On June 18, Zijin Mining Group, often referred to as China's "Mining King," made significant headlines with its announcement of a $2.5 billion refinancing plan aimed at overseas investorsThis funding initiative is comprised of $2 billion in convertible bonds and $500 million in new H-sharesGiven the current exchange rates, the total financing could exceed 18 billion yuan, making it one of the largest fundraising efforts in the company's history.
The reaction from the market was immediate and widespread, highlighting the importance of this financial maneuvering in the context of the mining industry and Zijin's strategic direction.
Back in May of this year, Zijin Mining had already issued 2 billion yuan worth of corporate bondsHowever, this new 18 billion yuan H-share financing will still require approval for filing, along with subsequent listing approval from the Hong Kong Stock ExchangeIf all goes as planned, Zijin Mining's fundraising efforts for the year would surpass 20 billion yuan.
Notably, this new financing round would be the largest since Zijin's inceptionThe company stands as a major player in China's mining sector, being the largest gold producer in the country and having secured the 373rd spot in the Fortune Global 500 list in 2023. The company first entered the Hong Kong stock market in December 2003 with its H-shares, and subsequently launched its A-shares on the Shanghai Stock Exchange in April 2008.
According to the announcement, Zijin Mining will be issuing approximately 25.19 million new H-shares at a price of 15.50 HKD each, raising a total of $500 million (about 3.9 billion HKD). This offering price represents a discount of approximately 5.02% compared to the closing price of 16.32 HKD on June 17.
The newly issued shares will account for roughly 4.39% of the existing H-share capital and 0.96% of the total issued capital as of June 18. The anticipated net proceeds from the fundraising will be around 3.871 billion HKD, intended for business operations and expansion in overseas markets, including mergers and acquisitions, working capital, and general corporate purposes.
In parallel, Zijin Mining plans to issue $2 billion in convertible bonds with a 1.0% coupon rate
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These bonds can be converted into Zijin's H-shares under stipulated terms, with an initial conversion price set at 19.84 HKD per share, which reflects a 21.57% premium over the June 17 closing price and a 28% premium over the new H-share placement priceShould these bonds be fully converted, they would represent approximately 13.72% of the existing H-share capital and 2.99% of the total issued capital, with an estimated net funding of $1.979 billion primarily for repaying overseas debts.
Zijin Mining has highlighted that this issuance is notably the largest overseas convertible bond offering by an A + H-listed company and the largest in the Asia-Pacific mining sector since 2008. The high demand was evident as both the convertible bonds and the H-share placements were subscribed multiple times over following the launch on June 17.
Zijin Mining sees this fundraising as a strategic move to refinance high-interest dollar debt, which is expected to significantly decrease its financial expensesPreliminary estimates suggest that simply replacing the high-interest dollar liabilities could lead to annual financial savings exceeding 1 billion yuan.
This impressive financing strategy comes after a series of acquisitions that has seen the company expend over 63 billion yuan within a span of six yearsSince its establishment, Zijin Mining has strategically expanded its footprint in the metals market through numerous mergers and acquisitions, amassing one of the largest mineral resource collections in China.
In 2018, Zijin acquired a 63% stake in Serbia's state-owned copper mining company for 2.398 billion yuanThe following year, it committed over 11.22 billion yuan for the Timok copper project and a further 1.033 billion yuan for a stake in Continental GoldA consistent pattern of aggressive investment continued with various projects related to lithium and renewable energy, particularly starting in 2022.
For instance, Zijin's pursuit of lithium resources led to its acquisition of a Canadian lithium company for 4.939 billion yuan and other investments totaling over 10 billion yuan in associated lithium mineral assets
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The continuous push into new mining sectors underlines the company's strategy to diversify and enhance its operational capacities in line with rising global demand for renewable and alternative energy solutions.
Although there was a notable slowdown in acquisition speeds post-2023, the accumulation of assets during the previous years has significantly propelled Zijin Mining’s revenue growthFrom 2020 to 2023, the reported revenue growth rates were 26.01%, 31.25%, 20.09%, and 8.54% respectively, showcasing a strong performance despite market fluctuationsNet profit growth reflected similar patterns, with staggering increases such as 140.80% growth recorded in 2021.
Much of this expansion financially stemmed from previous fundraising effortsFor example, in 2019, Zijin raised 8 billion yuan through a directed offering to finance its acquisition of NevsunIn 2022 alone, the mining group issued bonds and notes generating an impressive 10.7 billion yuan in funds, followed by another 6.75 billion yuan in 2023. Currently, Zijin is also pursuing an additional 10 billion yuan round of convertible bonds focused on A-shares, indicating its commitment to maintaining a robust financial strategy in an environment where capital is required.
By consistently engaging in significant capital accumulation, Zijin Mining has been actively working to mitigate the repayment pressures that have mounted as a result of their extensive borrowing for acquisitionsThe company reported a rising debt ratio, moving from 55.46% in 2021 to 59.66% in 2023. The repayments peak in 2024 will place additional scrutiny on their fiscal management as a considerable portion of their debts, totaling approximately 382 billion yuan over the next year, are due.
Despite these challenges, a reassuring element from Zijin Mining’s recent reports suggests that their cash flow remains stable and healthyWith available financial room and unused credit facilities totaling around 160 billion yuan, the company appears well-positioned to navigate this challenging financial landscape
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