China’s largest gold miner, Zijin Mining Group (OTC Pink:ZIJMF,HKEX:2899,SHA:601899), is moving into precious metals streaming — a model that offers miners upfront cash in exchange for a share of future production.
Through its Hong Kong-based subsidiary, Gold Mountains Asset Management, Zijin is rolling out China’s first streaming fund from a mining company, with ambitions to invest between US$200 million and US$400 million this year alone.
The fund will target projects in resource-rich but capital-hungry regions such as Africa and South America.
“We’re trying to find quality resources that are undervalued,” said Lisa Liu, managing director of the asset management arm, as reported by the Financial Times. “We are really bullish on gold prices.”
Gold has surged 27 percent since the beginning of the year, repeatedly setting all-time highs as geopolitical tensions and economic uncertainty — particularly around US trade policy — have driven investors toward safe-haven assets.
Zijin, which is listed in both Hong Kong and Shanghai and boasts a market capitalization of US$68 billion, is already one of the world’s most diversified and aggressive metals players.
Ranked as the sixth largest gold producer globally, Zijin also holds major interests in copper, zinc and lithium projects spanning from Serbia and Colombia to Australia and the Democratic Republic of Congo.
But streaming marks a new frontier for Zijin. Unlike traditional miners that take on ownership and operational risk, streaming companies can secure access to precious metals without actually owning or operating mines. They provide upfront capital, and in return, receive a share of the mined metal — often at a fixed, below-market price.
Zijin is betting on this model to complement its existing operations. Liu, a trained geologist, believes the company’s mining expertise will give it a leg up on deal evaluation and risk mitigation, allowing it to compete with key players like Franco-Nevada (TSX:FNV,NYSE:FNV) and Wheaton Precious Metals (TSX:WPM,NYSE:WPM).
It’s worth noting that Zijin partnered with Wheaton last October in an US$825 million financing package for the Koné gold project in Côte d’Ivoire, operated by Montage Gold (TSXV:MAU,OTCQX:MAUTF).
Zijin contributed US$125 million to the deal, which included US$75 million for a gold stream. In April, it followed up with a US$25 million streaming deal with TongGuan Gold Group (HKEX:0340) for a mine in China’s Gansu province.
“The quality of gold mines … they’re all decreasing,” Liu noted, citing the issues of falling ore grades and a lack of investment in exploration. “Under-investment has been a huge problem. It’s really hard to find quality projects.”
What is streaming — and why now?
Streaming, along with royalty financing, its cousin, has been steadily gaining favor as an alternative investment vehicle in the mining sector. As mentioned, in streaming deals, companies provide capital to miners in exchange for the right to purchase a portion of the metal produced — typically gold or silver — at a fixed price.
This model offers streamers several advantages: exposure to rising commodities prices, insulation from cost overruns and operational risks and the ability to warehouse metals during market downturns.
For miners, the benefit is an immediate capital infusion, usually during the expensive phases of development and expansion, without the debt burden or shareholder dilution associated with traditional financing.
Franco-Nevada’s transformative 1986 deal for a 4 percent royalty on the Nevada-based Goldstrike mine — which has since earned over US$1 billion — remains the industry’s archetype.
This example illustrates the outsized returns possible in streaming — but there are also risks.
For example, Franco-Nevada took a US$1 billion hit after Panama shut down First Quantum Minerals’ (TSX:FM,OTC Pink:FQVLF)Cobre Panama mine in late 2023. It is seeking US$5 billion in damages from the country.
Looking at Zijin’s entry into the streaming space, the move appears to be a signal that China — the world’s top gold producer and consumer — is preparing to wield more financial influence in the global precious metals trade, not just through mine ownership, but through alternative financing models.
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.
