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July 31, 2011

Australia’s Norton Gold sees China’s Zijin increasing stake

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Australian miner Norton Gold Fields expects its top shareholder, China’s Zijin Mining , to lift its stake to 19.9 percent, using Norton to expand offshore, Norton’s chief executive said.

Zijin, China’s top gold producer, last week agreed to invest $30 million in Norton, buying shares to lift its holding in the company to just under 17 percent.

Norton Chief Executive Andre Labuschagne said he plans to meet Zijin executives in the next few weeks to discuss what their longer term intentions are.

“All indications are we are the Australian arm for potential growth,” Labuschagne told reporters late on Sunday.

Labuschagne told two reporters separately that he expects Zijin will want to raise its stake to 19.9 percent, the threshold above which an investor would have to make a full takeover for the company if it wanted to increase its stake further.

Norton sees Zijin as a useful partner as it has expertise in the heap leaching process of extracting gold.

Norton Gold is considering developing its Navajo Chief lode using by heap leaching, alongside several other expansion opportunities on its tenements spanning 700 square kilometres in the gold belt around Kalgoorlie.

Zijin agreed to buy its stake for A$0.20 a share, a 14 percent discount to the stocks price on Monday.

The company’s shares have been languishing relative to its peers as it has an A$80 million debt load, compared to others who have no debt.

The share sale to Zijin will allow it to cut debt to A$50 million, and its recent sale of coal tenements in Queensland and the planned sale of its Mount Morgan mining leases in Queensland will cut debt to below $30 million by March 2013, if not sooner.

Once its balance sheet is strong enough Labuschagne is keen to get into merger activity which is sweeping the gold sector, and sees Norton as a predator rather than target.

“If I can help it, I’ll do it,” he said, adding that Norton would look at takeover opportunities in Australia and offshore.

“I feel disappointed we can’t at this stage participate in that consolidation process because of where the share price is.”

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