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【Media Focus】GGTT Acquired South Africa’s Listed Gold Mine Company Village Main Reef at over RMB 300

Date: 2015-04-09
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      On April 7, domestically famous PE institution GGTT’s acquisition of South Africa’s listed gold mine company Village Main Reef passed the vote of the listed company’s general meeting of shareholders, which implies this acquisition was basically completed. This cross-border M&A worth 637 million rand (about RMB 334 million Yuan) not only is the first case in which a Chinese private enterprise acquires a South Africa’s listed company, but also implies GGTT made another important step on the road of cross-border M&A.

      Acquisition of a South Africa’s Listed Gold Mine Company

       As GGTT’s person in charge of this project ZHANG Sheng introduced to China Securities Journal’s reporter, Village Main Reef’s main business is mineral resource development and investment. Its assets include a gold mine in operation and a gold mine in maintenance. The 2 gold mines’ total deposit is about 1,124t. Its platinum mine’s total deposit is about 1,213t. It’s one of the world’s biggest monomer platinum mines. Moreover, it also has an antimony mine asset, which is one of the biggest antimony mines outside China. The total antimony deposit reaches 208,000t.

      “On Feb. 4, 2015, we signed an Acquisition Agreement with VMR, and sent general acquisition offers to all VMR’s shareholders. On March 7, VMR sent out circulars for a shareholders’ meeting. On April 7, the acquisition passed the shareholders’ meeting’s vote with 99.4% support. In addition, on March 31, this acquisition was examined and approved by South Africa’s Competition Commission. After being put on file as a Chinese enterprise’s overseas investment, this project will officially finish the acquisition. After the acquisition, Village Main Reef’s stock will be delisted from Johannesburg Stock Exchange.” ZHANG Sheng said, “It seems our acquisition this time was finished in a very short time. But actually, we began to investigate projects in South Africa from the year before last. We chose the best among the good through massive screening, and selected Village Main Reef in the end.”

       GGTT’s acquisition of Village Main Reef also enjoyed favorable climatic, geographical and human conditions. In the long term, international gold price currently is at a relatively low point in history. The safety of the acquisition is relatively high. Meanwhile, after the bear market that lasted 3 years, international gold price finally bounced recently. Since the last 10 days of March, international gold price has kept a bouncing posture and risen for 3 weeks successively so far. From the lowest point within the year 1,140 USD/ounce, gold price has reached the key psychological pass 1,220 USD/ounce twice. The rate of increase is close to 7%.

      Besides GGTT, many domestic listed companies also have seen this tendency. Zijin Mining recently announced that its wholly-owned subsidiary Sharp Hero Developments Limited signed a Share Subscription Agreement with Ivanhoe Mines Limited of Canada on March 23, 2015. Sharp Hero Developments Limited will subscribe for 76.817 million common shares of Class-A at 1.36 Canadian dollars/share (about RMB 6.588 Yuan/share). The total amount will be 104 million Canadian dollars. After the transaction, Sharp Hero Developments Limited will hold 9.9% issued and circulating common shares of Ivanhoe Mines Limited.

      Data shows Ivanhoe Mines Limited is a mineral exploration/development company registered in British Columbia, Canada, headquartered in Vancouver, listed on Toronto Stock Exchange (stock code: IVN). Its main assets include 95% of Kamoa Copper Mine and 68% of Kipushi Zinc Polymetallic Mine in Democratic Republic of the Congo, and 64% of Platreef Platinum Mine in South Africa.

      In ZHANG Sheng’s mind, in the process of acquiring foreign mining enterprises, to ensure the success of acquisitions, domestic enterprises first should avoid mineral projects that are far from going into operation, because such projects have relatively bigger uncertainty; next, they should try to acquire assets of relatively high transparency in financial affairs and management, because such enterprises’ management is relatively standard, and their management ability is higher, which can reduce the risks in acquisition at the most. “Village Main Reef we acquired this time is a listed company. Its operation is highly transparent. Meanwhile, the listed company’s auditing was finished by PwC and other international accounting firms. Moreover, we chose to finish the acquisition at a relative low point of the industry. In this way, it ensured the project’s long-term safety furthest.” Said ZHANG Sheng.

     Cross-border M&A Made another Important Step

    Acquiring Village Main Reef also implies GGTT made another important step on the road of cross-border M&A.

    As early as 2012, GGTT became famous overnight in capital market for its acquisition of old brand European engine enterprise Steyr. On Nov. 5, 2012, on the verge of shell retaining, after 4 months’ suspension of trading, Bothwin Investment announced its first targeted additional issuance plan in the 15 years since its listing. The amount of fundraising reached RMB 1.5 billion Yuan, which is twice of its asset size, and even exceeded its market value at the time (RMB 1.253 billion Yuan). In the RMB 1.5 billion Yuan targeted additional issuance, RMB 500 million Yuan was used to acquire Steyr. Steyr was acquired by GGTT in April 2012 at 32.45 million euro (about RMB 284 million Yuan). From this, GGTT made a profit of RMB 216 million Yuan. GGTT used RMB 200 million Yuan in the RMB 500 million Yuan realized capital to take part in Bothwin Investment’s targeted additional issuance.

This case caused a sensation in the capital market at the time. GGTT’s Managing Director BAO Yue also thinks it’s the most successful case in GGTT’s M&A history. “This case was born under specific historical conditions. Back then, Europe was in a debt crisis. They were willing to sell some advanced technologies and enterprises. China is a big manufacturing power. Thus we made such a connection. In the process, we also experienced various setbacks and difficulties. But in the end, we successfully sold Steyr to Bothwin, and filled up China’s blank in high-end diesel engine R&D field.” BAO Yue told China Securities Journal’s reporter.

      By 2015, cross-border M&A has become one of the three big trends in the increasingly active domestic M&A market (National Equities Exchange and Quotations, state-owned enterprise reform, cross-border M&A). PE represented by GGTT also has become an important force in cross-border M&A market.

     A report of PwC shows in 2014 enterprise M&A transactions in China created a new height in history; the number of transactions reached 6,899; the amount of transactions reached 407 billion USD. 2014 was a year when PE funds and financial investors’ participation in investment transactions was particularly active. The number and amount of transactions respectively increased by 51% and 101%. Both were new heights in history. Their active participation in state-owned enterprise reform and overseas M&A (transaction amount reached large scale for the first time) is the main motivating factor for this trend.

      “In cross-border M&A, our 3 strategic directions are resources, technology and brand. In the aspect of resources, Africa certainly is the center of our attention. Acquiring Village Main Reef is our first acquisition in South Africa. In the future, South Africa will be a strategic center for GGTT in a long run.” said BAO Yue.

       Moreover, Chinese enterprises’ investment in South Africa also has an optimistic market prospect in a long run. On the afternoon of April 7, Premier LI Keqiang of the State Council met with Mbete, Speaker of the National Assembly of South Africa, in the Tower of Violet Light in Zhongnanhai. Mbete thanked China for China’s long-term support for Africa’s development, as well as its help in fighting against Ebola, saying South Africa is willing to expand mutually beneficial cooperation, strengthen cultural exchanges, and promote deep development of bilateral relations with China. She welcomes more Chinese enterprises and tourists to invest and travel in South Africa.

     (Reprinted from; date: April 8, 2015; author: REN Mingjie)


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