Companies

Zijin Mining to probe management flaws

(Agencies)
Updated: 2010-07-14 11:53

Zijin Mining Group Co, China's largest gold producer, will investigate its management methods after waste water from a mine contaminated a river and killed fish in Fujian province.

"We earlier said that the accident was a result of heavy rains, but it's not just that," Zhao Jugang, a spokesman, said by phone from Shanghang today. "The accident reflects some deeper issues about the company. We think closure of the plant and an investigation are very necessary."

Related readings:  Suspicions linger as river declared safe after spill  Copper plant closed after waste leakage  Zijin Mining shuts copper smelter after leakage

The Chinese government may make an example of Zijin as it seeks to highlight a more serious stance toward environmental issues, Bank of America Corp's Merrill Lynch said July 12. Zijin has been criticized for the nine-day delay in disclosing the accident to investors in Hong Kong and Shanghai.

"The company is under huge pressure from the media and investors for the disclosure delay, and luckily for them, there is no death or poisoning of human beings involved," said Owen Liang, a Shenzhen-based analyst at Guotai Junan Securities Co.

Zijin, based in Fujian province, rose 2.2 percent to HK$5.01 (64 cents) in Hong Kong trading at 10:20 am. The stock dropped 12 percent yesterday to the lowest level in more than 15 months. In Shanghai trading, the stock was down 0.5 percent to 5.73 yuan (85 cents).

"The board of directors decided not to make the accident public on July 3 on the consideration that we didn't want to cause a panic to local residents without a clear understanding of the leakage impact," Zhao said. "We discovered the reason with the assistance of local authorities on July 6 and after the weekend, we made the announcement."

The company closed its copper smelter at Zijinshan after the accident.

About 1.89 million kilograms of fish in the Mianhuatan reservoir in Fujian province were found dead or poisoned, Xinhua News Agency said July 12. Zijin will likely have to pay a penalty, and compensation for local fisheries may reach about 5 million yuan ($738,000), Zhao said yesterday.

The government has issued new environmental standards for commodity producers including steelmakers and lead plants in the past year, threatening closures if they weren't met.