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SHANGHAI — Chinese gold miners plan to extend the biggest buying spree in four years, as the nation seeks greater clout in the global bullion industry. The prospect may be helping to drive up the price of gold assets in other countries.

Some of the country’s top producers say they want to build on last year’s spree, when the nation spent the most on overseas gold assets since 2011. Overseas deals last year by companies based in mainland China quadrupled from the year before to $483m.

Bigger groups — including Zijin Mining Group, Zhaojin Mining Industry and Shandong Gold Group — have led a wave of domestic consolidation amounting to $5bn of takeovers in the past five years.

China is the world’s biggest producer and user of gold and started price-fixing in Shanghai this week as it attempts to establish a regional benchmark and bolster its influence in the global market.

With limited domestic resources and growing demand, Chinese companies are looking to snap up overseas assets as prices rebound after touching the lowest level in almost six years in December last year.

"A healthy gold price environment always spurs activity, but maybe a bigger factor is the coming of age of gold companies in China," said Peter Grosskopf, CEO of Sprott, a Canadian money manager that made its name investing in gold. "They are acquisitive." That would be a bigger factor for mergers and acquisitions (M&A) than the gold price, he said.

Gold has rallied 17% this year, snapping three years of losses, amid scaled-back expectations for US interest rate rises and financial market turmoil.

Zijin Mining, China’s biggest gold company by market value, sees more opportunities in the current cycle. "Global mining companies are selling high-quality assets right now, so this is a rare chance … to acquire first-tier assets," chairman Chen Jinghe said in an e-mailed response to questions.

Zijin has accounted for most of China’s outbound gold investment, last year, purchasing a 50% stake in Barrick Gold’s Porgera operation in Papua New Guinea for $298m.

"Global mining giants are facing various challenges … which will be a good opportunity for Zijin and other Chinese investors," he said.

"Chinese mining companies’ domestic development is limited by domestic resources, and the future — the hope — lies overseas. If Chinese mining companies failed to grasp the opportunity in this round of the commodity downturn, it will be a big failure," Mr Jinghe said.

Gold prices remain well below the 2011 high of $1,921/oz, and China is timing its interest as established western miners look to offload assets. Spot gold traded at $1,259.10/oz at 4.35pm in Singapore on Thursday. Better stock valuations were "partly because more and more Chinese companies are aggressively looking at opportunities", said Pan Guocheng, CEO of China Hanking. Predominantly an iron ore and nickel producer, Hanking is planning to conduct an initial public offering (IPO) for its gold projects in Australia.

"We are very aggressively and actively looking for high-quality gold assets," Mr Pan said this month.

"We’ll focus on the IPO first. As soon as that is completed, then we’ll be in better shape for acquisitions. We want to establish our presence in the Australian capital market and get the investor community to support more acquisitions."

Zhaojin Mining Industry, the fourth-biggest producer by domestic output, believes the gold price is at the bottom of the cycle, opening a window of opportunity in the next couple of years for acquisitions.

"Now, the price is at the bottom, we want to perform some financial investments," chairman Weng Zhanbin told a conference in Hong Kong this month.

"When it comes to international M&A, we still have a long way to go, but now is the time for us to plant our seeds," he said.

Shandong Gold Group, China’s second-largest producer by output, was also seeking to expand overseas to feed rising domestic demand, GM Li Guohong said.

Its focus was both across the One Belt One Road region — covering Asia, Europe and Africa — as well as North America, he said.

Original Article: http://www.bdlive.co.za/world/asia/2016/04/22/chinese-miners-eager-to-snap-up-gold-assets-abroad

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