395,000, respectively. As of the end of June this year, the total assets and net assets of the subject were 383 million and 42 million US dollars, respectively.
The transaction is a market-based transaction with a purchase price of $3.91 per share, representing a 24.13% premium to the closing price of Venus Resources of $3.15 per share on the trading day before the signing of the agreement.
Chifeng Gold believes that wassa Gold Mine is a production mine with large output and resource scale, high comprehensive recovery rate of dressing and smelting, low operating costs, and is in a good life cycle and good cash flow. It is expected to produce more than 4.5 tonnes of gold in 2022. The company will make full use of the gold mining technology and management experience accumulated over the years to dig deep into the resource potential in the future operation of the wassa mine, further reduce costs, improve operating income, and enhance the company's ability to continue to operate and the scale of profitability.
Under the "gold-based" strategy, it focuses on overseas high-quality assets
In recent years, China's gold enterprises going overseas has become a new development trend.
Since 2018, Chifeng Gold has carried out drastic reforms, implemented the "gold-based" development strategy, focused on gold mining and smelting, gathered high-quality gold mine resources at home and abroad, and gradually divested non-gold mining businesses.
In 2018, Chifeng Gold established Chijin Hong Kong in Hong Kong, which has become an important platform for the company to expand overseas financing and mergers and acquisitions. In that year, the company acquired the Vientiane Mining Sepon Copper-Gold Mine, the largest mine in Laos, taking the first step towards internationalization.
In 2019, Chifeng Gold successfully turned a loss into a profit and reached the peak of performance in 2020. In 2019 and 2020, Chifeng Gold achieved operating income of 6.068 billion yuan and 4.558 billion yuan respectively, a year-on-year change of 156.73% and -24.89%; net profit of 188 million yuan and 784 million yuan, an increase of 466.99% and 317.01% year-on-year.
Among them, in 2020, Chifeng Gold's Vientiane Mining Gold Mine Processing System was put into operation 5 months ahead of schedule, helping the company's gold production to climb. In that year, the company's mineral gold production reached 4588.55 kg, an increase of 122.09% year-on-year. Correspondingly, the company electrolyzed 39,700 tons of copper, down 44.82% from the previous year. In addition, the company also completed the divestiture of 100% equity of Xiongfeng Environmental Protection in the comprehensive recycling of resources. These factors led to a significant decline in the company's operating income.
But at the same time, since last year, the price of gold has risen sharply, and the price of copper has fallen, which has made Chifeng Gold's revenue decline last year but the scale of net profit has increased significantly. During the reporting period, Chifeng Gold's operating income from overseas regions reached 2.203 billion yuan, accounting for 48.33% of the total revenue.
In the first three quarters of this year, Chifeng Gold achieved operating income of 2.668 billion yuan, a year-on-year decrease of 23.45%; net profit of 551 million yuan, an increase of 8.73% year-on-year. Among them, the company's net profit in the third quarter was 150 million yuan, down 47.28% year-on-year.
In this regard, Chifeng Gold explained that Vientiane Mining shifted from the production of electrolytic copper to the main production of gold, and the production and sales of electrolytic copper decreased significantly compared with the same period last year, resulting in a large decline in the company's operating income; the Vientiane Mining Gold Mine Project was in the process optimization stage at the early stage of production, and the production cost was relatively high. In addition, the impact of the epidemic on the gold production capacity is not fully released, the process optimization cycle is extended, etc. have affected the company's performance in the third quarter.
In the first half of this year, Wanxiang Mining achieved operating income of 1.114 billion yuan, net profit of 180 million yuan, and total assets of 4.723 billion yuan at the end of the period. As of the end of June this year, Chifeng Gold's overseas assets totaled 4.724 billion yuan, accounting for 68.49% of total assets.
It is worth mentioning that in addition to the acquisition of Venus resources, Chifeng Gold has long been planning to "dig gold" in Africa. In December last year, Chifeng Gold had planned to acquire control of the Bibiani mine held by Australian listed company rml for US$108.9 million in cash through Chijin Hong Kong, in order to enter West Africa, an important international gold-producing region. But in April, the acquisition was terminated.
Editor-in-charge: zb
This article originated from the Yangtze River Business Daily