In 2015, when the global mining industry was mired in a downturn, Zijin Mining still achieved impressive results and made it onto China’s Fortune list of top enterprises. At the same time, the company aggressively expanded into overseas mining markets, gradually moving toward becoming an internationally oriented mining conglomerate. It’s safe to say that Zijin Mining has undoubtedly become a beacon of hope amid the harsh winter facing the mining sector. In this issue, “Mining Industry” was fortunate enough to interview Mr. Chen Jinghe, Chairman of Zijin Mining. During the interview, Chairman Chen provided an in-depth analysis of the current situation and future prospects for China’s mining industry, highlighted the best opportunities for bargain-hunting in the mining sector, and shared Zijin Mining’s key strategies for success!

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Chen Jinghe’s Analytical Guide

China's mining industry:

Where lies the way forward for China’s mining enterprises?

How do you view the current mining industry situation? Is now the best opportunity to buy mining stocks at a discount?

How can Chinese mining companies leverage and adapt to the country’s major national strategies, such as the “Belt and Road” Initiative?

How should we view “zombie” mining enterprises? What about mining companies whose production capacity is outdated yet continue to employ large numbers of workers?

Overseas Investment:

When mining companies go global, what kind of support do they most urgently need from the state—funding or policies?

Why do most mining companies that venture overseas ultimately end up failing, while Zijin Mining has managed to thrive and make a successful mark on the global stage?

How can we mitigate the risks associated with going global, and how can we effectively address the various challenges that frequently arise during the process of international expansion?

When mining companies go global, what services do they most urgently need from private think tanks to support them?

Winning Secret:

What is the biggest secret behind Zijin Mining’s more than 20 years of remarkable achievements?

What are Zijin’s main measures to cope with the global mining downturn?

| Original Interview Text

1. Mining Industry: Where Lies the Way Forward for China’s Mining Enterprises?

Chen Jinghe:

China’s mineral resource development is generally over-exploited, with relatively low reserves held and extremely low per capita reserve levels. Most mining companies are confined to domestic development, leaving them with very limited room for growth and facing ever-increasing challenges. “Going global” is precisely where the future development of China’s mining enterprises lies.

China is the world’s second-largest economy and the largest market for mineral products globally. In this critical strategic period of profound adjustment in the global mining market, both the government and enterprises must clearly recognize the situation, each fulfill its own responsibilities, and secure strategic positions of strength. If we fail to seize this opportunity and cultivate multinational mining groups with significant international influence, it will represent a major failure in the mining sector.

2. Mining Industry Magazine: How do you view the current mining market situation? Is now the best opportunity to buy mining assets at a discount?

Chen Jinghe:

In the global mining industry, massive pro-cyclical investments made during the mining boom have led to today’s “mining downturn.” Currently, most of Zijin Mining’s key mines were acquired during periods of low mining activity—when costs were low and risks were minimal. It was precisely these counter-cyclical investments that enabled Zijin Mining to thrive and gave the company a significant competitive edge even in the depths of the mining winter.

In recent years, both China and the global economy have experienced a slowdown in growth, leading to a decline in demand for metal and mineral products while supply remains relatively abundant. Gold and base metals are likely to continue fluctuating at low levels, with some varieties potentially hitting new lows. This challenging situation could persist for many years, and the likelihood of a rapid recovery in the short term is virtually nonexistent. As gold and metal prices continue to adjust, a large number of mining assets on the international market have already demonstrated attractive investment value. Although we may not yet have reached the bottom, now is indeed an excellent time to make moves. By contrast, domestic mining companies, constrained by various factors, remain less market-oriented, exhibit low sensitivity to market changes, and their adjustments are still inadequate, leaving them with few opportunities.

3. Mining Industry: How are China’s mining companies leveraging and adapting to major national strategies, such as the “Belt and Road” Initiative?

Chen Jinghe:

Zijin Mining’s development has always been closely aligned with the nation’s development strategy. In 2000, responding to the central government’s call for large-scale development of the western region, Zijin Mining joined in the nationwide exploitation of mineral resources and gradually expanded its presence across the country. Starting in 2003, the company began venturing overseas, actively exploring paths for international growth. From 2010 onward, it launched an internationalization strategy and, following the nation’s launch of the major “Belt and Road” initiative, proactively responded by accelerating its pace of overseas expansion. Currently, Zijin Mining has investment projects in countries along the ancient Silk Road—including Tajikistan, Kyrgyzstan, and Russia’s Tuva—as well as along the Maritime Silk Road—such as South Africa, the Democratic Republic of the Congo, Australia, Papua New Guinea, and Peru.

