Shanjin International Gold Co.,Ltd. (SZ: 000975), a mainboard listed company on the Shenzhen Stock Exchange, submitted its listing application to the Hong Kong Stock Exchange on March 27. CITIC Securities, China International Capital Corporation (CICC), and UBS Group AG are acting as joint sponsors. According to the draft prospectus, Shanjin International's gold resources amounted to 280.9 tonnes by the end of 2025, with an all-in sustaining cost (AISC) of USD 902.3 per ounce for the year, placing it within the top 10% of the global gold mining cost curve.
An analysis reveals several risks in Shanjin International's revenue structure, compliance of domestic and international mines, and technical validation of core projects. For instance, 58.4% of the company's 2025 revenue came from its metal trading business, which had a gross margin of only 1.4%. Furthermore, the company's domestic mines have repeatedly experienced mining volumes exceeding the scale specified in their mining permits. A core asset, the Mangshi Huasheng Gold Mine, has been suspended for ten years since 2016 and has yet to obtain approval for the change in mining rights. Additionally, existing mining areas face challenges from declining ore grades, while the newly acquired overseas project, Osino Resources Corp., also carries multiple overdue risks.
The prospectus indicates that Shanjin International's revenue has shown rapid growth over the past three years. However, the primary driver of this growth is not the high-margin gold mining business but the lower-profit metal trading segment. Total revenue for 2023, 2024, and 2025 (the reporting period) was RMB 8.094 billion, RMB 13.58 billion, and RMB 17.09 billion, respectively.
In terms of revenue structure, the contribution from the metal trading business has increased annually and now dominates the company's earnings. Specifically, revenue from metal trading was RMB 3.539 billion in 2023, accounting for 43.7% of total revenue. This figure rose to RMB 7.728 billion in 2024, representing 56.9% of total revenue. In 2025, trading revenue further increased to RMB 9.979 billion, constituting 58.4% of total revenue. Meanwhile, the profitability of this business differs significantly from the mining operations. The gross margin for the trading business during the reporting period was 0.1%, 1.1%, and 1.4%, respectively. In 2025, the RMB 9.979 billion in trading revenue contributed a gross profit of RMB 138 million. In contrast, the mining business generated revenue of RMB 7.112 billion with a gross margin of 74.7% in the same year.
The expansion of the low-margin trading business has diluted the company's overall gross margin. The consolidated gross margin for 2025 was 31.9%, lower than the 32% recorded in 2023.
Regarding operational compliance, the prospectus notes that Shanjin International has previously mined volumes exceeding the permitted scale specified in its licenses. Although the company assesses the risk of being ordered to suspend production as low, it acknowledges that relevant regulatory authorities may hold a different view.
Concerning asset quality and resumption progress, significant uncertainty surrounds the Mangshi Huasheng Gold Mine. The prospectus states that Mangshi Huasheng is a large Carlin-type gold deposit, with retained gold resources of approximately 28.5 tonnes and gold reserves of 24.4 tonnes as of the end of 2025. However, mining operations at the site ceased in 2016 and have been suspended for a decade. The resumption of the project still faces administrative hurdles. The company admitted that, as of the application date, there remains a significant risk that Mangshi Huasheng may ultimately fail to obtain registration of the mineral resource report and approval for the change in mining rights.
Obtaining approval for the change in mining rights is a prerequisite for renewing the safety production permit required to resume full operations. The related approval process involves completing and gaining approval for a reserve verification report, expanding the designated mining area, and having the mining plan and ecological restoration plan reviewed by municipal, county, and provincial authorities. Each stage carries uncertainty regarding timing and approval outcomes. Shanjin International warned that it cannot guarantee Mangshi Huasheng will obtain the mining license on the expected schedule or at all, which could adversely affect the mine's reconstruction progress, resumption plans, and overall business prospects.
Beyond the lack of administrative permits, the Mangshi Huasheng Gold Mine also faces a gap in metallurgical technical validation. A competent person's report indicated that "the refractory nature of the primary ore (with a low cyanide leach recovery of 21.62%) suggests that the metallurgical performance of the deposit may vary, requiring zone-specific testing." The prospectus further notes that the currently proposed process for low-grade oxide ore heaps uses heap leaching, with an expected recovery rate of 70.93%.
The technical report pointed out that the projected recovery rates for heap leaching and cyanidation appear optimistic in the absence of pilot-scale test verification. The low direct cyanidation recovery for sulfide ore and limited effectiveness of flotation upgrading (concentrate grade of 14.73 grams per tonne) highlight its refractory characteristics.
Technical and operational risks are also present in the company's other existing assets. At the Heihe Locke mining area, the competent person's report identified a risk of declining head grade. The head grade at this site is challenged by a potential drop from 15.38 grams per tonne to 4.88 grams per tonne. Such a decline in grade would impact the project's economic viability and increase the unit processing cost per ounce of gold.
Regarding overseas assets, Shanjin International also confronts challenges related to local compliance and license continuity. In 2024, the company fully acquired Osino, thereby gaining the Twin Hills Gold Project in Namibia. This project is positioned as a core overseas asset with a projected annual gold production of 5.1 tonnes upon commissioning, expected in 2027. However, the competent person's report disclosed that while Osino holds a mining license for the main Twin Hills area, several of its 18 prospecting licenses had expired in 2024 or 2025.
The prospectus notes that Namibian regulators are increasingly focusing on mine rehabilitation during operation and after closure. Although the current Minerals Act allows the government to include mine rehabilitation and closure responsibilities as license conditions, the regulatory system is moving towards more specific norms. A national mine closure framework is being developed to standardize final closure requirements, including the preparation of rehabilitation plans and financial assurance provisions covering closure costs. The company must set aside financial provisions for such rehabilitation activities. Failure to meet rehabilitation obligations or other environmental conditions could lead to enforcement actions. Regulators have the authority to issue compliance or stop-work orders, impose administrative fines, or even revoke environmental or mining licenses in cases of serious non-compliance.
Additionally, the prospectus indicates that the company's goodwill on the balance sheet has increased somewhat due to the purchase of new mining assets. This goodwill represents the premium paid over the fair value of identifiable net assets, calculated based on the expected future cash flows of the acquired businesses. However, there is a risk of impairment losses if the production schedules of these newly acquired mines do not proceed as planned. Such risks could arise from regulatory delays, technical or geological challenges, or unfavorable market conditions. If cash operating costs or total production costs exceed expectations, or if a mine underperforms in terms of output or profitability, the projected cash flows may prove insufficient. In such cases, Shanjin International's financial performance could be negatively impacted.
Regarding the low gross margin of the trading business and past instances of overproduction at core mines, inquiries were sent to Shanjin International's securities department on the morning of March 30, but no response had been received by the time of publication.
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