On February 17, Chifeng Gold (600988.SH) cleared the Hong Kong Stock Exchange's hearing, marking an important milestone as it prepares to join the ranks of companies listed on the Hong Kong marketFollowing its entry, Chifeng Gold will make history as the third gold mining firm to achieve a dual "A+H" listing, following in the footsteps of industry giants Zijin Mining (02899.HK) and Shandong Gold (01787.HK).

Just a day later, reports emerged detailing that Chifeng Gold has initiated a pre-roadshow, with aspirations to raise between $400 million and $500 million (approximately HK$3.11 billion to HK$3.89 billion). This upcoming listing is set against a backdrop where the demand for gold continues to soar, propelled by various factors, one of which includes geopolitical tensions that have led investors towards safe-haven assets.

Established as China’s largest private gold producer, Chifeng Gold specializes in the exploration, mining, and sale of this precious metalThe company boasts a robust portfolio, operating seven gold and multi-metal mines across various regions, including China, Southeast Asia, and West AfricaNotably, its ventures encompass the Jilong Gold Mine and the Wulong Gold Mine in China, as well as the Sepon Copper-Gold Mine in Laos and the Wassa Gold Mine in Ghana.

By 2023, Chifeng Gold's production and gold resources ranked fifth among Chinese gold producers, with an impressive annual output of 461,500 ouncesIn contrast to its public competitors—who are mostly state-owned enterprises—Chifeng’s standing solidifies its status as China’s largest privately-owned gold miner.

Amidst the limitations of domestic gold resources, leading producers like Chifeng have strategically expanded their operations internationallyThe firm's overseas ventures have shown exceptional performance, with overseas revenues significantly surpassing those of its peersAccording to 2023 statistics, approximately 76.9% of Chifeng’s total gold output and 71.9% of its overall income were generated from international operations, reflecting a distinctive edge in market diversification and risk mitigation.

In its prospectus, the company highlights the high ore grade of the minerals extracted from its domestic mines, categorizing them among the top-tier mines in China

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Additionally, the operational efficiency of Chifeng Gold has markedly outperformed the global industry average, maintaining a total sustaining cost lower than that of the international market.

In 2023, the company's sustaining cost for gold production was reported to be $1,179.1 per ounce, which stands out compared to the global average that is 14.4% higherThis year also saw a remarkable reduction in costs of 12.0%, countering the industry-wide trend of rising expenses.

Chifeng Gold has experienced an explosive growth rate in its output, fueled by a combination of investments and expansionsBetween 2021 and 2023, the company's gold production surged from 260,200 ounces to 461,500 ounces, resulting in a compounded annual growth rate of 33.1%. This is noticeably higher than the average growth rate of major gold producers in China, which stood at 16.4%, establishing Chifeng as one of the fastest-growing entities in the industry.

The surge in gold prices, driven by rising international tensions and economic recession concerns, has positioned gold as a prized assetRecent reports from the World Gold Council indicated that in 2024, gold prices broke record highs 40 timesChifeng’s gold product prices have also mirrored this trend, with the average price surpassing RMB 500 per gram in the first three quarters of 2024.

Furthermore, global demand for gold has reached unprecedented levels as central banks stockpile precious metals to diversify their foreign reservesInvestors, amid rising risk aversion and asset allocation needs, further amplify the surge in gold demand, with the World Gold Council reporting a record high global demand for gold in 2024, amounting to 4,974 tons.

However, after a notable sales increase in 2022, Chifeng Gold’s gold product sales saw a significant slowdown in 2023 and the first three quarters of 2024. In the first three quarters of 2024, the company reported sales of 352,100 ounces, reflecting a meager growth of only 4.9% from the previous year, while 2023’s growth rate was pegged at 4.7%.

Despite the slowdown in sales, Chifeng Gold’s revenue and profit figures reflected a robust performance, largely attributed to the soaring gold prices

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The company recently announced a projected net profit of RMB 1.73 billion to RMB 1.8 billion for the 2024 fiscal year, marking an anticipated year-on-year increase between 115.19% to 123.90%. This growth is largely fueled by increased production and sales volumes, alongside the rising sale price of gold, reinforced by cost-control measures implemented to effectively manage production costs.

However, it is crucial to note that Chifeng Gold faces some challenges, particularly concerning high tax rates in Ghana, its operational baseThe company reported an increase in corporate tax expenses from RMB 157 million in 2021 to RMB 328 million in 2022, largely due to the high effective tax rate of 35% in Ghana, substantially surpassing the rates in China.

Looking ahead, tax expenses further escalated to RMB 583 million in the first three quarters of 2024. Nonetheless, amidst these challenges lies opportunityGold remains one of the hottest assets in the current economic climateInvestment mogul Peter Schiff recently projected that the precious metal mining sector would be among the top-performing industries of this decade.

For gold mining companies striving to maintain their competitive edge, enhancing and diversifying gold ore resources is criticalThe scale and quality of gold mining resources serve as the foundation for establishing economies of scale, sustaining long-term growth, and attracting investmentChifeng Gold has laid out ambitious expansion plans, asserting in its prospectus that the visibility and certainty of its gold mine capacity expansion projects are exceptionally high, and it continues to achieve incremental resource reserves through exploratory activities.

Notably, Chifeng is accelerating the construction of the open-pit and underground mining projects at the Sepon Copper-Gold Mine, with expectations to increase its annual underground mining capacity from 536,000 tons to 806,000 tons by 2025. The company also envisions further enhancements in mining capacity for Discovery West Deeps and Phavat North by 2026 and 2027.

Domestically, the company has launched an expansion project for the Jilong Gold Mine, aiming to scale its annual mining capacity to about 300,000 tons by the end of 2025. As Chifeng Gold forays into the future, it is poised to increase its gold production capacity through expansion and resource exploration, while remaining vigilant to potential risks stemming from market volatility and rising costs.

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