Zhaojin Mining Industry Co, the second largest Chinese listed gold producer, is expected to price its Hong Kong IPO at the top of its price range to raise around US$281 million, sources close to the deal said yesterday.
Thanks largely to investors'' increasing zeal for the yellow metal, the East China''s Shandong Province-based gold producer is likely to lock down its price at HK$12.68 per share, highest end of its proposed price range of HK$9.8 to HK$12.68, the sources said.
However, final pricing of Zhaojin is expected to be decided today.
"Zhaojin''s profitability is correlated to the fluctuation of gold prices," said Steven Leung, director of institutional sales at UOB-Kay Hian, adding that "the recent gold price increases make the company look more attractive."
Gold miners, which are long thought to be a traditional safe haven, have drawn tremendous interest from investors.
Due to factors such as inflation concerns, US dollar uncertainty, worries over US trade and current account imbalances as well as geopolitical tensions, gold price has reached multi-decade highs in the first half of 2006 and peaked in mid-May at US$730 an ounce.
On Thursday, the price rose to a three-month high at US$647.8 an ounce.
Benefiting from the robust price of the precious metal, Zhaojin saw its retail tranche 500 times subscribed, triggering a claw back that would drive its retail allocation from a previous 10 per cent to 50 per cent.
Its institutional portion had been about 200 times subscribed, one of the sources said.
According to a Reuters''s calculation, total orders generated from Zhaojin''s share offering would be worth at least US$64.6 billion.
Zhaojin is offering 172.8 million shares, or 24.6 per cent of its enlarged share capital, with 90 per cent of the shares earmarked for global institutional investors and the remaining 10 per cent to retail investors.
At the top of its price range, Zhaojin''s price represents 33 times 2006 earnings.
By comparison, gold miner Zijin Mining trades at 34.9 times 2006 earnings, while Lingbao Gold, the mainland-based gold smelter and producer trades at 23.7 times.
With its share offering arranged by UBS and Cazenove Asia, Zhaojin is expected to kick off its trading debut in Hong Kong on December 8 under the trading number "1818".