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Kingold Secures Additional Source of Gold with SPD Bank Agreement

Group secures $69 million in gold sources to date.
Mar 5, 2013 11:28 AM   By Jeff Miller
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RAPAPORT... Kingold Jewelry Inc. signed a gold leasing framework agreement with the Wuhan branch of Shanghai Pudong Development Bank (SPD) Ltd. The deal provides guidance for Kingold to lease gold under a total credit line of about $32 million (RMB 200 million), with actual gold leases under the agreement made pursuant to separate leases that specify weight and price in yuan and gram, lease terms and rates.

SPD Bank began leasing gold to Kingold in February and the jewelry manufacturer has since entered into two additional agreements for an aggregate of 530 kilograms of gold, with a market price of approximately $28.3 million (RMB 176 million). These two lease agreements have an initial term of approximately 12 months each, and provide for a lease rate of 6 percent with payments due quarterly.

Kingold anticipates this access to gold will further its market share for the 24-karat gold jewelry and investment gold businesses. Kingold stated that there is increasing demand from existing and new clients, but it has encountered challenges to increase its working capital capabilities to meet  demand. 

Zhihong Jia, the chairman of Kingold Jewelry, said,  "We are very pleased to have secured access to additional gold to further develop our gold jewelry and investment gold business, and are currently seeking similar agreements with financial institutions in China.  This framework arrangement with SPD Bank, which builds upon our earlier gold leasing agreement with China Construction Bank in January 2013, have in total provided Kingold with $69.1 million in new sources of gold to date to help accelerate our growth and achieve a greater balance in free cash flow.  We are confident that we will be able to greatly enhance the processing capability in our 24-karat jewelry manufacturing and investment gold processing businesses.  We will continuously seek innovative financing options with China's leading banking partners to expand our business, further improve our market leading position and create value for our shareholders."

Tags: agreement, China, gold, Jeff Miller, Jewelry, kingold
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