China National Gold Talks to Barrick About Potential Partnerships
China National Gold Group Corp. is on the hunt for acquisitions and partnerships, the mining company's president said, possibly becoming a kingmaker in the beleaguered industry.
Xin Song said he recently talked about potential partnerships with Barrick Gold Corp. ABX.T +0.93% , the world's largest gold producer. But talks about an investment in the African properties of Ivanhoe Mines Ltd. IVN.T -0.77% aren't active, he said.
China is the world's biggest consumer and producer of gold, giving the country increasing sway over prices and output. The country's gold consumption increased to 1,176 metric tons last year while its production was 428 metric tons, encouraging overseas acquisitions, analysts say.
Mr. Song said he believed that long-term demand for gold in China will remain strong as a younger generation buys jewelry online, even if demand falls slightly this quarter from the first.
Acquisitions by China Gold would revive a mostly moribund market for gold mergers and acquisitions. Despite April's acquisition of Osisko Mining Corp. by Yamana Gold Inc. YRI.T -0.90% and Agnico-Eagle Mines Ltd. AEM.T +1.74% and several assets sales by big gold companies, deals have slowed as small companies struggle to raise financing and large ones taper off activity after years of empire building. Chinese companies have been cautious.
But Mr. Song said that his company, China's largest gold-mining concern, is searching for opportunities in gold, silver and copper. "The growing strategy is very clear: We are going out looking at things globally," he said through an interpreter. "We have a few opportunities, at different stages."
He said the company's current preference is for assets in countries near China, such as Mongolia, Russia and in Central Asia. It also is looking for acquisitions in developed countries such as Canada, Australia and the U.S. A third option is in developing countries, including in Africa and South America. "The political situation has to be stable," he said.
China Gold last year had considered buying a stake in or operating assets of Ivanhoe, which wants to mine copper and zinc in Congo and gold, nickel and copper in South Africa.
Mr. Song said China Gold hadn't held talks recently and that its focus in Africa is its properties in the Republic of Congo.
He said China Gold has had a long relationship with Robert Friedland, Ivanhoe's founder and chairman. "We keep a hotline" open with Mr. Friedland, Mr. Song said. "But we need to figure what the advantage points are where we can work together. Just like a marriage, we have to know the common benefit."
Mr. Song said he talked last week with Barrick Gold Chairman John Thornton, who has placed a priority on establishing long-term relationships with Chinese partners. "Both parties are looking for potential opportunities jointly," Mr. Song said. The two aren't working toward any specific project, he said.
Any such opportunity is unlikely to include an investment in the massive Pascua Lama mine on the Chile-Argentina border, which Barrick Gold has put on hold amid cost overruns and environmental demands from the Chilean government. Mr. Song said the project has several challenges, including cost, elevation and permitting difficulties.
China's gold consumption increased 41% last year as people took advantage of a price drop to buy jewelry and bars. Growth tailed off in the first quarter of this year as consumers exited investments.
Write to Alistair MacDonald at alistair.macdonald@wsj.com
Xin Song said he recently talked about potential partnerships with Barrick Gold Corp. ABX.T +0.93% , the world's largest gold producer. But talks about an investment in the African properties of Ivanhoe Mines Ltd. IVN.T -0.77% aren't active, he said.
China is the world's biggest consumer and producer of gold, giving the country increasing sway over prices and output. The country's gold consumption increased to 1,176 metric tons last year while its production was 428 metric tons, encouraging overseas acquisitions, analysts say.
Mr. Song said he believed that long-term demand for gold in China will remain strong as a younger generation buys jewelry online, even if demand falls slightly this quarter from the first.
Acquisitions by China Gold would revive a mostly moribund market for gold mergers and acquisitions. Despite April's acquisition of Osisko Mining Corp. by Yamana Gold Inc. YRI.T -0.90% and Agnico-Eagle Mines Ltd. AEM.T +1.74% and several assets sales by big gold companies, deals have slowed as small companies struggle to raise financing and large ones taper off activity after years of empire building. Chinese companies have been cautious.
But Mr. Song said that his company, China's largest gold-mining concern, is searching for opportunities in gold, silver and copper. "The growing strategy is very clear: We are going out looking at things globally," he said through an interpreter. "We have a few opportunities, at different stages."
He said the company's current preference is for assets in countries near China, such as Mongolia, Russia and in Central Asia. It also is looking for acquisitions in developed countries such as Canada, Australia and the U.S. A third option is in developing countries, including in Africa and South America. "The political situation has to be stable," he said.
China Gold last year had considered buying a stake in or operating assets of Ivanhoe, which wants to mine copper and zinc in Congo and gold, nickel and copper in South Africa.
Mr. Song said China Gold hadn't held talks recently and that its focus in Africa is its properties in the Republic of Congo.
He said China Gold has had a long relationship with Robert Friedland, Ivanhoe's founder and chairman. "We keep a hotline" open with Mr. Friedland, Mr. Song said. "But we need to figure what the advantage points are where we can work together. Just like a marriage, we have to know the common benefit."
Mr. Song said he talked last week with Barrick Gold Chairman John Thornton, who has placed a priority on establishing long-term relationships with Chinese partners. "Both parties are looking for potential opportunities jointly," Mr. Song said. The two aren't working toward any specific project, he said.
Any such opportunity is unlikely to include an investment in the massive Pascua Lama mine on the Chile-Argentina border, which Barrick Gold has put on hold amid cost overruns and environmental demands from the Chilean government. Mr. Song said the project has several challenges, including cost, elevation and permitting difficulties.
China's gold consumption increased 41% last year as people took advantage of a price drop to buy jewelry and bars. Growth tailed off in the first quarter of this year as consumers exited investments.
Write to Alistair MacDonald at alistair.macdonald@wsj.com
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