Guangdong Rising Assets Management, a state-owned Chinese investment group, offered to take control of PanAust in a cash bid that values the Laos-focused copper producer at AUD1.5 billion. PanAust rejected the bid as being too low and agreed to give Guangdong Rising, its largest shareholder, access to financial information. Some investors fear the deal will fail. Buying PanAust would give Guangdong Rising control of mines in Laos as well as the Frieda River project in Papua New Guinea, described as one of the largest undeveloped copper and gold deposits in the world. PanAust agreed last year to buy Glencore Xstrata’s stake in Frieda River in a deal it expects to be concluded before September, estimating the development costs at up to USD1.8 billion. PanAust expected to attract “significant interest” from other groups and the producer’s shareholders would expect it to talk to any parties that made competing proposals, Managing Director Gary Stafford said. Offering Guangdong Rising access to information was intended to help “facilitate them perhaps coming back with a better offer, but doesn’t indicate that they are close, or nearly there”, Stafford said. “It remains to be seen how high they are prepared to go.” China’s demand for assets may help fuel a doubling in the number of mining deals worldwide this year, according to Jay Leary of law firm Herbert Smith Freehills. Copper, iron ore and coal were the top targets, he said.

Gold sales at jewelers in Hong Kong have declined this year as mainland Chinese shoppers bought less, according to the Chinese Gold & Silver Exchange Society. Demand dropped about 30% from a year ago during the May Day holiday, according to President Haywood Cheung. There were fewer visitors this year as luxury spending fell and gift-giving slowed, he said. While China surpassed India as the largest gold customer last year, the buying frenzy that was sparked by gold’s slump into a bear market last April has not been repeated, according to Heraeus Metals Hong Kong. “Before, when they walked into a jewelry shop, they spend about HKD10,000 and now it’s about HKD5,000 to HKD6,000,” Cheung said, citing estimates by the society’s members, which include Chow Tai Fook Jewelry Group. An anti-corruption drive in China has hurt gold demand this year, which is back at 2012 levels after an exceptional 2013, said Dick Poon, General Manager at Heraeus, a precious metals trader and refiner. Chinese gold and silver jewelry sales fell 30% to CNY20.8 billion in April from a year earlier when low prices attracted buyers, according to the National Bureau of Statistics (NBS). Goldman Sachs is among banks forecasting further declines for gold as the U.S. Federal Reserve winds back monthly bond buying, predicting a price of USD1,050 per ounce in 12 months. Consumption in China rose 32% to a record 1,065.8 tons last year, making up about 28% of global usage, according to the World Gold Council (WGC).

The Shanghai Futures Exchange (SFE) started simulated trading of the country’s first futures contract based on a non-ferrous metals index which tracks the prices of four metals: copper, aluminum, zinc and lead. The simulated trading is intended to raise investors’ understanding of the risks involved in index futures. The exchange began work on the underlying metals index in 2004, and the index itself began trial runs in 2010. The index was launched on December 26, 2012. The exchange said that the index futures contract will add a hedging tool to China’s commodities market, where hedging options are limited. The contract will help small and medium-sized non-ferrous metal producers hedge their positions and aid in the process of price discovery. Contracts for precious metals and natural rubber will.

China will phase out high-cost and outdated primary aluminum plants in two to three years, limiting capacity growth. The closures should help prices recover from a sharp drop of almost 30% in the past four years. “Demand and supply in China would be basically balanced in five years or more,” said Yu Dehui, Vice President in charge of the aluminum business at China Power Investment Corp (CPI), the second biggest producer of the metal in China. China is not likely to turn into a big importer of primary aluminum, he said at an industry conference in Hong Kong. Yu estimated China’s total primary aluminum capacity at around 40 million tons in about three years, indicating an annual growth rate of less than 10% from 31 million tons last year. This would be significantly below the yearly rise of about 20% seen between 2003 and 2012. The government pledged it would cut at least 420,000 tons of outdated aluminum capacity this year as part of a program aimed at closing obsolete, inefficient and polluting industrial facilities. Building of new capacity will also slow as heavily indebted local governments cut financial support for loss-making aluminum smelters. Chinese banks cut back on loans and pollution control efforts pick up pace, Wang Feihong, Senior Analyst of China Minmetals Non-Ferrous Metals, said.

China Gold International Resources, the sole overseas listed arm of the nation’s largest gold miner, China National Gold Group, will raise output, cut production costs and scout for acquisition opportunities amid lower gold prices. The Hong Kong and Toronto-listed state-owned company would lower costs by improving metals recovery ratios, material procurement cost and advanced production techniques, said Song Xin, who was promoted from Chief Executive to Chairman of China Gold in February. The gold recovery ratio of China Gold’s main profit driver, the Changshanhao mine in Inner Mongolia, rose to 54% last year from 22% in 2007. Song said it was achieved through quality control of its crushing machines to ensure consistent ore rock size, increasing the penetration rate of chemical agents used to extract gold, good equipment maintenance to minimize down time, and staff training to improve productivity. The mine’s cash production cost last year fell 14% to USD707 per ounce, while total cost declined 7% to USD866. Cost cutting is vital since the mine’s ore grade is lower than some of its rivals and the gold price fell almost 30% last year, before rising 7.3% in this year’s first quarter. China Gold’s average selling price slid 15.5% last year to USD1,362 an ounce. The company plans to double the processing capacity to 60,000 tons of ore a day. China Gold projected its gold mine’s output to rise from last year’s 130,772 ounces to 208,000 ounces this year and 260,000 ounces next year. The company also aims to raise annual copper output from 12,847 tons last year to 22,698 tons this year and 79,896 tons by 2016.

Fujian-based Zijin Mining, China’s largest gold producer, is also being hit by lower gold prices and a decline in the gold content of ore at its mainstay Zijinshan mine. High production costs meant Zijin’s future profits were likely to be lackluster. “Beneath the Zijinshan gold belt is a layer of copper ore, which will be mined, and Zijin has other gold projects with five to six tons of annual output in the pipeline,” said Helen Lau, Senior Analyst at UOB Kay Hian. “Zijin is expected to be able to maintain gold output at 33 to 34 tons in the next few years even as Zijinshan’s output dries up in 2018. The concern is if metal prices stay flat, and if Zijin’s production costs remain high given the nature of its new projects, its profit growth will likely be sluggish.” Zijin’s net profit is forecast to fall 5.6% to CNY2 billion this year, and a further 4.4% to CNY1.91 billion next year, before rising 20.8% in 2016 to CNY2.31 billion, according to the average forecast in a Thomson Reuters analyst survey.