Zijin Expresses'Deep Regret' Over Copper Plant Leak (Update1)

July 20 (Bloomberg) -- Zijin Mining Group Co., China's biggest gold producer, expressed "deep regret" for a leak of acid-laced water from its largest mine, and a nine-day delay in admitting to the breach and losses caused to fish farmers.

The company will "properly" handle compensation for damages, hold itself responsible for the findings of government probes and improve disclosure, it said in an e-mailed statement late yesterday.

Zijin Mining tumbled 17 percent in Hong Kong trading last week after saying July 12 that 2.4 million gallons of acidic waste spilled from its Zijinshan mine, polluting the Ting River and poisoning enough fish to feed 72,000 residents for a year. Regulators are probing the company's disclosure of the incident.

"There are concerns the government would impose a large fine on Zijin in order to give a warning to other companies," said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million.

Zijin rose as much as 10 percent, the daily limit, in Shanghai trading to 5.73 yuan, and traded at 5.65 yuan at 11:01 a.m. local time. In Hong Kong, the shares rose 6.7 percent, the first gain in four days, to HK$4.77. The benchmark Hang Seng Index gained 1 percent.

The shares are rebounding after some investors bet last week's decline was overdone, having depressed the company's price-to-earnings ratio below rivals, Wu said.

Spreading Waste

The July 3 spill came after the same mine was cited for excess waste discharge last September, a problem the Fujian province-based company didn't fix, the Shanghang county government said July 15. Zijin initially blamed heavy rains for the leak near Shanghang, where about half a million people live.

There was another leak on the 16th, with 500 cubic meters of waste water discharged, the company said on its website.

The spill has contaminated the lower reaches of the river in nearby Guangdong province, China Daily reported, citing a notice from a local environmental protection agency. Copper content in the Meizhou section of the river in Guangdong has jumped, posing a threat to fisheries, the newspaper said.

Zijin will contact the environmental agencies in the two provinces regarding the report, spokesman Zhao Jugang said by phone today.

'Deep Regret'

Zijin's board of directors expresses "its deep regret regarding the incident and the improper handling of information disclosure by the company, for causing substantial losses to the fish farmers located at the reservoir downstream of the mine and having a harmful impact on society," the company said.

The company will investigate environmental safety across the group and take necessary measures to rectify any problems, as well as setting up an emergency relief team and improving its response system, according to the statement.

Heavy rain broke the plastic barrier in a waste pit and water containing acid copper polluted the river through illegally built drainage, the local county said last week.

Zijin, China's sixth-largest copper producer, has shut its smelter during the investigation and doesn't know when it will reopen. Output at Zijinshan accounts for about 15 percent of Zijin's total production, according to Guotai Junan Securities Co. The mine also generates about 60 percent of its gold output.

The detained managers were Lin Wenxian, head of the copper plant, deputy head Wang Yong, and Liu Shengyuan, environmental chief, the county said. As many as 38 Chinese officials will be penalized for dereliction of duty, the 21st Century Business Herald said today, citing an unidentified person.

Zijin's sales soared 68-fold in the past decade as China's gold industry became the world's largest producer of the commodity, overtaking South Africa in 2007. The company, the largest publicly traded Chinese bullion producer, operates in Peru, Mongolia, Canada and Myanmar, according to its website.

China has been hit by a series of health and environmental standard failures, with lead found in toys, and melamine-tainted milk and waste from smelters killing children. An oil spill caused by an explosion on July 16 in the northeastern city of Dalian polluted the sea, according to the Xinhua News Agency.