Good News on Listing | Frost & Sullivan Assists Chifeng Jilong Gold Mining Co., Ltd. to Successfully List on the Hong Kong Stock Exchange (6693.HK)

Chifeng Jilong Gold Mining Co., Ltd. (hereinafter referred to as 'Chifeng Gold') successfully listed on March 10, 2025. The company plans to issue 20,565.2 million H shares, of which 90% will be international offerings, 10% will be public offerings, and an additional 15% will be underwriters' rights issues. The maximum offering price per share is HK$15.83, with a maximum net raise of HK$32.55 billion.

During the process of listing in Hong Kong this time, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support and highlight the issuer's competitive advantages, assisting the issuer, investment banks and other intermediaries in completing the writing of relevant parts of the prospectus (such as the overview, competitive advantages and strategy, industry overview, business and other important chapters), helping the issuer complete communication with the Hong Kong Stock Exchange and investors, assisting investors in quickly understanding the market ecosystem and competitive landscape, and assisting the issuer in completing feedback on various industry-related issues from the Hong Kong Stock Exchange, etc.

• The company is China's largest private gold producer;

   

• The company is one of the gold producers in China with the highest growth rate in gold production from 2021 to 2023;

   

• The company's all-in sustaining cost (AISC) for gold is below the global average, ranking it in the top quarter of the industry;

   

• The company is the fifth-largest enterprise in terms of gold resources in China in 2023;

   

• The company holds a total of 12 valid mining licenses and 5 valid prospecting licenses within China, consolidating its mineral resource reserves in the Chinese market;

   

• The company holds mining and prospecting licenses in Laos and Ghana, actively expanding its global mineral resource portfolio.

According to the Frost & Sullivan report, in terms of production volume in 2023, the company:

• Ranked fifth in the Chinese gold mining market;

   

• It occupies a market share of 0.4% in the global gold mining market, with the top ten companies all being international gold mining enterprises.

Throughout history, gold has been a precious metal used for coinage, jewelry, and art production. It is also widely applied in high-tech manufacturing, such as electronic products, remote communications, and aerospace. Gold products include physical gold (such as bullion, alloy gold, coins, and gold concentrates produced during the smelting process) as well as gold derivatives. Alloy gold is a semi-pure alloy of gold and silver, usually refined and further purified to obtain the final product, bullion, which is a high-purity physical gold with a gold content of no less than 99.5% (for example, gold bars, coins, and gold medals). Gold concentrate refers to the ore powder obtained through crushing, grinding, and beneficiation of gold mines, mainly composed of gold, silicon dioxide, etc. The final product of the gold smelting process is gold-bearing carbon.

Gold demand is generally divided into the following categories: (i) Jewelry; (ii) Investment (including bullion, gold coins, and exchange-traded funds ("ETFs")); (iii) Central bank reserves; and (iv) Technical or industrial uses. From 2019 to 2023, China's gold demand increased, with a compound annual growth rate of 1.3%. During this period, China's gold demand fluctuated mainly due to changes in the consumer demand for jewelry. The main reason for the decline in gold demand in 2020 was the persistent impact of COVID-19 on the consumer economy, leading to a significant drop in demand for gold jewelry. In 2021, driven by economic recovery and a decline in gold prices starting from 2020, demand for gold jewelry increased significantly, and China's gold consumption experienced a strong recovery. In 2023, due to a substantial increase in China's central bank gold reserves, China's gold demand achieved a year-on-year growth of 10.9%, totaling 37.5 million ounces. During the forecast period, China's gold demand is expected to remain stable. Concerns about future economic uncertainties may suppress consumer demand for jewelry, while also stimulating growth in central bank reserves and investment demand. In the future, gold jewelry demand will decrease, while investment and central bank gold demand will increase, and China's gold demand will remain stable.

Generally speaking, global and Chinese gold supply has remained relatively stable. Gold supply is affected by various factors, mainly including the grade of gold mines, resources and mining difficulty, market demand for gold, fluctuations in gold prices, and government policies towards gold mining industries. China's major gold-producing areas include Shandong, Henan, Inner Mongolia, Gansu, Yunnan, and Xinjiang. In 2023, Shandong ranked first in gold production at 1,417.0 kilograms per ounce. Regarding China's gold supply, although production decreased by about 10% in 2021, companies resumed operations after the safety inspections in Shandong Province (which led to temporary shutdowns of several gold mines) from February 2021 to the end of March 2021, and production was restored by 2022. Benefiting from technological progress, equipment upgrades, and steadily increasing gold demand across various industries, it is expected that China's gold production will increase by 12.3% from 2024 to 2028.

