BREAKINGVIEWS-China's gold fever underwrites risky M&A binge

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Refiles to write out "context news" in full.

By Ka Sing Chan

HONG KONG, Jan 30 (Reuters Breakingviews) - Zijin Mining 601899.SS has a big advantage over Western miners in the current gold M&A bull market. It’s not that at $158 billion and 21 times earnings the Chinese company is bigger and more richly valued than rivals at home and abroad – though it certainly helps. It’s that it and its domestic rivals are engaged in some mutual back-scratching with the country’s central bank. That may well give Zijin and domestic peers greater insight into gold prices. Yet that’s unlikely to be enough to fully insulate them from a bear market.

The digger's recently spun-off goldmining unit put the exuberance for the yellow metal on full display on Monday. It unveiled an agreed $4 billion cash takeover of Canada’s Allied Gold AAUC.TO just as bullion prices broke through $5,000 per troy ounce for the first time – having nearly doubled in the past 12 months. That deal almost doubles to some $9 billion the amount Chinese gold miners have spent on overseas acquisitions in the past 12 months, per Dealogic.

A number of factors has driven the gold price higher, not least the geopolitical and economic uncertainties wrought by the actions of U.S. President Donald Trump. But the People’s Bank of China has been playing an outsized role, too.

Sure, official data show it bought just 27 tons of gold last year. Yet analysts generally agree that gaps in trade data indicate that the true pace of accumulation – as with many central banks seeking insulation from dollar and geopolitical risk – is far higher.

In November, for example, Société Générale analysts estimated that Chinese entities including the PBOC may have bought as much as 250 tonnes of gold in 2025. That’s more than a third of global central bank demand, yet much would have been done through unreported channels such as domestic refiners and trading firms, many of them key clients of Zijin. The PBOC's appetite could persist for years: at current prices, gold accounts for less than 10% of China’s $3.4 trillion foreign-exchange reserves. This compares with a global average of 20%, according to Société Générale analysts, citing data from International Financial Statistics.

That would seem to nurture ideal conditions for Zijin and others to keep trawling the world for mines. Trouble is, they’re generally limited to buying assets their international peers deem too risky or uneconomic to run, leaving them exposed to both local political, social and environmental difficulties as well as a big drop in the price of gold. That’s a big bet on events largely out of their control.

CONTEXT NEWS

Zijin Gold International, China's biggest goldminer, has agreed to buy Canada's Allied Gold for about $4 billion in cash, the companies said on January 26. Chinese miners including Zijin Gold's majority shareholder Zijin Mining spent up to $4.6 billion on acquiring gold mining assets overseas in 2025, according to Dealogic.

The People’s Bank of China acquired up to 27 tons of gold in 2025, according to official Chinese government data. Yet the country's central bank could have purchased as much as 250 tons last year through unreported channels, analysts at Société Générale estimated in November.

(Editing by Antony Currie; Production by Aditya Srivastav)

((For previous columns by the author, Reuters customers can click on CHAN/ KaSing.Chan@thomsonreuters.com))