After a three-decade exploration and acquisition blitz, Zijin Mining Group Co. digs up gold, copper and lithium throughout a number of continents. A state-run firm on paper, it has extra regularly behaved like a personal agency, with comparatively few workers and a versatile, risk-tolerant strategy to investments that has put it on monitor to affix BHP Group Ltd. this decade amongst the very prime ranks of copper producers.
“Within the first ten years, we developed gold and copper at Zijinshan. Within the second, we expanded throughout China. And up to now ten years, we’ve turned to international enlargement,” the 66-year-old Chen mentioned on the group’s headquarters in Xiamen, a coastal metropolis some three hours’ drive east of the mine that gave the corporate its identify.
Established Western names like Anglo American Plc restricted spending over the previous decade after the splurges of the final commodities growth, and most have but to totally loosen the purse strings — however Zijin and friends like CMOC Group Ltd. have pressed forward by way of the sector’s wilderness years. The result’s that China, lengthy dominant in refining and smelting, has now been capable of dramatically increase its entry to mined copper.
Zijin’s manufacturing of the steel has greater than tripled over the previous 5 years as new operations ramp up in Africa, the Balkans and at house. On an fairness foundation, it was the sixth-largest copper miner final 12 months.
To a sure extent, the enlargement tracks the nation’s broader rise to international development engine and prime commodity client. However Zijin is emblematic of a coterie of Chinese language corporations — each non-public and state-owned — altering the worldwide metals panorama by producing a wave of mine provide, outpacing others with innovation and billions of {dollars} of funding, typically in less-than-prime areas. China already dominated lithium refining, however has constructed up a strong lithium provide chain. Nickel too stands reworked.
Chen has beforehand described Zijin’s place as firmly in “the center transition zone” between state corporations and personal rivals.
“They’re the fastest-growing copper miner and so they fly a bit below the radar. They’ve ramped up mines internationally very efficiently,” mentioned Colin Hamilton, managing director for commodities analysis at BMO Capital Markets.
“Individuals ask me if China may do in copper what they’ve performed in lithium. The reply is, it’s rather a lot more durable in copper, however numerous the copper development within the subsequent few years is coming from locations with important Chinese language investments.”
Granted, the blueprint shouldn’t be as simple to observe because it was, between worsening geopolitical headwinds and a world scramble for important minerals.
“As a Chinese language firm, future enlargement will be harder,” Chen mentioned, sitting again in an armchair within the firm’s town-center workplace. “As buyers, we can not ignore these pressures.”
Resistance to Chinese language acquisitions is rising throughout Western markets, and Canada’s curbs on international funding in mining have had specific significance for Zijin. The corporate has performed greater than $4 billion value of offers with Toronto-listed corporations since 2015. Even so, its plans to purchase 15% of Toronto-listed copper miner Solaris Assets Inc. have been scuttled in Might, after a prolonged assessment by the federal authorities.
Solaris has since mentioned it can relocate its head workplace to Quito. Zijin says it received’t hand over on Canadian targets.
“All of that is fairly regrettable,” Chen mentioned, including miners would really feel the absence of Chinese language capital. Corporations like Zijin, which may take an extended, strategic view on uncooked materials investments, have lengthy been an essential funding supply for the junior mining sector.
However alternatives for Zijin will nonetheless come, he mentioned, even when they emerge from areas the place massive, blue-chip Western miners nonetheless worry to tread.
“With a purpose to have higher choices, we go to locations with the richest sources on the earth, even in locations with comparatively low growth ranges, or to locations that many worldwide mining corporations contemplate problematic,” Chen mentioned. “That is our differentiation.”
Not every thing has gone Chen’s method over the previous a long time. In 2010, the corporate suffered a critical setback when acid leaked from its copper smelter at Zijinshan into the native river, killing sufficient fish to feed 72,000 folks for a 12 months and inflicting widespread panic. The poisonous leak led to some Zijin and native authorities officers being charged, and Chen was handed a wonderful.
