In recent weeks, the gold market has shown remarkable resilience as it hit unprecedented highsThis surge in gold prices has positively impacted the stock market, particularly for Zijin Mining Group, whose shares have experienced a meteoric rise, reigniting the fervor around wealth creation associated with this booming industryWhen Zijin Mining first listed in the A-share market, it garnered significant interest from investorsHowever, as the company has aggressively pursued expansion, various challenges and risks have begun to surface, suggesting that the journey of wealth creation may not be without its complications.

On March 8, Zijin Mining's share price soared to 14.89 yuan per share, raising its market capitalization to over 390 billion yuan, marking a new high since its initial public offeringThis substantial increase reflects the heightened value of its reserves amid shifting macroeconomic conditions

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While the same inventory may have differing valuations under various circumstances, the recent record high of Zijin Mining's stock illustrates the favorable enhancement in the worth of its assets, particularly in light of surging prices for gold, copper, and zinc.

Notably, despite the multiple waves of wealth generation since Zijin Mining's entry into the stock market, the latest changes among the top ten shareholders indicate significant divisions among investorsThis divergence in perspectives hints at varying expectations and strategies regarding the company's future, suggesting that not all stakeholders might view the ongoing surge in gold prices as a guaranteed long-term advantage.

The surge of precious metals ignites stock prices.

As the stock rose on March 8, it reached a closing price of 14.89 yuan, pushing the total market value near 392 billion yuan and nearly breaching the milestone of 400 billion yuan, having recorded a 7.51% increase over the past three trading days

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Analysts attribute this rapid price appreciation to the skyrocketing demand and prices of precious metals, especially gold, which has been setting record closing highs consecutively on the COMEX futures market.

The situation in China is equally compelling; on March 7, the Shanghai Gold Exchange reported that the spot price of gold temporarily crossed the 500 yuan per gram threshold, peaking at 506 yuan, which culminated in transactions amounting to a staggering 5.379 billion yuanCopper and zinc futures, too, experienced upward trends, with prices climbing 1.24% and 2.77%, respectively, in April.

Zijin Mining stands out as China’s mining king, boasting substantial mineral resourcesBy 2023, its copper production reached 1.01 million tons, which is an 11% increase year-on-year, surpassing more than half of China’s total output for that year; gold production reached 67 tons, reflecting a 20% year-on-year increase and constituting 20% of the nation's overall gold yield.

Internationally, Zijin Mining ranks seventh in copper and zinc reserves and eighth in gold reserves

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Forecasts suggest that by 2025, production levels will soar to 1.17 million tons of copper, 90 tons of gold, and 48 million tons of zinc, all displaying impressive compound annual growth rates of 11%, 17%, and 3%, respectively.

The positive trajectory of precious metal prices appears particularly promising, suggesting a robust long-term outlookAs the United States moves toward lowering interest rates and slowing the unwinding of its balance sheet, market analysts predict that U.STreasury yields will descend, leading to reduced real interest ratesUnder such circumstances, the logical expectation is that gold prices will rise as the dollar devalues.

Moreover, since last year, central banks worldwide have significantly ramped up their gold purchasesThis significant trend may potentially fuel the continuation of gold price growth into 2024, creating additional momentum for Zijin Mining.

Morgan Stanley has expressed optimism regarding Zijin Mining's future stock performance

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In its reports, the firm observed that, despite Zijin having a lower sensitivity to gold prices compared to pure gold mining companies such as Shandong Gold and Zhaojin Mining, the company is also benefiting from robust sales growth in copper and goldThe bank estimated that for every 1% increase in gold prices, Zijin's net profit would rise by 0.6%, predicting gold's contribution to account for approximately 30% of the company’s total gross profit in the current year.

The frenzied wealth creation movement.

Since its listing on the A-share market, Zijin Mining has not only raised funds through public offerings but has also spearheaded a notable "wealth creation" movementAmong the original shareholders, Chen Fashu and Ke Xiping stand outIn April 2008, upon returning to the A-share market, the Xinhua Dou Group held 2.178 billion shares of Zijin Mining

Based on the issue price of 7.13 yuan, its initial market value amounted to 15.53 billion yuanCompared to their investment, both Chen Fashu and Ke Xiping earned returns that were astronomical.

