As Zijin Mining ushers in the year 2023 with a newly appointed executive team, I wish a Happy New Year to all our stakeholders in China and around the world. And I thank our employees and their families, our investors, local communities and governments of countries where we operate, for their devotion and support that have made us grow.
1. Three years of stellar performance
We have had three exceptional years, as we continued to deliver on our targets. Across the world, economies and societies have been undergoing unprecedented changes, with people grappling with challenges posed by a once-in-a-century pandemic and intensifying geopolitical conflicts. Staying calm and confident, we followed the overarching principle of “deepening reform, leapfrog growth and sustainable development”, and outperformed what we had aimed for. Between 2020 and September 2022, our cumulative sales revenue was over RMB 600 billion, our total profit before tax was over RMB 60 billion, our net profit was close to RMB 39 billion, and our net operating cash flow was more than RMB 62 billion. Our total assets have surpassed RMB 280 billion.
We lifted our position into global top miners’ group both by the amount of mineral resources we own and mineral products we produce. In terms of mineral resources, we now rank No.7 in copper, No.9 in gold, No.7 in zinc and No.9 in lithium. And based on metals output, we rank as the world’s No. 6 in copper, No.9 in gold and No.4 in zinc. More importantly, we have the biggest and fastest growth in our mined copper production compared to our peer companies.
We have had three fruitful years, overcoming difficulties in the movement of people and goods caused by the pandemic to deliver the defining Zijin Speed in the construction of several world-class projects. Our copper business grew exponentially. We operate or jointly-operate three of the world’s top five copper mines discovered in the 21st century - the Kamoa-Kakula copper mine in DRC, the Čukaru Peki copper-gold Mine in Serbia and the Julong copper mine in Tibet, China. All three have had their Phase 1 projects built and put into operation in a short space of time. Many of our mines have completed debottlenecking or expansion projects, further boosting capacity and efficiency. And our key assets have maintained stable or high production volumes. Zijin Mining expanded into renewable energy and advanced materials, making significant investments in less than two years to acquire “two lakes and one mine” - the 3Q lithium-bearing salar in Argentina, the Lakko Tso salar in Tibet, China, and the Xiangyuan hard-rock lithium mine in Daoxian, Hunan province, China. They will become important engines driving Zijin’s next phase of growth.
We have had three transformational years, as we strengthened our global competitiveness by adopting internationally acceptable standards and benchmarking our performance against the industry’s best practice. Zijin’s global operational and management system, one that is designed to be streamlined, standardized and efficient, is taking shape. MSCI has upgraded our ESG rating to B since we have shown an unwavering commitment to our goal of green, sustainable development as well as prioritizing ESG principles in every action we take. We have put the slogan of “green is gold” in all our operations as we stick to the highest standards in ecological rehabilitation and environmental protection while we accelerate electrification and widely introducing clean energy solutions. Our joint venture project with Fuzhou University on the ammonia-to-hydrogen energy solution has made headway towards commercializing. Zijin Mining’s core competitiveness lies in innovation. Our Five-Pronged Mining and Operational Model, which is based on systemic engineering and mineral economics, has been applied to more mines. Our in-house capabilities in technological research, engineering, and mine development have been further consolidated. And we have been steadily advancing our research on and application of block caving.
2. Quality, cost control and profitability at the heart of our future strategy
An old Chinese saying goes, the wise adapts to changes in time and circumstances, and the strong builds momentum to unlock further growth.
We live in a world of increasing uncertainties, as profound changes unseen in a century unfold and the impacts of geopolitics on businesses grow. China is the largest manufacturing country in the world, consuming about 40 to 50% of the world’s mineral resources. Changes in China’s demand for minerals have a significant impact on the global mining industry. Any disruptions to mineral supply chains could affect the global economy.
As a global metals miner, Zijin Mining has a sound resource base and mature production capacity. There is huge growth potential for us to unlock through further debottlenecking and expansion projects. In the next three years, Zijin’s global organizational process, one that is streamlined, standardized and efficient, will be put in place, with international competent talent pools at the heart of our endeavor. We will also seek to significantly boost our resource base and production capacity by acquiring large global miners at the right opportunity, while at the same time stepping up our in-house exploration activities.