As of December 31, 2023, Chifeng Gold ranked fifth in China in terms of gold production and resource reserves. In addition, compared to most major participants in the market, the company has a more diversified mineral product portfolio and a broader overseas business coverage.

●Market competition pattern in China's gold mining industry

In 2023, Chifeng Gold ranked fifth in gold production in China. From 2021 to 2023, the company's gold production grew the fastest among China's five major gold producers. In addition, compared to most major participants in the market, Chifeng Gold has a more diversified mineral product portfolio and a broader overseas business coverage. The company has comparative advantages in several aspects compared to other leading enterprises in China's gold mining market. For example, compared to most major participants in the market, the company offers a richer variety of mineral products and a broader overseas business coverage. The company's gold production growth over the past three years was the highest among China's major gold producers, with a 33.1% increase from 2019 to 2023. In terms of the proportion of overseas business, the company maintains its position as a leading participant in the market.

● Barriers to entry into China's gold mining market

1.policy barriersMost governments around the world adopt a gold resource mining access system. The extraction and smelting of gold must comply with national gold industry planning, industrial policies, as well as relevant investment project approvals, environmental protection, and land management regulations. Gold mining enterprises need to possess gold resource mining qualifications to obtain a mining permit issued by the local government of the mining area. In addition, gold mining enterprises can only carry out mining activities within the scope stipulated by the state and comply with increasingly strict safety production and environmental protection regulations. For new market entrants, obtaining relevant qualifications in the short term is not an easy task.

2,capital barriersThe gold industry is a capital-intensive sector that requires substantial investment in infrastructure and production equipment in its early stages. Exploration, mining, and refining costs are extremely high, and purchasing equipment requires a huge initial investment. It is worth noting that gold production requires a large amount of initial capital, which is used to purchase ore, build production facilities, and acquire or install machinery for producing gold products.

3,technical barriersWith the decline in ore grade and the increase in mining depth, the difficulty and complexity of gold mining processes have correspondingly risen, posing a high-tech barrier for new entrants. In addition, gold mining companies need to spend a great deal of time and effort cultivating or recruiting qualified professionals who can apply new mining technologies. Moreover, only companies with advanced technology and rich experience can meet the government's increasingly strict requirements for safe production and environmental protection, further increasing the challenges for new entrants.

4,Human capital barriersAs mining shifts towards intelligent and green mining practices, which have become a global trend, the mining industry will become more technology-intensive in the future. Due to the strong demand for talents with information technology, ESG (environmental, social, and corporate governance), and mining experience in this industry, it will become more labor-intensive. Professionals with rich experience are extremely sought after in the job market, while new market entrants often find it difficult to find experienced professionals.

●China's gold miningMarket-driven factors

1.The central bank has increased its gold reservesThe internationalization of the Renminbi is an important achievement in the development of the national economy. Since the Renminbi was included in the Special Drawing Rights (SDR) of the International Monetary Fund (IMF) in 2016, it has become an important component of international reserve currencies. Gold reserves, as an important means of reserve and settlement, are used to hedge against risks in the international financial market. The increase in China's central bank's gold reserves is a trend that conforms to the demand for the internationalization of the Renminbi.

2,Continuous consumer demandConsumers' continuous and long-term demand for gold jewelry and gold as an investment asset plays a significant role in the global gold market. As a traditional pillar of the gold market, the demand for gold jewelry remains relatively stable. In addition, in the face of economic fluctuations or uncertainties, individual investors' investment in gold continues to increase.

3,Gold price risesGold prices affect both the supply and demand of gold. In terms of supply, rising gold prices have expanded the profit margins of gold mining operations, encouraging companies to increase their gold mining activities. On the demand side, some individual investors are attracted by the continuously climbing gold prices, hoping to purchase gold before it reaches its peak in order to achieve profits. In recent years, under the combined effect of increased downward pressure on major economies and widespread pessimistic sentiment in global financial markets, the hedging function of gold has been fully highlighted, leading to an upward movement in gold prices.

4,Increased demand for safe-haven assetsGlobal socio-economic fluctuations and uncertainties, coupled with geopolitical risks such as the Russia-Ukraine conflict and Israel conflict, have jointly driven market demand for safe-haven assets. Against this backdrop, gold, as a traditional safe-haven choice, may attract some investors, and countries may increase their gold reserves to protect their economies from exchange rate fluctuations, thereby promoting the growth of the global gold market. For Laos and Ghana, gold exports play a key role in their economic structures and are an important source of foreign exchange income. Given the promising growth prospects of the global gold market, the gold industries of Laos and Ghana are expected to provide strong impetus for economic development.