China’s new round of development should be guided by a global strategy and globalization. The country’s “Belt and Road” initiative, on the surface, focuses on international cooperation and capacity export; at a deeper level, however, it represents an outflow of capital—specifically, the internationalization of the renminbi. As the “Belt and Road” initiative deepens and the process of renminbi internationalization accelerates, it is only a matter of time before Chinese capital fully enters global capital markets. Chinese mining enterprises and investment funds will undoubtedly follow the trend of the times, respond to the nation’s strategic goals, and engage in more comprehensive and in-depth cooperation with international mining companies, thereby boosting the revitalization of the mining market and global economic growth—and becoming active promoters and beneficiaries in the process.

Zijin Mining’s new investments will primarily focus on overseas markets, closely aligning with the nation’s “Belt and Road” initiative. The company will prioritize investing in operating projects or companies located in countries and regions along the Belt and Road, with a particular emphasis on mature, large-scale mining projects for metals such as gold and copper. Zijin Mining will also place great importance on partnering with major international corporations, making them key collaborators, and further deepening its internationalization efforts.

4. Mining Industry: How should we view “zombie” mining enterprises? What about mining companies with outdated production capacity yet still employing large numbers of staff??

Chen Jinghe:

During the boom period when the mining industry enjoys a hot market and high profits, capital and expenditure tend to spiral out of control—especially costly investments made in line with cyclical trends. When the market turns downward, such enterprises often find themselves in dire straits, sometimes even becoming zombie companies that are barely able to sustain themselves. These companies not only fail to create value but actually erode it, holding back the company’s overall development. Therefore, based on each enterprise’s specific circumstances, we must resolutely implement measures such as closure, suspension, merger, or transformation—and make tough, decisive decisions to deal with them effectively.

In recent years, Zijin Mining has been actively implementing a “focus on the big, let go of the small” strategy in response to changes in the economic and mining landscapes. The company is prioritizing capacity expansion at enterprises that are profitable while strictly controlling non-mining investments and focusing on streamlining inefficient small companies and projects. It is important to emphasize that, for enterprises slated for divestiture, proactive measures should be taken in advance to reassign and reassure employees, maintain good communication with local authorities, and secure their support. Even more crucial is to remain highly sensitive to market dynamics at all times, promptly adjusting investment decisions and optimizing enterprise capacity and workforce structure—thus avoiding situations where capacity has become severely outdated while the workforce remains significantly overstaffed.

Zijin Mining’s Domestic Business Distribution

5. Mining Industry Magazine: As mining companies go global, what kind of support do they most urgently need from the state—funding or policies?

Chen Jinghe:

1) Further streamline administration and delegate power.

We look forward to the mining-related regulatory authorities and fiscal and tax departments expediting reforms by delegating more approval powers to local governments, streamlining approval procedures, accelerating approval timelines, and clearly defining the required approval procedures and deadlines for different categories of applications. For “going global” enterprises that receive key national support, we recommend exempting them from mandatory approval or review within a certain limit, based on their asset status and capabilities. Additionally, we suggest simplifying the approval process for subsidies provided by the commerce authorities for overseas investments.

2) Strongly support mining enterprises in “going global.”

We hope that the relevant national ministries and commissions will provide more policy and financial support, on a conditional basis, to mining enterprises that are “going global.” We also call for the establishment of convenient channels to facilitate these enterprises’ access to capital markets. Leveraging our ample foreign exchange reserves, we recommend setting up special funds for overseas mining investments or adopting other effective mechanisms to offer low-interest financing support for enterprises’ overseas mergers and acquisitions as well as project construction. Furthermore, we urge the nation to intensify its resource diplomacy, strengthen cooperation and exchanges in the mining sector at the national level, and sign comprehensive resource development agreements with relevant countries. We also request that countries rich in mineral resources further relax foreign investment准入 conditions, simplify or even eliminate certain investment approval procedures. At the same time, we advocate for enhanced protection and support for Chinese-funded enterprises operating in countries with mining investments—providing greater convenience in consular protection, visa issuance for personnel, community relations, and logistics import and export.

6. Mining Industry: Why do most mining companies that venture overseas ultimately end up failing, while Zijin Mining has managed to thrive and succeed on the global stage?

