Zijin Mining Announces Acquisition of Over 10 Billion, Chifeng Gold H Shares Plummet 25%

Gold prices remain under short-term pressure due to deleveraging effects.

Zijin Mining (601899.SH, 02899.HK) recently announced a nearly 18.3 billion yuan acquisition of Chifeng Gold (600988.SH, 06693.HK), but the gold market experienced a continuous sharp decline.

On March 23, Zijin Mining’s A-shares fell by 3.38%, and H-shares dropped by 4.97%. Chifeng Gold’s A-shares hit the daily limit down, while H-shares plummeted 25.1%, closing at HKD 31.52, with a turnover of HKD 1.436 billion, approaching the acquisition price of HKD 30.19. Its total market value also fell below 60 billion yuan.

Industry insiders believe that the sharp decline in Chifeng Gold is related to the relatively low acquisition pricing, especially the low pricing of the H-share issuance; additionally, recent significant drops in gold prices have caused some investors to face liquidity issues, leading to leveraged gold selling. Short-term, gold prices are still under adjustment pressure, and investors can gradually position themselves once the market stabilizes.

Shareholding will exceed 25%

On the morning of March 23, Zijin Mining and Chifeng Gold simultaneously announced that Zijin Gold, a wholly owned subsidiary of Zijin Mining, plans to acquire control of Chifeng Gold through a combination of A-share purchase and subscription of newly issued H-shares, with a total transaction value of about 18.258 billion yuan. After the transaction, Li Jinyang will divest all holdings in Chifeng Gold, and Zijin Group will hold approximately 242 million A-shares and 330 million H-shares, accounting for about 25.85% of the enlarged issued share capital, becoming the single largest shareholder.

The transaction consists of two parts: A-share transfer and H-share issuance. Zijin Gold will acquire 242 million shares of Chifeng Gold at 41.36 yuan per share, totaling about 10 billion yuan. For the H-shares, Zijin Mining plans to subscribe to 311 million new H-shares at HKD 30.19 per share, with a subscription amount of about HKD 9.386 billion (RMB 8.252 billion).

Upon completion, control of Chifeng Gold will change hands. Currently, Zijin Mining, through other wholly owned subsidiaries, holds 19 million shares (0.99%). After the transaction, its subsidiaries will hold a total of 572 million shares, about 25.85% of the total shares after the issuance.

By 2025, Chifeng Gold is expected to achieve operating revenue of 12.639 billion yuan, a 40% increase year-on-year; net profit of 3.082 billion yuan, up 74.7%. Zijin Mining expects 2025 revenue of 349.08 billion yuan, nearly 15% growth, and net profit attributable to parent of 51.8 billion yuan, up 61.55%.

Zijin Mining management stated that looking ahead to 2026, the macro fundamentals supporting gold prices remain solid, and the value of gold allocation is expected to continue rising. Amid profound changes in the global macro landscape, competition in currency systems and restructuring of global supply chains are intensifying. Central banks are expected to maintain gold purchases to diversify foreign exchange reserves and hedge geopolitical uncertainties. Additionally, ongoing macro uncertainties, combined with concerns over U.S. debt security and increased consensus on strategic gold allocation, are likely to sustain demand for gold ETF investments, working in tandem with central bank buying.

The management also said they will apply financial derivatives scientifically, reasonably, and prudently, strengthening hedging management for trade and commodities.

Gold prices still under short-term pressure

Industry experts believe that gold prices will continue to face pressure in the short term, as global funds are reducing leverage and risk. Investors may wait for better opportunities.

Pan Jun, investment manager at Cheese Fund, said that after the acquisition news was announced, Chifeng Gold experienced selling in both A-shares and Hong Kong stocks. The issuance price of HKD 30.19 per H-share is significantly below the pre-suspension market price of HKD 42.08, setting a low valuation anchor for Chifeng Gold in the short term. The large discount triggered panic selling among secondary market investors. Additionally, funds that previously speculated on restructuring expectations took profits after the positive news, further dragging down the stock.

Pan Jun predicts that in the short term, Middle Eastern geopolitical conflicts have reduced market risk appetite, leading to withdrawals from sectors like non-ferrous metals, and gold mining stocks are entering a pause phase. In the medium to long term, the logic for gold prices remains unchanged: continuous central bank gold purchases, de-dollarization trades, and rising geopolitical uncertainties support increased gold allocation. The fundamentals and valuations of leading gold mining companies have some room for recovery.

Li Zeming, Chief Investment Officer of Blue Water Capital Management Limited, explained that the large decline in Chifeng Gold is due to two reasons: one, related to gold price trends, which may continue downward; and two, the rise in U.S. Treasury yields impacting gold prices. As market risk appetite declines, a deleveraging effect has emerged amid rising risk aversion. Since gold has already increased significantly from USD 2,000 per ounce, some investors with high leverage may see short-term support around USD 4,000 per ounce under deleveraging. Gold mining stocks remain under pressure.

Li Zeming also noted that the HKD 30.19 issuance price is significantly below the previous closing price, disappointing the market. After the transaction, the future stock price of Chifeng Gold and Zijin Mining will depend on gold price movements. After full adjustment, both gold and gold mining stocks present buying opportunities. Investors are advised to focus more on large gold mining stocks.

Li Qian, investment advisor at Huiyan Zhitu, commented that this is a typical case of good news being fully priced in. Zijin Mining’s acquisition of Chifeng Gold is a win-win for both sides, but many market concerns remain. Given the current market correction, stock prices have fallen sharply. Additionally, gold mining stocks had previously surged, but with international gold prices dropping sharply, stock prices are under high pressure. The significant decline also reflects market worries about current gold prices. Investors are advised to wait until prices stabilize before actively considering entry, which could offer better buying opportunities.