SINGAPORE China National Gold Corp is leading a drive offshore to help meet soaring demand for gold at home by considering a bid for the African unit of Barrick Gold (ABX.TO), the world's No.1 producer.
If state-owned China National Gold makes a bid for all of African Barrick, it would rank as the biggest Chinese deal in Africa since China Guangdong Nuclear Power Corp's GDNCP.UL $3.37 billion takeover of uranium developer Kalahari Minerals and its partner, Extract Resources, in Namibia earlier this year.
A full bid for African Barrick ABGL.L could be worth 2.4 billion pounds ($3.78 billion), if the London-listed gold miner were to fetch a 40 percent premium on its closing price on Thursday.
The gold deal would also be the biggest ever made by China National Gold and a takeover of African Barrick, Tanzania's largest gold producer, would increase its reserves by a third.
China National Gold calls itself the country's top gold company by production and resources with 1,565 tonnes, or 50.3 million ounces, in gold reserves as of June. China Gold mined 1 million ounces of gold in 2011, compared with 688,000 ounces produced by African Barrick.
"In the second half and onwards, the group will focus on merger and acquisition of major projects as well as obtaining large resources and to make sure that key projects under construction will be completed and launch production," China National Gold said on August 8.
The move by China National Gold follows the Zijin Mining Group (601899.SS) takeover of Australian gold producer Norton Gold Fields (NGF.AX), which valued the company at A$215 million ($225.70 million) in a deal due to close next week. Zijin built up a 17 percent stake in Norton before launching its bid in May.
China, the world's top gold producing country, saw its gold demand in the first half of the year rise 2.8 percent on an annual basis to 400 tonnes, or 12.8 million ounces, despite a 7 percent drop in second-quarter demand. The country is expected to become the world's top gold consumer on an annual basis this year with 850 tonnes of demand, the World Gold Council said.
The demand is being driven by China's increasing affluence, which leads to higher demand for jewellery and gold is being used as a hedge against inflation by Chinese investors.
Barrick said there was no certainty the talks would result in a bid for all or part of its 74 percent stake in the African unit, worth almost 1.3 billion pounds at current prices.
Should China National Gold buy more than 30 percent of the voting interest in African Barrick, it would be required to make an offer for the whole company.
The Chinese company is looking to double mined gold output to 2 million ounces a year by 2015, China National Gold's vice president, Song Quanli, told Reuters recently, adding that the company was also expanding into non-ferrous metals.
It expects to book revenue of 100 billion yuan ($15.7 billion) this year, which would be three years ahead of its target.
The offshore push is being handled through its Vancouver-based subsidiary, China Gold International Resources Corp (CGG.TO). China National Gold deferred all comment on the talks to its international division.
China National Gold Corp has promised to shift all its domestic gold resources to its Shanghai-listed subsidiary, Zhongjin Gold Corp Ltd (600489.SS), according to Zhongjin.
($1 = 6.3658 Chinese yuan, 0.6352 British pounds)
($1 = 0.9526 Australian dollars)
(Writing by Sonali Paul; Editing by Matt Driskill)