Zijin Mining (2899 HK): Fully Valued Ahead Of (Expected) Gold Unit Spin-Off

• Back on the 30th April 2025, Zijin Mining (2899 HK) said it planned to spin off its overseas gold mine assets on the Hong Kong exchange.

• The newly created unit, Zijin Gold International, owns/operates mines in South America, Central Asia, Africa and Oceania, including the Buritica project in Colombia, the nation's largest gold mine.

• A Circular is now out concerning the spin-off, which is not subject to shareholder approval. Pegged to peers, Zijin appears fully valued.

The Trade:

• A spin-off makes sense as Zijin capitalises on the upward cycle in gold prices.

• However, I see Zijin trading at a single-digit discount to NAV.

• Before any holding company discount.

This insight is labelled bullish as I'm not bearish here.

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The NEW News

• A Circular detailing the gold unit spin-off has been dispatched.

• Given the size of Zijin Gold relative to its parent, it is not a notifiable transaction according to the Listing Rules, and therefore, no shareholder approval is required.

• The spin-off is not a formality, and various regulatory approvals - such as CSRC - are still required.

• Timetable? No timetable has been furnished.

• Size? The number of new shares to be issued by Zijin Gold will not exceed 15% of issued shares on a fully diluted basis.

  • 15% is the minimum free float (not 25%) as Zijin Gold is expected to have market cap in excess of HK$10bn.

• Assured entitlement? Yes, existing Zijin Mining shareholders - H shareholders only, not A shareholders - will be provided with an assured entitlement to the shares in Zijin Gold, subject to a shareholder vote at a (expected) forthcoming EGM.

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On Zijin Gold

• The assets to be involved in the spin-off consist of eight large-scale gold mines located in South America, Central Asia, Africa and Oceania - full detail of these mines can be found on page 33.
  

  • Apart from the Porgera Mine in PNG, Zijin Mining holds a controlling stake in each mine.

• Finances for the spin-off are limited. Zijin Gold's net profit (after non-recurring items) was RMB3.3bn in FY24, up 99% yoy.

  • As a comparison, Zijin Mining net profit (after non-recurring items) was RMB31.7bn in FY24, up 47% yoy.

  • Therefore net profit (after non-recurring items) for Zijin Mining, net of Zijin Gold, was RMB28.4bn in FY24, up 42% yoy.

• The upshot: Zijin Mining's profit is growing; Zijin Golds's are growing faster. But remain a smallish % of the overall group - ~10% of group profit.

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