Chinese investors looking beyond slump in mine sector – by Toh Han Shih (South China Post – December 13, 2013)

Despite falling prices, those with a long view and deep pockets on the mainland and in HK are buying projects worldwide, especially for gold

Despite the bearish mood in the global mining sector, participants at a conference in Shenzhen this week said mainland and Hong Kong investors are snapping up mines around the world.

One of them is Samuel Chan Wing-sun, vice-chairman of YGM Trading, a Hong Kong-listed garment firm, who acquired 59 per cent of Crater Gold Mining about 12 months ago and was appointed Crater Gold chairman in February, John Hung, an adviser to Crater Gold, said at the Global Resource Investment Conference. Crater Gold is an Australian-listed firm with gold mines in Papua New Guinea and a metals mine in Australia.

Stewart Cheng Kam-chiu, a nephew of Hong Kong tycoon Cheng Yu-tung, had agreed to co-underwrite a continuing rights issue of A$2.1 million (HK$14.8 million) for Crater Gold, Hung said.

“Before Sam came in, the company suffered from a lack of funds,” he said. “At the moment, it is very difficult to raise funding in Australia because market sentiment is very soft for gold mining companies. The decline in gold prices has forced cutbacks in global gold production. We aim to buck the trend with financial backing.”

Crater Gold managing director Greg Starr said the company was not profitable, but its main gold mine in Crater Mountain, Papua New Guinea, would start production in six months.

John Gravelle, global mining leader at Big Four accounting firm PwC, said falling commodities prices meant “investors no longer want to invest in mining shares”.

The HSBC Global Mining Index fell 33 per cent between January last year and August this year, while the gross profit margins of gold mining companies dropped from 49 per cent in 2010 to 29 per cent last year, Gravelle said.

Mining companies’ revenues stopped growing last year but costs did not stop increasing, he said, so there was a dramatic drop in profits, while the world’s 40 biggest listed mining companies had combined write-downs of US$45 billion.

The poor market conditions are not deterring Toronto-listed Bullman Minerals, which is 60 per cent owned by private Hong Kong and mainland investors.

Bullman planned to buy gold mines in Guinea and neighbouring countries in West Africa to expand its gold ore resources to more than 500 tonnes from 60 tonnes at present, said Peter Yue Shi, its mainland-born chief executive.

The cost of acquiring the mines would run into tens of millions of US dollars, he estimated.

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