company growth

From the Wall St Journal 3rd March 2014

The Australian unit of China's largest gold producer, Zijin Mining Group Co. 601899.SH 0.00% , is confident of sealing an acquisition in the "near future," despite worries over a possible increase in Western Australian state royalties on sales of the precious metal.

Norton Gold Fields Ltd. NGF.AU 0.00% , which is 83%-owned by Zijin, said it won't slow down its effort to double gold production in the near-to-medium-term while Western Australia completes a review of royalties, including those on gold.

"Our strategy is to grow our business through mergers and acquisitions and we have one of the biggest M&A teams in town (Perth) looking at opportunities," said Dianmin Chen, Norton's chief executive.

"We are actively looking and are pretty sure we'll do a substantial deal in the near future," he told The Wall Street Journal on the sidelines of an industry conference in Perth.

Norton wants to eventually achieve annual production of more than 300,000 ounces, compared with the guidance of 176,000 to 184,000 ounces this calendar year, but Mr. Chen said the targeted increase may grow "well beyond" that level depending on Zijin's appetite for assets in Australia.

Zijin's Chairman Chen Jinghe confirmed in Hong Kong this week that the group has 8 billion yuan ($1.3 billion) earmarked for M&A activity, including large-scale operations, Mr. Chen said.

Zijin, based in southern China's Fujian province, has made little secret of its desire to grow overseas but Mr. Chen said that Zijin is keeping a close watch on the Western Australian government's long-running review of royalties, which may lead to a decision on gold later this year.

The resource-rich state is seeking to boost revenue in the face of weaker commodity prices, and tackle ballooning debt that has knocked down its credit rating.

Norton won't put its M&A plans on hold until the royalty issue is decided, Mr. Chen said. But he warned that any increase in the levy, currently 2.5%, will have a "very negative" impact on the attractiveness of Western Australia to China.

"This is going to have an impact on their (Zijin's) decision on where they are going to put their investments," Mr. Chen said. "We have a very good investment reputation, but we are making too many changes in a very short time, and at the wrong time as well, because the industry is in trouble at the moment."