On February 17, Chifeng Jilong Gold Mining Co., Ltd., listed on the Shanghai Stock Exchange as 600988.SH, successfully passed the Hong Kong Stock Exchange' hearing requirements, moving one step closer to becoming a publicly listed entity on the Hong Kong marketThis transition marks a significant milestone for the company, which is poised to join the ranks of other notable gold production firms, notably Zijin Mining Group (02899.HK) and Shandong Gold Group (01787.HK), making it the third gold enterprise to achieve a dual listing in both the A-share and H-share markets.

On February 18, reports emerged indicating that Chifeng Gold has initiated a pre-roadshow, with plans to raise approximately $400 million to $500 million, translating to between 3.11 billion to 3.89 billion Hong Kong dollars.

Known as China’s largest private gold producer, Chifeng Gold is highly active in the extraction, selection, and sale of goldThe company boasts ownership and operational control over seven gold and polymetallic mines, which are strategically distributed across China, Southeast Asia, and West AfricaIts lineup of assets includes several key mines in China such as the Jilong Gold Mine, the Wulong Gold Mine, the Jintai Gold Mine, and the Huatai Gold MineFurther afield, it owns the Sepon gold-copper mine in Laos and the Wassaw Gold Mine in Ghana.

According to data numbered for 2023, Chifeng Gold ranks fifth among Chinese gold producers regarding both gold resource volume and production output, with a reported annual production of 461.5 thousand ouncesNotably, the top four gold producers are state-owned enterprises, emphasizing Chifeng Gold's unique positioning as the largest privately owned gold company in the country.

Due to limited domestic gold resources, major producers from China have increasingly sought mining opportunities overseas to boost production and mitigate risksChifeng Gold's international operations have been particularly successful, with its overseas assets and revenues contributing significantly more than those of its peers

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In 2023, the company reported that overseas operations accounted for approximately 76.9% of its total gold production and 71.9% of its overall revenue, underscoring its diversify strategy and risk management competency.

In its prospectus, Chifeng Gold claims that the ore grades in its domestic gold projects are relatively high, characterizing them as among the top tier deposits in ChinaMoreover, the company has made impressive strides in operational efficiency, outperforming the average standards in the global gold sectorIt has also managed to maintain total sustaining costs that are below the global average.

The company's unit all-in sustaining cost for gold in 2023 was reported to be $1,179.1 per ounce, which was notably 14.4% lower than the global average for the same periodThat year, Chifeng Gold managed a reduction of 12.0% in its total sustaining costs, defying the general trend of rising costs prevalent in the global market.

However, while the company's production has skyrocketed due to various investments and expansion efforts, the growth rate of sales volume has shown signs of slowing down, notwithstanding the strong performance metrics.

Between 2021 and 2023, Chifeng Gold's production surged remarkably, climbing from 260.2 thousand ounces to 461.5 thousand ounces, thereby achieving a compound annual growth rate of 33.1%, significantly outpacing the average growth rate of 16.4% observed among major domestic gold producersSuch impressive growth has established it as one of the fastest-growing firms within the industry.

Driven by geopolitical tensions and looming fears of a global economic downturn, international gold prices have surged to record highs in recent yearsReports from the World Gold Council indicate that gold prices smashed historical records 40 times throughout 2024 alone.

As a result, Chifeng Gold’s product prices have also shown a steady increase, with the average price of gold per gram breaking through 500 yuan in the first three quarters of 2024. Additionally, central banks around the world have been amassing gold as a means to diversify their foreign reserves, driving demand for gold further as investors seek safe-haven assets amid ongoing economic fluctuations

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Recently, the World Gold Council noted that global demand for gold reached an all-time high in 2024, totaling 4,974 tonsThe report emphasizes that central banks' appetite for gold remains insatiable, achieving what it describes as a significant milestone.

Despite these favorable trends, Chifeng Gold's product sales saw a noticeable deceleration following a substantial increase in 2022. In the first three quarters of 2024, the company recorded sales of 352.1 thousand ounces, with a mere year-on-year growth of 4.9%, compared to a higher growth rate of 4.7% displayed in 2023.

Nevertheless, buoyed by the buoyant prices of gold, Chifeng Gold achieved remarkable revenue and profit growthIn its latest earnings forecast disclosed last month on the Shanghai Stock Exchange, the company projected its net profit attributable to shareholders for the fiscal year 2024 to fall between 1.73 billion to 1.80 billion yuan, marking an increase of 115.19% to 123.90% year-on-yearThis growth stems primarily from elevated production and sales volumes alongside price increases, as well as the company's ongoing initiatives aimed at cost reduction and efficient management of production expenses.

It is worth mentioning, however, that Chifeng Gold faces an uphill battle with high tax rates in Ghana, which could negatively impact profitabilityAccording to its prospectus, income tax expenses soared from 157 million yuan in 2021 to 328 million yuan in 2022, partly due to higher effective tax rates imposed in Ghana combined with losses from non-deductible gold streaming operations in the nationThe income tax rate in Ghana was as high as 35%, significantly outpacing the domestic benchmarks, and these pressures have continued to mount, with tax expenses rising to 583 million yuan in the first three quarters of 2024.

Ambitions run high for Chifeng Gold in the current environment where gold has ascended to the status of a hot commodity, with Wall Street heavyweight Peter Schiff recently forecasting that "the precious metals mining industry will be the best-performing sector of the decade." For gold mining companies striving to remain competitive, expanding and diversifying mineral resources is essential, as the scale and quality of mining resources form the backbone for achieving economies of scale, sustaining long-term growth, and attracting investment.

Chifeng Gold's ambitious expansion plans are detailed within their prospectus, which confirms a high degree of visibility and certainty regarding the expansion of its gold mines

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