Zhaojin Mining Industry has cut spending on capacity expansion this year and turned more cautious on acquisitions, after it posted a worse-than-expected 61.8% net profit drop for last year to CNY734.1 million. The Zhaoyuan-based firm, Shandong province’s largest gold miner, has budgeted CNY1.9 billion for capital expenditure this year, compared with CNY3.3 billion spent last year. Chairman Weng Zhanbin said most of the scale-back was from spending on a smelting facilities upgrade, which has been cut to CNY200 million from CNY1.5 billion. “This is because we have completed our major upgrade projects,” Weng said, adding the company also planned to reduce mine construction expenditure to CNY985 million from CNY1.31 billion. Scaling back investment was part of the firm’s efforts to raise efficiency as it sought to shift its expansion focus from chasing after scale and speed to quality, Weng said. The average price on the Shanghai Gold Exchange fell 16.8% last year, which more than offset a 12.1% rise in output from Zhaojin’s own mines. It plans to raise output of its mines by 10.3% this year to 536,300 ounces. Total gold output, including smelting of gold ore sourced from third parties, rose 4.2% and is targeted to rise 2.5% this year to 950,500 ounces. It aims to keep the rise in production cost within 10% this year, after it rose 10% to USD672.40 an ounce.

Citic Pacific took a public swipe at Australian billionaire Clive Palmer over his attempts to halt its long-delayed and massively over-budget USD8 billion iron ore project in Australia. The Sino Iron project, China’s biggest offshore mining investment, was to be a key element in Beijing’s strategy to ease its dependence on iron ore producers Vale, Rio Tinto and BHP Billiton. But instead it has been a disaster for Citic Pacific and its contractor, Metallurgical Corp of China (MCC), as they ran into regulatory hurdles, labor shortages, disputes over hiring Chinese workers, safety issues and soaring costs. Palmer, who sold the rights to the ore to Citic Pacific, has sued the company for what he says are hundreds of millions of dollars owed in royalties and tried to block Citic’s port access. “Any claim that we haven’t paid our fair share in accordance with agreements is just plain rubbish,” Citic Pacific President Zhang Jijing told mining industry executives, bankers and lawyers in Melbourne. He said commercial disputes were not unusual and Citic Pacific always preferred them to be sorted out away from the public spotlight, but that was an “unrealistic expectation” with “some larger-than-life characters involved”. The current dispute between Palmer and Citic Pacific is over a royalty stream potentially involving around AUD200 million. Zhang said the industry benchmarks under which it was to be calculated no longer existed, so the method of calculation needed to be resolved. “The proposition is Citic wants to come here and suggest the main consideration can’t be calculated, yet they still want to take our resources back to China without paying for them,” Palmer’s company Mineralogy retorted. Palmer also accused the Chinese company of having “occupied the port and shipped Australian resources to China without paying full consideration”. Citic Group Chairman Chang Zhenming warned investors to be patient for returns on the project in a six-page letter to shareholders. “We ask for your patience. No pain, no gain,” he wrote. What Chang made abundantly clear is that shareholders may have to endure years of losses before the iron ore mining and processing project in Western Australia will turn a profit.

China’s drive to transform its economy, which includes reducing the role of energy-intensive industries and cutting steel capacity, is driving up coal inventories at key ports as demand across a variety of sectors weakens. Inventories at Qinhuangdao in Hebei province, the largest coal port in China, exceeded what is widely viewed as the warning line of 8 million metric tons on February 6, which was a 10-month high, according to the China Coal Transportation and Distribution Association. The rising stockpiles indicate that downstream users at steel mills, cement factories and coal-fired power plants are reluctant to purchase fuel because of weak market conditions. Xing Lei, Professor at the Institute of China Coal Economy at the Central University of Finance and Economics, said the coal market will be weak all year as policymakers pursue a slower-growing but “more stable” economy. Xing said inventories at Qinhuangdao usually hover around 6 million tons, but the figure has been rising in the past few months. Inventories are also rising at the other three major coal ports in North China－Caofeidian and Jingtang (both in Hebei province) and the municipality of Tianjin. Coal producers have cut prices in an attempt to attract buyers. According to the China National Coal Association, the industry suffered a total loss of CNY40.55 billion for the first 11 months of 2013.

Although China’s economic growth is slowing down, ongoing urbanization will still strongly support demand for iron ore and steel products for a long time. “We have confidence in China’s iron ore demand because its urbanization requires a large amount of steel products in the coming years,” said Neville Power, CEO of Fortescue Metals Group, the third-biggest iron ore producer in Australia. Based on the huge benchmark iron ore demand from China, even if it increases at a slower rate in the future, is still a big number, said Power. The view is shared with top officials of other international mining firms. Sam Walsh, Chief Executive of Rio Tinto, said: “The growth in China is still there, China is our most important market.” The company will continue to expand its iron ore capacity in Western Australia to meet growing demand from China. He regarded China as the key driver of iron ore demand because of its continued growth and ongoing urbanization. Li Xinchuang, Dean of the China Metallurgical Industry Planning and Research Institute, estimated earlier this month that China will import 850 million metric tons of iron ore in 2014.

The price of iron ore is predicted to drop this year as growth of China’s steel production slows and the supply of raw materials from international mining giants increases, according to industry experts. An estimate from UBS in January said the average price of iron ore would decline from USD120 per metric ton in 2013 to USD110 per metric ton this year, an 8.33% year-on-year decrease.

China National Nuclear Corp (CNNC) has agreed to pay USD190 million for a 25% in the Langer Heinrich mine in Namibia from Australia’s Paladin Energy. The deal also allows the Chinese company to purchase its pro-rata share of output at the prevailing spot market price, with the option to buy further supplies at market rates. Australian brokerage Patersons Securities expects CNNC’s investment to give a boost to uranium prices as the Chinese return to the market after a hiatus of two years. The Namibian mine, with a 20-year lifespan, started production in 2007 and has a production capacity of 5.2 million pounds of uranium concentrate a year at present. Paladin said capacity could rise to 5.7 million pounds in 2014. China currently has the largest pipeline of new nuclear reactors worldwide, with 28 under construction, according to the World Nuclear Association. The deal is China’s second major foray into Namibia’s uranium sector, following China Guangdong Nuclear Power Group’s USD2.2 billion acquisition of the Husab mine in 2012. CNNC controls nine of the country’s 17 reactor units and is working on an ambitious reactor construction program.