Gold mining companies usher in major development opportunities

Recently, the “Several Opinions on Promoting the Development of the Gold Market” jointly issued by the six ministries and commissions including the People’s Bank of China (hereinafter referred to as the “Opinions”) clearly define the overall thinking and main tasks of the future development of the gold market. This is not only a major good news but also a major development opportunity for gold mining companies. It is mainly reflected in two aspects:

First of all, for the small and medium-sized gold enterprises, "opinions" has brought new opportunities for development. In the past two years, due to the global economic crisis, international gold prices have continued to rise, and gold companies have entered a “golden cycle”. Driven by profits, gold companies have high enthusiasm for investment, and the speed of new construction and expansion has accelerated. The consequent problem is the tight cash flow.

As the gold industry is a capital-intensive industry, whether it is gold mining, beneficiation or smelting, it requires the purchase of a large number of machinery and equipment and land resources, and with the gradual improvement of national standards for safe production of mines and environmental protection, these two aspects Investment is also increasing. This puts higher demands on the cash flow of gold mining companies.

Most gold mining enterprises mainly rely on bank loans and self-owned accumulation funds to complete their production inputs. The ** channels are relatively single, leading to high asset-liability ratios of enterprises, which restricts the ability of the mine's liabilities and brings more to the mine development. Uncertainties. The "opinions" encourages the development of financial services such as gold bullion, which is of great significance for small and medium-sized gold enterprises to increase their channels, increase their cash flow and enhance their strength.

Second, the "Opinions" clearly stated that it provides strong support for the integration and merger of large-scale gold mining groups.

Due to historical reasons, the concentration of production in the gold industry in China is not high. According to statistics, at present, there are still a small number of small-scale mines that are scattered and extensively managed in China. These small mines are often constructed with very low exploration levels. After the mine is put into production, production, infrastructure and technical reforms are carried out almost simultaneously. Most small-scale enterprises have relatively low levels of metallurgical processes and management. This, coupled with the initial selection and procurement options, may lead to ill-considered and easily lead to greater waste of resources. From a long-term perspective, this is not conducive to the sustainable development of the national economy.

As the country vigorously promotes the integration of mineral resources, the concentration of the domestic gold industry is expected to continue to increase, and the situation of the dominant industry structure of large-scale gold enterprises will become more apparent, and small gold mines with backward technologies and serious waste will be merged or acquired. After the integration of gold companies, unified planning and unified mining are adopted, which not only saves production costs, but also significantly improves comprehensive benefits, and the ability to withstand risks will be further enhanced.

After the outbreak of the financial crisis, powerful domestic gold companies also began a high profile mergers and acquisitions process, accelerating the pace of resource integration. However, a reality that cannot be ignored is that, with the improvement of the integration capabilities of large-scale gold group resources and the expansion of domestic gold resources exploration, the competition for gold resources has become increasingly fierce, and the cost of integration and M&A has also increased. The higher, the gold company financing becomes more and more difficult. This has affected the continuous progress of large gold groups.

The "Opinions" clearly stated that for large enterprises that meet the requirements of the gold industry's planning and industrial policies, commercial banks should expand the line of credit according to the principle of credit. This is undoubtedly good news for a large gold group. The large-scale gold group that is no longer “shocked” is expected to further accelerate the pace of resource acquisition, and the pattern of leading industries of large-scale gold companies is also expected to be realized earlier.