Shortly after the lock-up period lapsed in 2009, Chen Fashu sold 294 million shares, which netted him 2.7 billion yuan, catapulting him to become the "richest man in Fujian." His newfound wealth allowed him to invest in companies like Qingdao Beer and engage in mixed-reform efforts with Yunnan BaiyaoMeanwhile, Ke Xiping sold 74.77 million shares, cashing out approximately 670 million yuan, which he used to acquire shares in BOE Technology Group, becoming its second-largest shareholder.

As original shareholders gradually exited, Zijin Mining attracted increased interest from institutional investorsThe Gao Yi Xiaofeng No2 Fund, managed by Deng Xiaofeng, first appeared among Zijin Mining's top ten shareholders in 2019 and participated in a capital increase at 3.41 yuan per share, securing 117 million shares

Just over a year later, in February 2021, Zijin Mining reached a peak stock price of 14.28 yuan.

Deng Chengfei, a partner at Ruijun Asset Management, also showed a preference for ZijinThe stock first appeared in his portfolio during the mid-2017 reports of Xing Quan Trend Investment and was valued at 184 million, equating to 2.21% of the fund's total valueBy the second quarter of 2019, Zijin Mining emerged as a top-ten holding in his portfolio.

However, perspectives within institutional investors regarding Zijin Mining have recently started to divergeDuring the first three quarters of last year, funds managed by Deng Xiaofeng at Gao Yi Asset began reducing their holdingsNotably, the Gao Yi Xiaofeng No1 Ruiyuan Fund exited the top ten shareholders roster by the second quarter.

In contrast, funds under Hillhouse Capital significantly increased their positions in Zijin Mining, entering the ranks of its top ten shareholders in the second quarter of last year

Furthermore, foreign investors also remain optimistic, with Goldman Sachs International and UBS AG joining the top ten shareholders by 2023, while the Abu Dhabi Investment Authority continued acquiring shares during the same period.

By the end of the third quarter last year, apart from the controlling shareholder Minxi Xinghang State-owned Asset Investment Management Company, High Yi Xiaofeng No2 Credit Fund and High Yi Xiaofeng Hongyuan Fund held approximately 4.11 million shares and 2.98 million shares, accounting for 1.56% and 1.13% respectively, ranking fifth and sixth among shareholdersGoldman Sachs held 0.99%, the Abu Dhabi Investment Authority owned 0.58%, and Hillhouse's HHLR held 0.54%.

Concerns behind aggressive growth.

Zijin Mining's transformation from a local mining company in Shanghang to a global mining giant is attributed not only to outstanding mining technology and management practices but also to significant investments in industry acquisitions

In 2005, Zijin initiated its "going out" strategy, acquiring 21% of Canadian Peak Mining for 1.95 million Canadian dollars, marking its first step toward globalization.

Over subsequent years, Zijin became a notable player in global mining acquisitions, establishing a footprint in major mineral-rich regions worldwideInterestingly, Zijin has a penchant for striking deals during downturns in the mining industryFor instance, in 2015, following the gold boom's end, major global mining corporations reported massive losses, with Vale facing about 12.1 billion dollars in lossesDuring this tumultuous period, Zijin took the opportunity to make substantial acquisitions, including those of Tibet Julong Copper, the Wolfram Creek Gold Mine, Barrick (Papua New Guinea), Phoenix Gold in Australia, and Norton Gold Fields.

Upon entering 2022, Zijin once again capitalized on the industry's low tide by acquiring 20% of Zhaojin Mining, Hai Yu Gold Mine, and Rosebel in South America, alongside acquiring shares in Jiangnan Chemical and controlling Longjing Environmental Protection

In total, the acquisitions and equity transactions exceeded ten, with an estimated expenditure of nearly 35 billion yuan for that year alone.

Following extensive mergers and acquisitions, Zijin Mining's asset scale burgeoned, with total assets hitting 3.308 trillion yuan as of September 2023, a staggering increase of 2.556 trillion yuan compared to the end of 2014.

However, this aggressive acquisition strategy has inevitably led to a soaring debt level, which amounted to 1.952 trillion yuan by the end of the third quarter of 2023, resulting in an increased debt-to-asset ratio of 59.02%. Increased borrowing also escalated the company's financial costs; in the first three quarters of 2023, interest expenses totaled 3.604 billion yuan, marking a year-on-year increase and placing considerable pressure on net profit, leading to a decline since 2019.

Additionally, the foreign acquisition strategies employed by Zijin Mining expose it to significant overseas risks