Zijin Mining announces over 10 billion acquisition, Chifeng Gold H-shares plummet 25%

Ask AI · Why does a relatively low acquisition price trigger panic selling in the market?

Zijin Mining (601899.SH, 02899.HK) just announced a merger and acquisition of about RMB 18.3 billion to acquire Chifeng Gold (600988.SH, 06693.HK), and it has already run into a streak of declines in gold.

On March 23, Zijin Mining’s A/H shares fell 3.38% and 4.97%, respectively. Chifeng Gold’s A-share hit the daily limit down, while its H shares plunged 25.1%, closing at HK$31.52. Trading volume was HK$1.436 billion, approaching the acquisition transaction price of HK$30.19 for this deal. Its market capitalization also fell below RMB 60 billion.

Insiders believe Chifeng Gold’s sharp drop is related to the merger and acquisition pricing being relatively low, especially the lower H-share placing price. In addition, the gold price has fallen sharply recently. Some investors have encountered liquidity problems and need to deleverage and sell gold. The market expects that gold prices will still face downward adjustment pressure in the short term. After the market stabilizes, investors can gradually position themselves.

Holding will exceed 25%

On the morning of March 23, Zijin Mining and Chifeng Gold simultaneously issued announcements. Zijin Mining’s wholly owned subsidiary, Zijin Gold, plans to obtain control of Chifeng Gold through a combination of acquiring A shares and subscribing for the H-share placing. The total consideration for the transaction is about RMB 18.258 billion. Upon completion, Li Jinyang will exit all its holdings of Chifeng Gold, and Zijin Group will hold about 242 million A shares and 330 million H shares, totaling about 25.85% of the enlarged issued share capital, becoming the single largest shareholder.

This transaction is divided into two parts: A-share transfer and H-share placing. For the A shares, Zijin Gold will acquire 242 million Chifeng Gold A shares at a price of RMB 41.36 per share, with a transaction amount of about RMB 10 billion. For the H shares, Zijin Mining plans to subscribe for 311 million H shares from Chifeng Gold’s placing at a price of HK$30.19 per share, with a subscription amount of about HK$9.386 billion (RMB 8.252 billion).

After the transaction is completed, control of Chifeng Gold will change hands. Currently, Zijin Mining, through other wholly owned subsidiaries, already holds 19 million shares of Chifeng Gold, representing a stake ratio of 0.99%. After completion, its wholly owned subsidiaries in aggregate will hold 572 million shares of Chifeng Gold, about 25.85% of the total number of shares after Chifeng Gold’s placing is completed.

In 2025, Chifeng Gold’s operating revenue was RMB 12.639 billion, up 40% year over year. Net profit was RMB 3.082 billion, up 74.7% year over year. Zijin Mining’s operating revenue in 2025 was RMB 349.080 billion, up nearly 15% year over year; attributable net profit was RMB 51.8 billion, up 61.55%.

Zijin Mining management said that looking ahead to 2026, the macro fundamentals logic supporting an upward trend in gold prices will remain solid, and the value of gold allocation is expected to continue to improve. Against the backdrop of profound changes in the global macro landscape, competition among monetary systems and the restructuring of global industrial chains are intensifying. Central banks in various countries are expected to maintain gold-buying, diversify foreign-exchange reserve risks, and respond to geopolitical uncertainties. Meanwhile, amid ongoing macro uncertainties, together with heightened market concerns about the safety of U.S. Treasuries and strengthened consensus on strategic gold allocation, demand for gold ETFs is expected to continue to rebound and form a combined force with central bank buying.

Zijin Mining management also said it will apply financial derivative instruments scientifically, reasonably, and prudently, and strengthen hedging management for trade and bulk commodities.

Gold prices remain under pressure in the short term

Some insiders believe gold prices will still face pressure in the short term. There have been deleveraging and de-risking moves by global funds, and investors can wait for better opportunities.

Pan Jun, investment manager at Cheese Fund, said that after the merger and acquisition news was released, Chifeng Gold was hit with sell-offs in both the A-share and Hong Kong stock markets. The H-share placing price (HK$30.19) is far below the pre-trading halt market price (HK$42.08). This sets a relatively low valuation anchor for Chifeng Gold in the short term and the larger-than-expected discount space has triggered panic sell-off by investors in the secondary market. In addition, the funds that had been lying in wait to bet on a restructuring expectation realized profits in a concentrated manner after good news was confirmed, further intensifying the stampede in the stock price.

Pan Jun expects that in the short term, geopolitical conflict events in the Middle East will lead to a decline in market risk appetite. Funds will withdraw from crowded sectors such as nonferrous metals, and gold-mining stocks will enter a period of consolidation. From the medium to long term, the logic for gold prices has not changed. Ongoing central bank gold buying, de-dollarization trading, and rising geopolitical uncertainty all support an increased share of gold allocation. The fundamentals and valuations of leading gold-mining companies have a certain foundation for repair.

Li Zeming, Chief Investment Officer of Blue Water Capital Management Limited, said there are two reasons for Chifeng Gold’s large decline. On one hand, it is related to the gold price trend: the current downtrend in gold prices may continue. In the short term, higher U.S. Treasury yields are affecting gold prices; as global market risk appetite declines, a deleveraging effect may appear amid a warming of risk-avoidance sentiment. Gold has risen from US$2,000 per ounce to now, accumulating a relatively large gain. Some investors have built up relatively high leverage levels, so it is expected that under the deleveraging effect, in the short term the gold price may test the US$4,000 per ounce support level, and gold-mining stocks will also continue to be under pressure.

Li Zeming said that the H-share placing price is subject to a significant discount compared with the earlier closing price, which disappointed the market. After this transaction is completed, regardless of whether it is Chifeng Gold or Zijin Mining, the subsequent stock-price trend will depend on the gold price trend. After this full adjustment, both gold and gold-mining stocks have opportunities for positioning. He suggests investors pay more attention to large gold-mining stocks.

Li Qian, an investment consultant at Huiyan Zhitou, said this is a typical case of “good news fully realized.” Although Zijin Mining’s move to take control of Chifeng Gold from the front is a “win-win” situation for both parties, there are many market concerns. Under the backdrop of the current broad-market pullback, the stock price has fallen sharply. In addition, gold-mining stocks had seen an overly large rally in the prior period; with the international gold price showing a clear decline now, the stock price at high levels faces pressure, and the sharp drop in the stock price also reflects the market’s concerns about the current gold price. He suggests that once the stock price stabilizes, investors can actively pay attention, which provides investors with a better buying opportunity.

(This article comes from First Financial)