Net profits from 700 million to 1.7 billion, then to 2.55 billion! In recent years, zijin mining industry rapid development of management performance, become a domestic listing resources company size and growth of both representatives. Recently, the reporter to follow “gold futures advanced study class rule system” into shanghang research found, zijin mining industry in recent years to explore the establishment of a centralized supervision of hedging, decentralized operation model, has become to help enterprises achieve stable profit, expansion and effective tool.
Strategy risk
“Our decentralization to hedge its smelters, for processing enterprises, because, if not a hedge, are at greater risk. “Zijin mining Executive Vice President of marketing General Manager Yang Shu told reporters. Reportedly, smelting enterprises earn processing fees, but their profit is often very thin, slight fluctuations in gold prices will probably disappear.
Reporters noted, zijin mining in gold production was most is the way to this foreign ore processing production. In 2007, zijin mining production of 52.294 tonnes, of which 24.827 tons of mineral gold, meaning that more than half of the remaining gold yield immediate hedging needs. In addition, zijin mining also is China’s third-largest copper mineral production enterprises and one of the six large zinc manufacturing enterprises in China, and those of the two metals in recent years is significant volatility.
It is understood that in response to market risk, zijin mining began in 2005 to futures trading, hedging through futures on gold and copper cathode. In 2006, the company Board of Directors for 2007 product range of hedging and trading plan trading volume made resolutions clearly hedging of less-year plan of cathode copper production of 25%, annual output of gold long term of less mineral plan 25%. After the 2007 domestic zinc futures, zijin mining zinc transaction resolution of the Board, company operations and marketing positions does not exceed 1000 tonnes of zinc products hedging transactions agreed bayannaoer zijin after approval process in the fulfilment of prerequisites, for the position of no more than 2000 tons of zinc products hedging transactions.
Internal control mechanism function
Participating in futures trading, while the enterprise disperse the original risk, but at the same time he created a new source of external risks. In response, zijin mining management team has deep understanding.
Zijin mining group Finance Director Zhou Zhengyuan said Futures is a double-edged sword, enterprises in order to ensure their own profits, should participate in the futures market, such as expected this year’s Gold target price is $ 200/g if it exceeds the profit target companies doing futures hedging, this ensures realization of profit targets. But certainly also to note that the amount of control, the Board requires a hedge within the volume control in the output of 25%.
In addition, while in the control group’s overall financial risk, but subordinate business flexibility and autonomy, zijin mining group will also have rights to sell, and operate distributed to various subsidiaries so that they can be based on the business independent of time hedging operations, but the Group Headquarters to the branch’s operations, position and status of funds closely monitoring, and strict checks on the internal control system.
According to understanding, for control futures business of risk, zijin mining developed has group futures and the forward transactions management approach under and sets period hedge transactions management rules under, system, provisions: company of futures transactions must in Board authorized of permission within for futures transactions, to sets period hedge for purpose, is through appropriate of futures transactions, in must degree within lock company products sales of forward price fluctuations risk. And, company futures trading internal system of limit and stop loss orders, all trader transactions only within the limit, . they hold positions set up stop loss point no higher than 5%, when it comes to firmly positions left.
Stability of management performance upgrade
Although live in cyclical industries, zijin mining solid and steady management strategy, but has provided excellent performance for enterprise. According to the company over the past 14 years, three indices, sale of assets, profits grew by more than 68%. In 2007, zijin mining is sales revenue of RMB 14.871 billion, net income of RMB $ 2.552 billion, 49.72% than the previous year. By the end of 2007, total assets of RMB 16.799 billion yuan, 48.01% than the previous year; net assets RMB 7.119 billion yuan, 40.86% than the previous year.
Meanwhile, the company on the scientific management of market risks, more conducive to the growing scale of business and sustainable development. For futures transactions of strategy significance, company management layer think, from mining enterprise itself operating operation mode and features view, from Enterprise long-term sound operating departure, using sets period hedge as a lock price, and evasion risk of tools, is as enterprise scale constantly expanded and must used of a means or said mining class enterprise of a trend, and sets period hedge in spot price fluctuations of two a direction Shang are has its control price risk of actively role.
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