Chen Jinghe:

There are multiple reasons for mining companies’ failure when they venture overseas. Many of these companies entered the market during its peak, paying a high price in the process. Once the market turns downward, costs become uncontrollable, and without effective management strategies in place, projects easily end in failure. In contrast, Zijin Mining takes a long-term view and tends to invest counter-cyclically, initiating mergers and acquisitions during market downturns to acquire valuable mineral resources at lower costs. For instance, Zijin Mining’s early response to the nation’s Western Development Strategy led to the acquisition of the Ashile Copper Mine in Xinjiang, while its acquisition of the Hunchun Shuguang Gold-Copper Mine in Jilin—aligned with the strategy to revitalize Northeast China’s industrial base through reform of state-owned enterprises—remains one of Zijin’s most profitable assets to this day.

The Norton Gold Fields project in Australia, acquired by Zijin Mining in 2012, is also a relatively successful case. Following the acquisition, the company achieved a smooth transition and, through Zijin’s distinctive management approach and technological innovations, reduced its cash costs by one-third. Moreover, Zijin expanded its operations by acquiring several projects surrounding the mine, thereby strengthening the company’s long-term growth potential. Currently, the company holds gold reserves totaling 356 tons, and its operations and management are fully aligned with international standards. It has now become a wholly-owned subsidiary of Zijin Mining and serves as an important platform for the company’s overseas business expansion. These facts demonstrate that as long as Chinese enterprises possess strength, competence, and innovation, they are fully capable of managing overseas projects effectively—even better than companies from mining-developed countries.

In 2015, Zijin Mining completed two mergers and acquisitions that have had significant impact on the global mining industry. One of these was the Porgera gold mine project in Papua New Guinea, owned by Barrick Gold—the world’s largest gold producer. This mine is a mature, fully operational large-scale gold mine with proven gold reserves of 500 tons and an annual gold production of approximately 15 tons. The project is located in an area with a favorable investment environment, and it has maintained stable and normal production operations. The company also upholds internationally recognized standards of governance and operational practices. Zijin Mining acquired about 50% equity interest in this project for a consideration of US$298 million. Since Zijin’s involvement, the project’s performance has improved markedly, achieving profitability in the year of acquisition itself. It is projected to generate after-tax profits of US$100 million in 2016. Through this acquisition, Zijin Mining has significantly boosted its gold production and increased its reserves of high-quality gold resources. Moreover, by collaborating with Barrick Gold’s world-class team on the project’s development, Zijin Mining will effectively enhance its capabilities in overseas project operations and its global management capacity. Overall, this merger and acquisition represents one of Zijin Mining’s most successful overseas development cases to date. Another major acquisition completed by Zijin Mining in 2015 was the Kamoa copper project in the Democratic Republic of the Congo, operated by Ivanhoe Mines—a globally leading exploration company. This project is one of the world’s largest undeveloped copper deposits, with copper reserves totaling 24 million tons. Upon full completion, the project will have an annual copper metal production capacity of 400,000 tons.

7. Mining Industry Magazine: How can we avoid risks when going global, and how should we address the various challenges that frequently arise during the process of international expansion?

Chen Jinghe:

Zijin Mining has been “going global” for ten years now. Some individual investment projects have failed to achieve their intended objectives smoothly, either due to unfavorable investment conditions in the host countries or issues related to the integrity of partner companies. From these experiences, the company has also drawn valuable lessons and insights.

To cultivate an international perspective and a global mindset, we must be adequately prepared in terms of attracting and developing high-quality, internationally-minded talent.

We must closely align with the nation’s development strategy, and foreign investments should be able to balance the interests and needs of the nation, society, and enterprises.

We must firmly adhere to the company’s established development strategy and focus on industries and projects where we have a competitive edge.

We must conduct thorough and comprehensive due diligence to gain a holistic and systematic understanding of the investment environment in the target location. We need to be fully confident that project construction, development, and operations can proceed according to the planned budget.

Pay close attention to the integration of Chinese culture and your own corporate culture with the culture of the project’s location, and do a good job of localization.

We must enhance our sense of vigilance and anticipate the worst-case scenarios, making more thorough preparations to deal with any potential unforeseen circumstances.

8. Mining Industry Magazine: As mining companies go global, what services do they most urgently need from private think tanks to support them?

Chen Jinghe:

Zijin Mining originated as a small, county-owned state-owned mining company. In its early days, it had no connections, no capital, and no technology—it started from scratch. Today, it has grown into a leading domestic and internationally renowned mining conglomerate. Compared to other large mining companies in China, Zijin has followed a different path, one fraught with more challenges and obstacles. Yet precisely because of these difficulties, we believe Zijin is poised for even greater success in the future. We hope—and are grateful—that professional media outlets and other independent think tanks will continue to pay close attention to Zijin and offer constructive, effective advice to support its healthy and stable development.