It was, Chen says, a mistake made by a younger firm. The corporate put up a memorial after the catastrophe, and marks the event yearly. Right now, he says, requirements in some respects exceed these of Western counterparts.
Extra just lately, Zijin has been swept up in US accusations of pressured labor use in China’s western Xinjiang area. Its copper-gold unit there was sanctioned by the US in August, a growth Chen mentioned he met with “complete shock and disbelief”. He mentioned salaries have been almost double the native common, and added the corporate’s recruitment standards required workers to be succesful and to affix of their very own accord.
Again at Zijinshan, within the earliest days, Chen’s crew sought to seek out something extra profitable than the scraps of gold that had been noticed within the space way back to the Music dynasty, a thousand years earlier.
He led his crew into the forest, and towards what turned out to be a significant gold lode under the mountain’s peak. Below that, they discovered copper. Extraction didn’t begin till the Nineties, however it turned Zijin right into a poster youngster for Chinese language mining.
In Chen’s telling, the expertise in the end outlined the corporate.
“Expertise and innovation is our key aggressive benefit,” Chen mentioned, a floor-to-ceiling {photograph} of Zijinshan looming behind him. “We now have our personal analysis, design, development capability, so our tasks will be accomplished very quick.”
In actuality, offers have mattered virtually as a lot, accelerating after a 2003 Hong Kong itemizing. From 2006 till final 12 months, Zijin spent no less than $7 billion on acquisitions, most of them accomplished abroad and up to now decade. It invested in Glencore Plc’s convertible bond in 2009, a way of gaining data and, the group mentioned on the time, entry. It moved into battery metals in 2021, with Argentinian lithium.
“We all the time know that many of the world’s highest-quality and largest mineral sources are managed by Western mining corporations,” Chen mentioned. “As a latecomer, the alternatives for acquisitions have been all the time going to be comparatively tough.”
Many offers have been small — the greatest thus far was Canada’s Nevsun Assets in 2018, snapped up for $1.4 billion in money. Nevertheless it’s the early-stage swoops that Zijin stands out for. It’s been sufficient to make sure the corporate is value near 9 occasions greater than it was a decade in the past and might credibly goal the place of prime three copper miner. Output from Zijin’s mines is anticipated to climb to as a lot as 1.6 million tons of copper by 2028, up from 1 million final 12 months — hefty, even when that features some manufacturing attributable to different shareholders.
One such threat was a 2015 gamble on Canadian maverick Robert Friedland and his Kamoa mission. Then, many of the business was in debt and this was at finest a promising mission, tucked away in a distant nook of the Democratic Republic of Congo.
Now it’s one of many world’s greatest. Zijin purchased into the mine and took a near-10% stake in Friedland’s Ivanhoe Mines Ltd, later elevated. Right now, Zijin and Ivanhoe each have a share within the operation of just below 40%.
“He’s been the excessive bidder for the very best belongings,” Friedland informed Bloomberg. “And that’s precisely Warren Buffett’s motto. Warren Buffett mentioned, after I look again at my profession, I all the time made essentially the most cash overpaying for the very best belongings.”
The mine produced virtually 394,000 metric tons of copper focus in 2023 and Chen mentioned Zijin was contemplating a pathway towards 1 million tons of annual output — formidable, given the continued logistics and energy provide challenges at Kamoa-Kakula.
“Our greatest remorse by way of M&A is that we didn’t handle to purchase all of Ivanhoe at the moment,” Chen mentioned. “Robert was not prepared.”
Zijin’s copper surge is properly timed. The prospect of surging demand, because the vitality transition takes maintain, has already pushed the purple steel to a document earlier this 12 months. Massive-scale new mines like Kamoa are uncommon.
“They’re unburdened by the self-imposed constraints that Western mining corporations — that are very threat hostile — face,” Friedland mentioned. “It’s tough to conceive of a future the place Zijin doesn’t proceed to have world main development.”