Zijin Gold seeks $3.2 billion in world’s biggest IPO since May

Zijin Gold has a track record of identifying high-potential mines and securing them at low cost, Bloomberg Intelligence said

Zijin Gold International Co. is seeking to raise HK$25 billion ($3.2 billion) for an initial public offering in Hong Kong that’s poised to be the world’s biggest deal of its kind since May.

The unit of China’s top miner is offering about 349 million shares at HK$71.59 each,  with trading set to begin Sept. 29, according to a listing document. Investors expressed enough interest to buy all the shares on sale shortly after the company started taking orders, according to people familiar with the matter.

The gold producer is coming to market at a time when prices of the precious metal extend their rise — it broke another record this week. That’s provided a tailwind for miners to raise funds for further expansion or pay off debt.

Based on the pricing, its shares look relatively cheap compared to other mining companies, according to an analyst. Specifically, the value investors are paying for Zijin’s gold reserves is about 20% lower than the big global miners’ average, and 26% below a mid-sized miners’ average, Bloomberg Intelligence’s Michelle Leung said in a note.

Its parent, Zijin Mining Group Co., is one of the biggest gold producers around the world, with mines spanning from Central Asia to Africa and Latin America.

Zijin Gold has a track record of identifying high-potential mines and securing them at low cost, Bloomberg Intelligence said. The company said in its IPO prospectus that its output is growing faster than any other sizable competitor.

Meanwhile, gold has more than doubled over the past three years, and has recently eclipsed an inflation-adjusted record hit in 1980. Having just hit a fresh record of over $3,700 this week, the metal is seen having more room to run on central bank buying and threats to the Federal Reserve’s independence.

The rally has boosted interest in gold miners globally, prompting a wave of gold producers to raise funds offshore. That includes PT Merdeka Gold Resources, which is planning to raise more than $280 million in what would be Indonesia’s largest IPO this year.

As for Zijin Gold’s listing, it’s set to be the biggest globally since the blockbuster offering by Chinese battery giant Contemporary Amperex Technology Co. Ltd., whose listing raised more than $5 billion.

Singapore sovereign-wealth fund GIC Pte, Hillhouse Investment, BlackRock Inc., Fidelity International Ltd. and Millennium Management LLC were among the more than two dozen cornerstone investors, as reported by Bloomberg earlier. These buyers, which get IPO allocations in exchange for holding the shares for at least six months, agreed to buy about half of the deal.

Part of the IPO proceeds will go toward settling the acquisition of a gold mine in Kazakhstan, according to the company. It also plans to fund upgrades and construction of existing mines over the next five years.