CHINA'S LARGEST gold miner has said it plans to borrow Gold Bullion from banks to sell on the open market as a means of raising short-term financing.
Zijin Mining Group – China's biggest Gold Mining firm by market capitalization – says it will begin by borrowing gold from Industrial& Commercial Bank of China.
"Borrowing gold is a low-cost option for financing," explains Zijin vice chairman Lan Fusheng.
Zijin will borrow no more than 10 tonnes of Gold Bullion this year – the maximum permitted by the Shanghai Gold Exchange – for a duration of not more than 12 months.
By using this alternative form of financing, the company is expected to make a significant saving compared to more traditional cash borrowing.
"The cost of funding of this alternative would be only 3 to 5 percent which is cheaper than borrowing money from banks," said Richard Leung, research analyst at CLSA in Hong Kong.
The news comes in the same week that the Chinese Gold & Silver Exchange Society launched the Kilobar Gold contract in Hong Kong – the first gold contract outside mainland China to be denominated in Yuan.
The Hong Kong Mercantile Exchange – which earlier this year began trading Dollar-denominated contracts for 32 ounces of Gold Bullion each – has said it too plan a Yuan-denominated contract.
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