2023 marks the first year in the tenure of our newly elected board of directors and the 30th anniversary of Zijin Mining. We are in the process of revising our Five-Year (2+3) Plan and 2030 Development Goals. In the new phase of our development, we will focus on achieving three objectives: improving quality, controlling costs, and increasing profitability. Our innovation philosophy, holistic project management model and enterprising spirit give us a unique edge. It will guide us as we make every effort to deliver on our financial and ESG performance targets and move even closer to a leading miner status.
Improving quality by being globally oriented and pursuing sustainable mining.
Zijin is a market-oriented public company operating across the world. We must learn from leading peers, and on this basis, find our own path for high-quality, green and sustainable development, one that aligns with international standards but suits our needs. We will put a stronger focus on innovation, technology, human capital, mining-related future-facing industries, ESG credentials and green development. Reshaping our overseas operational system will be one of the top priorities of our new management team. Through better delegation of powers and improved internal processes, our overseas operational center and our M&A center will be strengthened. The reform on our overseas operational center will be one of the key tasks for our newly elected management team.
To become a leading global mining company, Zijin needs a top-tier workforce made up of internationally competent talent from different countries, races, ethnicities, and gender groups. Our global recruiting programs will help us overcome such issues. We will improve our global HR system, to focus on value creation in recruitment, promotion and performance appraisals. Our headquarters must be equipped with skills and capabilities match for a leading global company. We will therefore set a mandatory target on the proportion of non-Chinese employees at the HQ, as well as a basic requirement for young and middle-aged managers and technicians to be proficient in at least one foreign language. We will also bolster our talent pipeline and improve our mechanisms for long-term incentives and income distribution so that our employees can share our growth, our organizational vitality will be boosted and our workforce will be highly motivated.
We will take steps to improve our ESG rating published by major ratings agencies. These steps include following international standards and norms, strengthening internal appraisals against key ESG metrics, and stepping up information disclosure and corporate reputation management. The health and safety of our people and environmental protection are at the heart of what we do. We will remain steadfast on this front and keep clear of the red lines, so as to prevent fatal events from happening. We will improve the management of our carbon emissions and energy consumption, striving to become a leader in de-carbonization in China first, and then working towards the levels of world-leading businesses. To drive our own low-carbon transition, we will develop natural carbon sinks, use more clean energy, and electrify various production lines. As a responsible mining company, Zijin Mining will continue to contribute to the global endeavor on mitigating GHG emissions. We will spend more in renewable energy and advanced materials, in particular in battery metals, and branch out into downstream materials industry if business sensible.
Development for All is a core value in Zijin’s corporate culture. We will integrate company values with the cultures of host jurisdictions and ensure that our stakeholders and society benefit from our presence. Broad social recognition is a huge intangible asset for companies and an important safeguard for our high-quality, sustainable growth.
Controlling costs – reshaping our comparative advantages in the global mining sector.
Disciplined capital budgeting and expenditure as well as cost management are two key secrets behind Zijin’s success. In the next three years, controlling costs will be the first priority in our corporate management. It will be made the most important indicator in our performance appraisals, to help bring down rising costs we face in recent years and ensure that we “save the money we ought to save and earn the money we ought to earn”. To better control costs, we will focus on value creation, improve our market-oriented practices, follow the company motto of “stay enterprising, stay innovative”, and improve the cost awareness of all employees. More resources will be allocated to subsidiaries and business segments that create value. Our total factor productivity and asset portfolio will be improved. We will be stricter in talent recruitment and weed out those who have damaged company’s interests. We need to have rigorous capital budgeting process that help us avoid thoughtless spending in project construction. Aided by e-platforms and IT systems, we will better manage inventory, revive assets that are still viable, and dispose of loss-making ones. We will also strive to improve our capital and liquidity ratios and expand our financing channels to lower our cost of capital. Fine management will be enhanced through standardized and more centralized management of technologies and equipment, integrated management of business and finances, comprehensive budget management and re-assessment of budgeting.
We will further improve our construction efficiency, keep operational costs low and boost the vitality of our affiliates. This will ensure that we achieve optimal efficiency and maximize the economic and social benefits we create. Technology will be an empowering tool. Relying on Zijin’s innovation philosophy and the Five-Pronged Mining and Operational Model, we will keep focusing on making breakthroughs in key technologies and applying new findings and technologies to our operations. We will continue to strengthen our newly built R&D system on renewable energy and advanced materials by recruiting key experts and skilled workforce. The introduction of digital applications and smart tools will help us further improve our business management and cost structure. To this end, we will strengthen our own R&D capabilities in information technology, expand our mining information database, deploy more electric and autonomous equipment, and build smart mines and plants.
