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Fosun to invest $887m in Russia's largest gold miner

Plans to acquire 10% stake, join forces to meet increased Chinese demand

SHANGHAI -- Chinese private investment group Fosun has agreed to buy a 10% stake in Polyus Gold International, the largest gold miner in Russia, for $887 million.

The two companies hope teaming up can help take advantage of demand in China, the world's largest gold consumer.

Fosun will make the investment through a consortium consisting of Fosun International, a Hong Kong-listed subsidiary, and its mining unit. The group hopes to close the deal by the end of the year and plans to send executives to Polyus. The deal also includes an option that allows Fosun to acquire an additional 5% stake within the next 12 months.

Polyus foresees using the capital for purposes such as developing gold mines. According to an announcement from Fosun International, Polyus is the largest producer of gold in Russia and one of the top ten gold miners globally by ounces produced. As of the end of 2015, its total gold reserves amounted to 2,000 tons -- the fourth largest amount in the world.

Western media had reported Polyus was in search of investment from China in a bid to increase access to its market, with Russia continuing to suffer under economic sanctions imposed after the crisis in the Crimea region of Ukraine.

Data from the World Gold Council indicate that global demand for gold grew 2% year on year to 4,315 tons in 2016, of which 2,040 tons were for jewelry. China's share was about 30% and highest in the world. Demand for gold is projected to grow steadily thanks to the country's expanding middle class and Fosun's investment is designed to strengthen its gold operations to keep up with increasing demand.

The company seeks to enhance synergy with its Shanghai-listed subsidiary Hainan Mining, which owns iron ore mines in China. According to the statement, investment in a world-class mining project will "accelerate the transformation of its business structure, and strive to become a resources group with global investment and financing capabilities."

However, Hainan Mining shares lost over 4% from Wednesday to close at 10.24 yuan on Thursday. Fosun International ended the day at 12.22 Hong Kong dollars, up 0.82% from the day before, in Hong Kong.

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