●China's gold miningMarket development trend

1.Green miningGovernments around the world have successively introduced a series of policies calling for the development of environmentally friendly gold mining technologies. Therefore, gold mining enterprises are bound to need to update their technologies to promote environmentally friendly mining.

2,deep miningWith the depletion of shallow gold resources, the global gold mining industry has gradually shifted towards deep mining. As surface resources are gradually exhausted, many mining companies have begun to turn to deep mining. The depth of deep gold mines can range from several hundred meters to several kilometers, and some specific gold mines may even reach 4,000 meters or deeper. In China, the National Development and Reform Commission issued the 'Industrial Structure Adjustment Guidance Catalog (2019 Edition)', encouraging the development of deep gold mining. Enterprises capable of gold mining in complex terrain (such as our company) are more competitive in the gold industry.

3,Intelligent miningWith the reduction in digital technology costs and the successful testing and piloting of digital solutions, the feasibility of intelligent mining applications is increasing day by day. Intelligent mining helps to manage resources such as energy, labor, equipment, and infrastructure as variable costs, and integrates with smart automation based on equipment capacity, availability, and utilization rates. Optimizing these variable resources across the entire value chain will improve sustainability, reduce resource consumption, and significantly enhance mining efficiency.

4,Corporate M&AThe proportion of low-grade ore and refractory gold resources globally is relatively high, leading gold miners to face rising production costs and reduced profit margins. Gold mining companies may turn to seek overseas gold resources, capital, and technology. Global corporate mergers and large-scale acquisitions have become the mainstream trend in the development of the gold industry.

●China's gold mining marketKey Success Factors

1.Increase and diversification of gold resourcesFor gold mining companies that maintain competitiveness, it is crucial to increase gold mine resources and diversify them. The scale and quality of gold mine resources are the foundation for gold mining companies to establish economies of scale, maintain long-term growth, and attract investment. Geographical diversification of gold mine resources will significantly enhance the risk resistance capabilities of gold mining companies.

2,Technological innovationChinese gold producers should continuously develop new technologies and apply them through technological innovation to strive for cost reduction and efficiency improvement in operations and resource utilization. Advanced production management systems and technologies are conducive to achieving a high degree of mechanization, digitization, intelligent control, and optimization of the gold production process.

3,ESG governanceThe gold industry should continue to uphold the concept of green development. Environmental safety, humanistic care, and social responsibility are among the main goals of corporate development, which Chinese gold producers will continue to focus on.

4,Supply Chain ManagementGold mining companies need to purchase various equipment and raw materials such as rock drills, rock drilling jigs, loaders, explosives, diesel, and sodium cyanide during the gold mining and processing process. In addition, gold mining companies may need to hire multiple third-party subcontractors for refining, logistics, and other tasks. A well-managed supply chain is crucial for gold mining companies to maintain efficient production and expand their global asset portfolio.

5,Gold price fluctuationsGold price is a key factor affecting the company's revenue and profit. Gold producers must closely monitor the trend of gold prices, flexibly adjust production plans and sales strategies to cope with market opportunities and challenges.

Frost & Sullivan has extensive research experience in the chemical and materials industries, assisting well-known enterprises to successfully enter the capital market. Successful listings include: Biyou Group (9893.HK), Conch Materials Technology (2560.HK), Qiangbang New Materials (001279.SZ), Migao Group (9879.HK), Jihai Resources (2489.HK), Zhongbao New Materials (2439.HK), Shengneng Group (2459.HK), Jinli Yongcimagnet (6680.HK), Avia Avian (IDX: AVIA), Global New Materials (6616.HK), Dafeng Equipment (2153.HK), Yihai International (8659.HK), GHW (9933.HK), Sanhe Fine Chemicals (0301.HK), Xingyu Holdings (2346.HK), Xinghe Holdings (1891.HK), Xuyang Group (1907.HK), Long Resources (1712.HK), Shandong Gold (1787.HK), Henan Jinma (6885.HK), Xingye New Materials (8073.HK), Dongguang Chemicals (1702.HK), Zhongqi Group (1932.HK), Xinbang Holdings (1571.HK), Meigu Technology (8349.HK), Huajin International (2738.HK), Flot Glass (6865.HK), Dynos (1452.HK), Caike Chemicals (1986.HK), Chang'an Renheng (8139.HK), Sansida (1337.TWSE), Born NYSE, CPC NYSE, Gu Shan Group (GU NYSE), Tianhe Chemicals (1619.HK), Yihua Holdings (2121.HK), Sijia Group (1863.HK), and others.