Chinese Mining Giant CMOC to Snap Up Four Brazilian Gold Mines for USD1 Billion

(Yicai) Dec. 16 -- CMOC Group plans to purchase four gold mines in Brazil for as much as USD1 billion as the Chinese nonferrous metals giant moves to ramp up its gold production as gold prices reach historic highs.CMOC intends to buy 100 percent stakes in the Aurizona gold mine, the RDM gold mine and the Bahia integrated mining area, which includes the Fazenda and Santa Luz gold mines, from Canadian miner Equinox Gold, the world’s top cobalt producer said yesterday. The acquisitions are expected to hike CMOC’s gold output to about eight tons a year, it added.CMOC will pay Vancouver-based Equinox USD900 million in cash on the closing of the deal, followed by up to USD115 million in sales commissions one year later, it said. Brazil is rich in gold resources and has relatively stable geopolitical conditions, it added.The takeover comes just five months after CMOC forked out USD419 million for another South American mine, Ecuador’s Cangrejos Project, as the Luoyang-based company moves to expand its gold mining footprint on the continent.Aurizona, located in Maranhão state in northeastern Brazil, is expected to produce between 70,000 and 90,000 ounces of gold this year, with the potential to reach 160,000 ounces in the future. The RDM mine in southeastern Minas Gerais state is forecast to have an output of between 50,000 and 60,000 ounces this year, while the Bahia complex in eastern Brazil is expected to deliver 125,000 to 145,000 ounces, the filing showed.CMOC, which mainly deals in copper, cobalt, molybdenum and tungsten, is in the midst of transforming itself into a more diversified mining group, Li Zeming, investment director at Atta Capital, told Yicai. As copper accounts for a rising share of revenue, adding gold assets will help diversify its product mix, he added.Gold prices are at historic highs, and while short-term volatility is possible, downside risks over the medium- to long-term appear limited amid waning confidence in the US dollar and as central banks continue to stock up on gold, Li said.Spot gold prices have surged more than 60 percent so far this year, hitting a record high of USD4,381.48 per ounce on Oct. 20. As of 3 p.m. Beijing time today, gold was trading at about USD4,289 an ounce.As metal prices surge, CMOC’s net profit soared 73 percent in the first three quarters from a year earlier to CNY14.3 billion (USD2 billion), a record for the period, even though revenue slumped 6 percent to CNY145.5 billion (USD20.7 billion).CMOC’s Shanghai-listed share price [SHA:603993] closed down 2.4 percent today at CNY17.50 (USD2.48), though the stock has still gained 173 percent so far this year. Its Hong Kong-traded shares [HKG:3993] ended the day down 1.3 percent at HKD18.04 (USD2.32), bringing their gains this year to 263 percent.Editors: Dou Shicong, Kim Taylor