Lou Dingbo,Chairman of Pengxin Mining, expressed in an interview with the reporter forChina Securities Journal that the company has made the business layout morereasonable and dispersed the business risk through continuous mergers andacquisitions of high-quality projects, and in the future, the company willfocus on mineral resources to create a leading global provider of integratedresources. At the meantime, the company will properly grasp the rhythm ofmergers and acquisitions, rationally seek the M&A objects based on fullabsorption and digestion of M&A resources, so as to realize the driving ofendogenous growth and denotative expansion.

Diversify risksthrough manifold layout

In June of this year, the assets of SouthAfrica’s ORKNEY GOLD MINE were officially incorporated into Pengxin Mining. Accordingto the information disclosed by Pengxin Mining previously, the miningconsultancy Minxcon detected that the gold reserves of ORKNEY GOLD MINE isabout 501.74 tons in total, with an average grade of about 7.04 grams per ton,which belongs to high-grade mineral deposits. ORKNEY GOLD MINE officiallyresumed production at the end of June.

Lou Dingbo said that the incorporation ofORKNEY GOLD MINE into the assets of listed companies not only means that thecompany has set foot in the gold industry since then, and the situation of over-relianton copper resources and the volatility of performance have been changed, butalso indicates that the company’s international layout has becoming moredispersed and more secure.

“Previously our assets are almost in Congo(Kinshasa), and as a listed company, such resources allocation seems not healthyenough to endure risks. Based on this situation, we begin to consider lookingfor assets with better quality outside Congo (Kinshasa).” Lou Dingbo said.

As regards business model, Pengxin Mining hasbuilt its positioning of integrated resources service provider through thedevelopment of bulk commodity trading, etc. based on the development of mineralresources, and further increased the richness of the company’s businessactivities and enhanced the company’s ability to resist risks.

The company has carried out domestic trade of nonferrous metals and noblemetals, such as copper, nickel and silver, etc. with many domestic large andmedium-sized trading companies, and conducted international trade of nonferrousmetals with a number of international trading companies as well. At themeantime, the company has carried out corresponding hedging operations, as wellas the basis trades of bulk commodities such as copper, aluminum, nickel, zinc,silver and natural rubber, etc., and has gained good returns through adopting avariety of trading strategies in trade. In the future, it is expected toprovide more support for the development of the company through the stableprofits brought by bulk commodity trade and trade financing.

Diversified development of copper, cobalt and gold

Pengxin Mining has become a diversifiedenterprise with copper, cobalt and gold as its core through successivedeployment of gold and cobalt resources. Lou Dingbo introduced that three kindsof resources can effectively overcome the cyclical fluctuations of theresources industry and promote the long-term stable development of the company.

Lou Dingbo said that amongthese three kinds of resources, copper is the basic resources for globalindustries and has a stable and steady demand, it is an important component ofthe company’s business; gold, as a global strategic resource, has strongerfinancial attributes and strong ability to resist risks in economic periodicfluctuations, and it is a key source of profit for the company; cobaltresources enable the company to share the dividends of new energy industry.

Lou Dingbo revealed that Pengxin Mining hasestablished a large-scale cobalt ore trading center in Congo (Kinshasa) todevelop the cobalt ore warehousing, logistics, trade and supporting services,to enrich the sources of cobalt ore and to raise the right to speak for cobaltpricing; the company has signed a lease agreement of copper and cobalt minescovering an area of 180 square kilometers with Congo (Kinshasa) Gecaminies.

In addition, Pengxin Mining’s cobalt hydroxideproduction line project with an annual output of 7,000 tons of cobalt metalquantity is located at Congo (Kinshasa) Shituru Mining, its first-stageconstruction of 3,000 tons of cobalt metal quantity/year is expected to becompleted by September 30^th, 2018, and then carried out trialproduction in October, and reached design capacity in December.

Frequent large-scale acquisitionsmade by Pengxin Mining has also caused market concerns, how to balance therelationship between endogenous growth and denotative mergers and acquisition?Lou Dingbo said that Pengxin Mining has attached great importance to the rhythmof mergers and acquisitions, and basically, there will be a major merger andacquisition in about one and a half years. “We will carry out the next round ofmergers and acquisitions only after confirming that we can digest the assets tobring cash flow value for the company and enable the entire financial status ofthe company to reach a new stage.”

Taking ORKNEY GOLD MINE asan example, Lou Dingbo introduced that the monthly exploitation quantity ofORKNEY GOLD MINE has risen to 1,000 tons at present, and both the time of theresumption of production and mining progress are faster than the originaldevelopment plan.