Furthermore, we hope that relevant industry organizations will carefully listen to the views of enterprises regarding policies, regulations, and taxes and fees, and actively and systematically convey the current situation and demands of the mining industry to the relevant government departments, thereby creating a favorable environment for mining development and providing a safe haven and warmth for mining enterprises currently enduring a difficult period.

9. Mining Industry: What’s the biggest secret behind Zijin Mining’s more than 20 years of remarkable achievements?

Chen Jinghe:

Innovation is Zijin Mining’s core competitive edge and the single greatest factor behind the company’s success. This encompasses both technological innovation and management innovation. The company boasts high-level R&D platforms and research & design entities, including a national key laboratory, a state-level enterprise technology center, a postdoctoral workstation, a mining and metallurgy research institute, and an engineering design firm. It possesses a portfolio of highly applicable, proprietary intellectual property rights and research achievements that have been successfully applied in its own mines and delivered remarkable economic benefits. In collaboration with Fuzhou University, the company has established the Zijin Mining College, and it has forged long-term partnerships with renowned domestic research institutes and academies. Zijin Mining has solved a large number of challenging technical problems in China’s mining industry and holds a leading position in the industry in areas such as geological exploration, hydrometallurgy, comprehensive utilization of low-grade and difficult-to-process resources, and large-scale engineering development. Through management and technological innovation, Zijin Mining has achieved low costs and high efficiency even under unfavorable resource conditions. The company’s production costs for major mineral products are lower than those of its domestic peers, giving it a significant competitive edge on the international stage. This advantage becomes especially pronounced during periods of weak market conditions. There are numerous exemplary cases illustrating this point. For instance:

The Zijinshan gold mine was once considered a "dead mine" by professional authorities, deemed not economically viable for development. However, following large-scale development and technological advancements, the mine’s recoverable gold reserves now exceed 300 tons, making it the largest single gold mine in China at the time. Its key economic and technical indicators have reached internationally advanced levels, and the mine has become a national demonstration base for the comprehensive utilization of mineral resources. Moreover, it represents the pioneering and successful model for large-scale open-pit heap leaching of gold under the humid and rainy environmental conditions typical of southern China.

The Shuigongdong gold mine in Guizhou is a typical “Carlin-type” gold deposit characterized by high arsenic and carbon content, making it a challenging ore to process. After two years of operation and an investment of over 20 million yuan by a Canadian mining company, the project was voluntarily abandoned. Following the takeover by Zijin Mining, the company independently developed a “heated atmospheric chemical pre-oxidation process” and successfully implemented it in large-scale industrial production—a world first—earning a national technical patent and receiving the First Prize for Scientific and Technological Progress from the China Gold Association. Through intensive technological research, the company has also boosted the overall recovery rate of both beneficiation and metallurgy to over 95%.

The Achele copper mine in Xinjiang has adopted a brand-new engineering design and construction approach. Despite a 33% increase in production capacity, investment has actually decreased by 20%. Moreover, the construction period has been shortened from 3.5 years to 2.5 years, setting multiple new records. Through breakthroughs in key technologies, the copper recovery rate has reached 93%, and the challenge of separating copper from zinc has been successfully addressed. The mine’s gravity-fed water supply project is a prime example of the company’s independent innovation.

Following Zijin’s acquisition of the Norton Gold Fields project in Australia, a series of reforms and innovations have reduced cash costs by one-third.

In addition, Zijin Mining also enjoys competitive advantages in other areas, such as institutional strengths and team advantages. The company’s shareholders place great trust in it and have granted it ample authority; both the board of directors’ decision-making and management’s operational activities are conducted strictly in accordance with market rules. This represents the most significant competitive advantage compared to most state-owned enterprises. Most of the company’s senior executives come from mining backgrounds, possessing high levels of professional expertise and strong professional ethics. They excel at identifying market trends and demonstrate exceptional execution capabilities.

10. Mining Industry: What are Zijin’s main measures for coping with the global mining downturn?

Chen Jinghe:

The company has a relatively accurate understanding of the market and is able to respond swiftly and take timely action. Faced with a challenging economic and mining landscape, the company’s board of directors has established a fundamental working strategy centered on “grasping reform, ensuring growth, and promoting development,” emphasizing market-oriented principles and value creation. Controlling capital expenditures and operating costs has been identified as a key priority.

Comprehensively reform the management system and human resources system to boost enterprise vitality.

Through technological innovation and management innovation, fully tap into the enterprise’s potential, reduce costs, improve efficiency, and enhance performance.

Seize market opportunities by divesting assets that fail to generate value for the company or generate little value but consume significant resources, while simultaneously stepping up mergers and acquisitions of projects that will have a major impact on the company’s future development.