THE WEST AUSTRALIAN
Monday, 14 January 2013 08:15
Hanking Mining's $22.5 million acquisition of St Barbara's Southern Cross project is the first step in a plan to build a bigger footprint in the Australian gold industry, according to the Chinese company's Australian managing director.
Hanking Australia executive director Mark Yumin Qiu said he had little doubt it could meet its ambition of producing 200,000 ounces of gold from the 2.4 million ounces resource it will own when the transaction is complete, with the company also considering a local stockmarket listing down the track.
But the Southern Cross buy would not be Hanking's last, although Dr Qiu, who conducted his doctoral studies at the University of WA and has held senior roles at Sino Gold Mining and Eldorado Gold Corp, played down the prospects of an acquisition spree.
He said Hanking would spend the next 12 to 18 months delivering production goals at Southern Cross.
"We need to demonstrate to shareholders, demonstrate to the market that we can deliver," he said. "And then we can look out for something much bigger."
Chinese companies have picked up projects containing more than 13 million ounces of gold in a WA spending spree, with the Middle Kingdom's biggest gold producer, Zijin Mining Group, buying Norton Gold Fields for $229 million and Shandong Gold completing a $225 million share placement for a 51 per cent stake in Focus Minerals.
All acquisitions came with big gold endowments but also high operating costs. They need substantial capital investment to become profitable and leave little margin for error for their new owners.
Chinese buyers have seemingly shunned higher-margin projects where shareholders could demand a substantial takeover premium.
Dr Qiu said Australia's political and economic stability was attractive to Chinese investors, despite relatively high local operating costs. But the Chinese acquirers were also aware of the need to build local experience.
"For us it is better to get a lower entry point and then gradually learn about the operations and practices in Australia," he said.
"And then gradually we will look for other opportunities as well.
"If you were to buy something like a Northern Star you would have to pay a very high premium and that's not our strategy at this point. I think that many Chinese companies do not have enough experience in developed countries and we are looking at lower entry point projects. Relatively lower quality projects, in other words, but with time things will change."
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