Zijin Mining has strong expertise in decision making and leading exploration techniques. We are also good at swiftly closing M&A deals in market downturns. These will empower us as we pursue major discoveries and deals at relatively low costs. We will step up our new round of exploration activities. Our focus is to build an international team of geologists for our overseas exploration programs and make discoveries both on brownfield operations and green field projects in the world’s major metallogenic belts. This will sharpen our edge in global exploration in the new era.
Boosting profitability by transforming resources into economic and social benefits.
To enhance our profitability, producing mines must work towards steady-state production or even higher output; and major copper projects under construction will be fast-tracked for early commissioning. We will speed up the construction of key growth projects - the Phase 3 expansion and smelter project of the Kamoa-Kakula Copper Mine in DRC, the expansion project of the Bor Copper Mine and the Čukaru Peki Copper Mine in Serbia and the Julong Copper Mine in Tibet. The application of block caving will be accelerated for four major porphyry copper deposits - the Jama copper deposit and the Lower Zone of the Čukaru Peki copper deposit in Serbia, the Tongshan copper mine in Heilongjiang province, and the Luoboling copper mine in Fujian province. The potential of our gold operations will be further unlocked. We will seek to increase the capacity of producing assets include the Rosebel Gold Mine in Suriname, the Buriticá Gold Mine in Colombia, the Aurora Gold Mine in Guyana, Norton Gold Fields in Australia, JV Zeravshan in Tajikistan, Altynken in Kyrgyzstan, and Longnan Zijin, Shanxi Zijin, and Guizhou Zijin in China. We will ensure our newly acquired projects - the Haiyu gold mine in Shandong and the Sawaya’erdun gold mine in Xinjiang - to be put into production ahead of schedule and try our best to restart the Porgera Gold Mine in Papua New Guinea. We will also advance the construction of the Shapingou molybdenum mine in Anhui province, to turn Zijin into the largest molybdenum producer in the world.
Lithium will become the most important new business for us in the near future, as we seek to become a major player in the global lithium industry. Our production lines in renewable energy and advanced materials will be put into operation as soon as possible. A particular focus for 2023 is to commission three lithium projects - the 3Q lithium project in Argentina, the Lakkor Tso lithium project in Tibet, and the Xiangyuan hard-rock lithium mine in Hunan. New lithium deals will be also pursued and lithium exploration activities stepped up. On our watch, Fujian Longking (600388), one of our newly acquired subsidiaries will seek to combine its tradition business of exhaust capture and air pollution solutions with the renewable energy service. Major breakthroughs will also be sought in other controlled or part-owned companies and joint ventures. We are expanding into mining-related materials, and advancing ammonia-to-hydrogen energy projects and energy storage operations. Meanwhile, we will try to recover all valuable minerals at our mines and seek business opportunities in metals recycling.
Our mining service businesses such as smelting, fabricating, finance, trading, logistics, and EPCM service have grown to notable sizes. As such, synergy among them must be maximized. Their priority now is to be more market-oriented, shifting from providing services within the group to mainly serving external clients. This will allow them to grow into fully competitive market players and add significant share to Zijin’s profit growth.
Efforts will be made to keep identifying and increasing the overall value of Zijin Mining by seizing market opportunities in our subsidiaries and investment portfolios. To this end, we will further open up to global capital markets to improve our financing capability and issue new convertible bonds. We will drive forward the securitization of our assets and make the most of our outposts in Shanghai, Hainan, Hong Kong, and Singapore.
Looking back on our journey, we are filled with joy and pride. Now at the start of a new one, we feel even more confident and ambitious.
Facing a world defined by diversity and complexity, Zijin Mining is contemplating on three eternal questions from a new angle : Where do we come from? Where are we now? Where are we going? We must understand the underlying trends of the world economy and the mining industry, and be clear about our own status, strengths and weaknesses. Building on this understanding, we must be bold enough to make critical decisions when great opportunities emerge, and tough enough to take responsibility and rise to challenges. This will enable us to build our own competitiveness in the global mining industry and move towards becoming a green, high-tech, leading global mining company.
My heartiest wishes to Zijin Mining, to all our stakeholders, and to the world.
紫金矿业 董事长 陈景河
Chen Jinghe, Chairman of Zijin Mining Group
December 31, 2022