Zijin Mining Reports Surging Net Income, Acknowledges Growing M&A Threats

Zijin Mining Group ZIJMF, a Chinese copper and gold producer, is encountering increasing obstacles to its mergers and acquisitions (M&A) ambitions due to geopolitical tensions, a slowing global economy, and a rise in resource nationalism.

These challenges have raised concerns over the company's ability to expand its international footprint, particularly in strategic mining jurisdictions like Canada.

Despite these headwinds, Zijin reported a robust financial performance in the first half of 2024, with net income surging 46% to $2.1 billion. Higher commodity prices and effective cost management drove this growth; however, management acknowledged the impact of commodity price fluctuations, geopolitical risks, and policy changes on their future operations.

As one of China's most acquisitive metals companies, Zijin has a history of acquiring copper and gold mines worldwide, including in Canada and Africa. It has also ventured into lithium, aiming to become a significant player in the battery materials market.

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Still, the growing effort by the U.S., EU, and their allies to reduce reliance on Chinese-controlled supply chains is restricting Zijin's expansion plans. These efforts have increased regulatory hurdles for Chinese companies, particularly in mining.

Earlier this month, Zijin's subsidiary, Jinteng Mining, hit a regulatory hurdle after Canada's Industry Minister, François-Philippe Champagne, indicated that he might order a formal review of an asset acquisition. Jinteng made a $295 million deal to acquire Pan American Silver Corp's PAAS La Arena mine in Peru.

Jinteng filed a judicial review application quoting lacking jurisdiction. "The targets are Peruvian entities. They do not have a place of operations in Canada or otherwise carry on operations in Canada, they do not have individuals in Canada who are employed or self-employed in connection with their operations, and they do not have assets in Canada used in carrying on their operations," they noted, per Financial Post.

Recent changes to the Investment Canada Act that tighten control over foreign investments in sectors have created obstacles, given that many junior mining companies—potential takeover targets for Zijin—are listed in Canada.

Despite these issues, Zijin remains focused on expanding its global footprint in copper, gold, and lithium. Management also offered its outlook for these metals.

"The copper market will go into a deficit in the medium to long term due to the metal's use in the global green transition, artificial intelligence and booming demand from emerging economies. Gold will fluctuate at high levels, with geopolitical uncertainty raising haven demand, while the lithium price downturn may continue as supply and demand rebalances," the statement said, Bloomberg reported.

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