An undisclosed institutional investor in gold and copper miner Zijin Mining Group sold its entire stake through a block trade on Tuesday evening, showing that the market remains open — at least for quick, non-marketed transactions.
Long-only investors have been buyers of Zijin Mining during the past few weeks and saw the Goldman Sachs-led placement as a good opportunity to increase their exposure at a discount to the market price. As a result, the bookrunner was able to fix the price in the upper half of the range for a total deal size of HK$1.46 billion ($187 million).
The seller offered all its 338.383 million H-shares at a price between HK$4.22 and HK$4.36, which corresponded to a discount of 4% to 7% versus Tuesday’s closing price of HK$4.54. The deal size equalled approximately 1.6% of Zijin Mining’s total market value and 5.8% of its H-share capital.
The investor interest, which had been evident earlier in the day when Zijin Mining’s share price rose 2.25%, gained additional momentum as the spot gold price broke $1,600 an ounce to set a new record and futures trading indicated that US equity markets were in for a positive day. This resulted in a broad take-up by both long-only investors and momentum players and allowed the price to be fixed at HK$4.31 for a discount of 5.1%.
According to a source, more than 60 investors took part in the transaction and by 9pm had placed enough orders to cover the deal almost three times. For the momentum players, it would have helped that the deal was relatively small in terms of daily turnover — it accounted for no more than 10 days of trading volume. The stock has also become more liquid after a five-for-10 bonus issue in June. However, the allocation was skewed towards long-only accounts.
Zijin Mining’s share price has been underperforming the rally in the gold price after a spill of acidic waste from its Zijinshan mine in Fujian province in July last year, which polluted the Ting river and, according to media reports, poisoned enough fish to feed 72,000 people for a year. However, any further fall-out from the spill now seems to be in the price and focus is once again on the company’s fundamentals. Since hitting a low of HK$3.64 on June 17, its H-share price has gained 25%.
In 2010, the company reported a 37.3% increase in revenues to Rmb27.8 billion ($4.3 billion) and a 40.8% gain in net profits to Rmb5.74 billion.
Investors are still quite keen to participate in discounted block trades to make up for the fact that they have failed to make much money on IPOs this year. And existing shareholders are likely to continue to take advantage of this on days when the secondary market is favourable. However, for large holders the window is soon to be shut as many companies will come into the one-month blackout period before their first-half results during which they aren’t allowed to sell any shares.
Zijin Mining’s share price fell 5.7% yesterday after the completion of the deal to a close of HK$4.28 — slightly below the placement price of HK$4.31.