Increasing access by foreign entities to cheap Chinese capital and improved safety and environmental regimes that are accelersting to become more in line with world best practice will continue to drive China’s in its new position as the world’s largest gold producer, according to Australia’s Sino Gold Mining. Sydney-based Sino – which operates the second largest gold mine in China, Jinfeng – said today the revolution in China’s gold industry had, however, yet to reach levels where it had become a sustainable industry.
“That presents an opportunity for Australian gold miners, particularly because of the country’s cash liquidity and willingness now to debt fund foreign involvement in expanding and modernising China’s gold sector,” Sino’s President and Chief Executive Officer, Jake Klein, told the first day in Perth of the Paydirt 2009 Australian Gold Conference.
“The change in circumstance in the sector since the local gold revolution commenced in 1995 is profound and the global equities market should expect it to continue. Five Chinese gold miners are now listed on the Shanghai and Hong Kong stock exchanges and Sino Gold itself used this emerging pathway to capital funding to raise more than A$175 million at less than 7% interest rate from Chinese banks to fund our developments there,” he said.
“Expect the ongoing revolution to also see an easing in State ownership in China’s gold sector while successful local gold miners will expand out of China as they grow in confidence. They will obviously have the benefit of cheap capital backing to pursue resource opportunities overseas.”
Klein appealed to Australian resource investors and mining houses to consider China gold opportunities against historic trends in domestic gold production and other lead global producers. “Australian gold production has in the last 10 years, collapsed by about 32% and would have been worse if it was not for the development of Newcrest’s single mine at Cadia Hill in NSW.” Klein said. “South Africa, which had long held the mantle of world’s largest gold producer, has seen its gold output plunge 42% in the past decade at a time total gold production has risen 40% – China’s gold revolution being the benefactor at the expense of Australia and South Africa.
“However, while China now hosts four foreign gold mines – two of them owned by Sino – the country still only hosts five mines above an output of 100,000 oz/y. And while it has moved from vast subsistence gold mining in 1995 to the issue since of 20,000 government backed and regulated exploration licences, the majority of these gold footprints have barely been subject to modern exploratory analysis.”
Klein said Australian explorers had the expertise to assess the data base built up from subsistence mining records, lock down financing via China’s cheap and increasingly available capital, and drive the transition process which is cementing China’s position as the world’s new number one gold producer.
“The best of the subsistence mines, for example, never produced anything more than 15,000 -16,000 oz/y of gold yet sit on known ore mineralisation that has barely been drilled,” Klein said. As a result, this is an industry still in transformation and yet to become sustainable. Critically for Australian investors wanting to step up their role in this sector, one of the biggest catalysts influencing the change in China’s gold and mining structure is that safety and environmental regulation have now been bestowed Ministerial status.
“This is, for the first time, helping turn around the country’s alarming and unacceptable incident levels and death and injury rates in its old and now being phased out, mining practices. Australian miners should expect this level of safety and environmental regulation to continue.”
Sino Gold pointed to the ongoing emergence of Jinfeng as an insight into the untapped potential in China from historically ‘known’ mineralised areas. “In 2001, Jinfeng had the potential of 1 Moz, it is now 5 Moz and continuing to expand and we expect to produce around 180,000 oz this calendar year.” Klein explained. “Its cash operating costs are also coming down from $400/oz in calendar 2008 to $375 in the latest December quarter. The mine is now reaching a reliable performance level – and that’s the potential that awaits the broader gold sector in China through organic and new mine opportunities open to foreign entities.”