Zijin Mining... Hmmm

China dolls still arriving at our shores despite protestations by the wives. I am just going to highlight the interesting ones.

Business - Principally engaged in the exploration, mining, processing, refining and sale of gold and non-ferrous metals and other mineral resources in the PRC, and is a large mining conglomerate primarily engaged in the production of gold and non-ferrous metals.

Business Review - For the year ended December 31, 2006

Summary - Favorable Production and Operation, Gold Business Remains the Main Business, Business of Copper and Zinc Continuously Improving

1. GOLD MINE BUSINESS - During the reporting period, the Group totally produced 20,700 kg of mine gold (665,520 ounces) which was mainly from 3 main gold mines, representing a growth of 35.6% over last year, of which, 13,870 kg (445,930 ounces) was produced at Zijinshan Gold Mine, 3,240 kg (104,168 ounces) was produced at Shuiyindong Gold Mine, and 1,100 kg (35,366 ounces) of gold was produced in the form of concentrates at Huichun Shuguang Gold and Copper Mine, which was amounted to about 88% of total mine gold of the Group. Remaining 12% gold outputs was contributed by new productive gold mines such as Shanxi Yixingzhai Gold Mine, Sichuan Jiuzhaigou Gold Mine, and Yunnan Dixu Gold Mine which produced 2,490 kg (80,055 ounces) of gold in total. During the reporting period, the Group produced 28.510 kg (916,617 ounces) of refinery gold, representing a growth of four times over last year, of which, Henan Luoyang Zijin Yinhui Company produced 27,660kg (889,289 ounces) of refinery gold, Zijin Science and Technology produced 850 kg (27,328 ounces) of refinery gold. The substantial growth in the Group's turnover was mainly contributable to the growth of sales of refined gold from Louyang Zijin. Sales income from gold business of the Group represented 70.4% of the total annual sales income, and net profit of gold business represented 54% of the total net profit.

2. COPPER MINE BUSINESS During the reporting period, the Group produced 40,302 tonnes of copper, representing a growth of 102.83% over last year. Ashele Copper Mine successfully achieved the production plan and produced 30,018 tonnes of copper in concentrates form. Zijinshan Copper Mine produced 6,781 tonnes of copper cathodes. Hunchun Gold and Copper Mine produced 3,169 tonnes of copper in concentrates form. Bayannaoer Refinery Plant produced 334 tonnes of copper from other associated metals. Copper mine business grew rapidly. Its sales income represented 16.4% of the annual total sales income, while it represented about 32% of the total net profit.

3. ZINC MINE BUSINESS The Groupˇs zinc mine business rapidly rises as a new force. During the reporting period, 13,303 tonnes of zinc was produced in concentrates form, representing 8.38 times over last year. Yunnan Huaxi Yunye Jingyuan produced 2,945 tonnes of zinc in concentrates form. Ashele Copper Mine produced 9,439 tonnes of zinc from other associated metals. Other mines produced 199 tonnes of zinc from other associated metals. Wulatehouqi Zijin produced 17,017 tonnes of zinc in concentrates form. It is an ore provider to Bayannaoer Refinery Plant. In order to avoid duplicate calculation, its production was not included in our statistics. Bayannaoer Refinery Plant commenced production in July 2006, and has met the production plan quickly by producing 41,400 tonnes of zinc ingot. Sales income of zinc mine business represented about 10.7% of total annual sales income, while net profit represented about 13% of the total net profit of the Group.

Investment - In the first half of year 2007, the Group investigated 43 projects in the PRC and abroad, among which, contracts of 7 domestic mine projects were officially concluded, including the Xinjiang Wulagen Lead and Zinc Mine, Sichuan Songpan County Dongbeizhai Gold Mine,Malipo County Tungsten Mine and an integration of associated resources, Hunan Anhua Liaojiaping Antimony Tungsten Mine, Hunchun Yangjingou Tungsten Mine, Yunnan langdu Copper Mine, Lannitang Copper Mine and as a result that the resources controlled by the Group increased dramatically. The Group also successfully acquired two international projects. The Group’s associate company-Zijin Tongguan successfully acquired 89.9% equity interest of Monterrico by way of offer, and as a result, it gained the exploration right of a substantial large copper and molybdenum mine in Rio Blanco, Peru. The takeover has successfully been completed. The Group’s wholly owned subsidiary – Xinjiang Zijin has successfully acquired the whole equity interest of CBML recently and accordingly controlled the ZGC Gold Project in Tajikistan.

Projects - Domestic projects progressed smoothly, including, the Zijinshan Gold Copper Mine joint technological renovation, Dongping Gold Mine technological renovation, Guizhou Shuiyindong Phase III technological renovation, Guangdong Xinyi Gold Mine and Tin Mine technological renovation, Xinjiang Fuyun Reduced Iron Project, Wulatehouqi 200,000 tonnes per year process plant technological renovation, Zijin Copper Company Copper Sheet Belt Project, Makeng Iron Mine Phase II technological renovation, Tibet Yulong Phase I Project etc. Some of the above projects will start production soon, and will provide powerful support for the Group’s future development. As to the international projects, the exploration, development, and construction of Mongolia Nari Tolgoi Gold Mine proceed on schedule and is expected to be completed and production is to commence by the second half of year 2007. The Vietnam Ha Giang Lead-Zinc Mine is in production and its 300 tonnes per day production plant was in operation. Russia Kuton Gold Mine and Tuva Lead Zinc Mine were also in the process of applying for approval and have in place certain preliminary preparation work for project construction.

Year / Revenue / Net Profit (Renminbi)

2005 / 3.064bn / 704m

2006 / 10.87bn / 1.7bn

2007 (e) / 18.5bn / 5.8bn

Market Cap: approximately US$22bn

Positives:

a) Massive GOLD play, gold looking good now and near term

b) Do not have an A-share listing yet

c) Good commodity play on other metals as well, a Chinese BHP?

Negatives:

a) PER already 60x 2007 earnings, that is very high for a H-share, its not an A-share, thus limiting upside

b) Surprise, surprise, A-share listing plans on the way

Verdict - Very good, though not as good as CNOOC and Petrochina because of its high H-share valuations already. Good for buy trade.