In response, the reporter of Securities Daily contacted the relevant personnel of Zijin Mining securities department and sent the interview outline to the company, but the other party replied that the current acquisition project has not yet been delivered, and there is still uncertainty, so it is temporarily inconvenient to be interviewed.
Increasing debt pressure
On June 8, Zijin Mining announced that it would purchase 50.1% of the equity of Julong copper at a price of 3.882 billion yuan, of which the 100% equity of Julong copper was valued at 7.75 billion yuan, while the 100% equity of Julong copper was valued at about 18 billion yuan in 2018.
In the halo of the largest copper mine in China, Julong copper is responsible for a total of 9.617 billion yuan, with a debt ratio of more than 83%, which puts great pressure on its subsequent investment.
As of the end of the first quarter, Zijin Minings debt ratio was 58.06%, and the companys capital demand for projects under construction from 2020 to 2021 was about 10 billion yuan. According to institutional analysis, the acquisition of Julong copper will further increase the companys original high debt ratio.
Zijin Mining said that the current debt level of the Target Corp is relatively high. After the completion of the acquisition, it will be included in the companys consolidated statements. It will arrange to increase capital matters and ensure the capital demand necessary for project construction. In the short term, the companys asset liability ratio will rise. However, with the completion and operation of the project, especially after the project is profitable, the companys asset liability ratio will decline rapidly.
However, in the view of industry insiders, although Zijin Mining has low-grade mine development experience, the operation and development of Julong copper industry is still full of challenges.
Share in Tibet Tianyuan loss to date
Wang Yi, an analyst with Zhuo Chuang, told Securities Daily that compared with overseas high-quality mines, the domestic mine grade is generally low, and the weak cycle of copper market demand will continue, posing a challenge to the profitability of low-grade copper mining.
According to the disclosure, the estimated total ore volume of Qulong mining area is 1879 million tons, the copper metal volume is 7.1904 million tons, and the average grade is only 0.383%. This grade is lower than 0.4% grade of Duobaoshan copper mine and bor copper mine in Zijin mining, or it will become the lowest grade copper mine in Zijin mining.
Industry insiders told reporters that the Qulong Copper Polymetallic Mine and rongmucuola Copper Polymetallic Mine are porphyry copper mines with relatively low overall grade and high sensitivity of economic benefits of the project to copper price changes. If copper price fluctuates greatly in the future, it will bring great uncertainty to the profit of the project.
According to the data of Zijin Minings annual report, the reporter of Securities Daily found that Zijin Mining Co., Ltd. has not made profits since it participated in Tibet Tianyuan mining project in 2011, and the accumulated loss of equity investment of the project has reached 140 million yuan.
Loan from related parties: RMB 650 million
As early as 2011, Zijin Mining Co., Ltd. invested 1.438 billion yuan (6.95% of the companys net assets at that time) to acquire 45% of the equity of Jinying Mining Co., Ltd., while Jinying Mining Co., Ltd. 100% controlled Tibet Tianyuan Mining Co., Ltd. The project is an important project for Zijin Mining to enter the western region since its A-share listing. However, the project has continued to fail to realize benefits since then.
According to the data of Zijin Minings annual report in the past eight years, the reporter of Securities Daily found that under the financial data of Jinying mining, the companys equity investment income in Jinying mining lost year after year from 2012 to 2019, with a cumulative loss of 140 million yuan.
It is worth mentioning that Chuangxing investment has been renamed as Jinjian global mining. According to the companys 2019 annual report, Jinjian global and Jinying mining signed an agreement in 2012 to provide Jinying mining with a loan principal of US $22.68 million, and the loan has been extended to June 30, 2020. In 2014, Jinjian global mining provided another US $51.75 million loan to Jinying mining, which has been extended to August 31, 2020. The total principal and interest of the two payments is 651 million yuan. It is worth mentioning that the two loans bear interest at LIBOR + 2.60% for one-year term and are unsecured.
Source: Yang Qian, editor in charge of Securities Daily_ NF4425