"M&A is the basic growth model of mining companies, but M&A is not just 'buy, buy'. M&A with regular profits only expands the scale of operations. The logic behind obtaining excess M&A profits is organic M&A growth." March 30, No. At the Second China International Mining Investment and Development Summit, Wang Jingbin, Chief Geologist of Zijin Mining Group Co., Ltd. said.
Wang Jingbin pointed out that the growth path of mining companies is to find the starting mine through geological surveys, and then carry out mergers and acquisitions on this basis to achieve transnational development. In Wang Jingbin's view, the development of a mining company requires a well-established mine. For Zijin Mining, the Zijin Mountain Gold-Copper Mine is the "birthplace" of Zijin Mining. Wang Jingbin said that the Zijin Mountain Gold and Copper Mine has obtained a huge cash flow for Zijin Mining, realized a cumulative profit of 22.5 billion yuan, and supported the merger and acquisition of foreign projects; it has established Zijin Mining’s mine development technology advantages: innovation in the exploration and development of large-scale low-grade gold and copper mines Concept and technology system; became the Huangpu Military Academy of Zijin Mining talents, providing talent and management support for rapid expansion; created a beautiful business card for Zijin Mining to display to the outside world (National Mine Park, Industrial Tourism Demonstration Site). Wang Jingbin pointed out that mergers and acquisitions are the basic growth model of mining companies. But mergers and acquisitions are not just "buying, buying and buying". Regular profit mergers and acquisitions only expand the scale of operations, and excess profits from mergers and acquisitions must be obtained. The logic behind it is organic mergers and acquisitions growth, that is, the combination of mergers and acquisitions growth and organic growth. In 2022, Zijin Mining will complete 10 mergers and acquisitions with a cumulative amount of 31.9 billion yuan. Mergers and acquisitions have added equity resource reserves equivalent to Zijin Mining: 12.15 million tons of lithium carbonate, 682 tons of gold, 1.34 million tons of copper, and 1.84 million tons of molybdenum. Currently, Zijin Mining maintains 73.72 million tons of copper, 3117 tons of gold, 11.18 million tons of zinc (lead) and 12.15 million tons of equivalent lithium carbonate, ranking 7th, 9th, 7th and 9th in the world respectively. A Chinese enterprise with the most non-ferrous metal mineral resources.
According to Wang Jingbin, there are four main aspects of organic M&A growth:
One is low-cost mergers and acquisitions. Take advantage of the window of opportunity, such as mergers and acquisitions at the bottom of the cycle, mining assets sold due to financial problems, domestic mining assets near the bottom (bottom policy, bottom investment), etc., such as Zijin Mining’s $412 million acquisition of the Kamoa copper mine in 2015, tons of copper The cost is 176.5 yuan/ton; in 2019, CITIC Metal invested in Ivanhoe's copper cost as high as 1705.5 yuan/ton.
In addition, Wang Jingbin said that low-price mergers and acquisitions can also acquire sub-optimal assets, advance the layout of emerging industries, wait more and wait for opportunities. For example, Zijin Mining will actively enter the "lithium" mine in 2022, and catch up in a relatively backward situation. The Shapinggou molybdenum polymetallic mine project has been tracking for more than ten years before waiting for the right time.
The second is to increase reserves through prospecting. "Additional resources are profitable." Wang Jingbin pointed out, "The potential for increasing reserves is an important indicator of Zijin Mining's mergers and acquisitions. Immediately after the delivery, additional exploration will be added, and mine development will be re-planned according to the results of increasing reserves." Like Congo (DRC) Kamoa- The Kakula Copper Mine has achieved a substantial increase in resources after the acquisition.
The third is efficient development. Wang Jingbin said that relying on excellent integration and operation capabilities, the entire process will optimize technical transformation, expand the scale of mining and selection, reduce production costs, increase project profits, and earn back the money that should be earned. The construction period of Ashele Copper Mine in Xinjiang is one year shorter than the feasibility study, the production scale is expanded by 33%, and the investment is 27% lower than the budget; the first phase of the Kolwezi Copper-Cobalt Mine in Congo (DRC) only takes 26 months, and the total budgeted investment 640 million U.S. dollars, with an actual investment of about 300 million U.S. dollars. The second phase of construction was completed in 9 months, creating the "Zijin Speed" of African mine construction.
The fourth is the synergistic effect. Wang Jingbin believes that, on the one hand, it is synergy at the project level to realize the integration of surrounding resources of production mines, such as Shanxi Zijin, Xinjiang Ashele Copper Mine, etc.; on the other hand, it is synergy at the capital level to realize capital premium. In addition, there are overall economies of scale, such as branding, reduced procurement and management costs, and financing.
"The key to organic M&A growth is due diligence starting from the end; global talent team, strong execution; independent technical engineering system: land, mining, selection, smelting, design (feasibility study) technology and engineering support." Wang Jingbin explain. Regarding the basic considerations of Zijin Mining Resources’ investment and M&A, Wang Jingbin pointed out:
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One is the merger and acquisition of minerals. Priority will be given to gold, copper and lithium projects, and other strategic minerals with high added value and long-term shortage in the country.
Second, mature large-scale projects are given priority. Choose large-scale projects that are in production or quasi-production and are expected to have sufficient positive cash flow, including mergers and acquisitions at the project and company levels.
The third is projects with great prospecting potential. Actively participate in projects that have prospecting prospects and can greatly increase resource reserves, including greenfield projects.
The fourth is to focus on controlling mergers and acquisitions or leading operations, supplemented by strategic equity investment.
The fifth is the region. Countries along the “Belt and Road”; countries with below medium risk on the world’s important metallogenic belts; countries with important investment projects.
Excerpt from - Congo Today
