Gold Mining in China

In the past 10 years, the output of China’s gold rose by 70%. The gold output of China broke the record and reached a peak of 276 ton in 2007 which made China the biggest country of gold origin and ended up the time of more than one centry when South Africa acted as a leader in gold mining industry(in 2007, the output of South Africa was 272 ton). For the rising demand of gold, the gold price on China market has risen by 150% during the past 10 years. Although Chinese has enhanced the understanding of investment on gold, it still has a large gap between China and the world. Till now, the average amount of owning gold is only 4 g in China while the world’s average is about 25. there is huge space for gold market to develop in China.

There are 1000 gold mines in China with most being medium to small scale operations. About 160t of total output in 2003 came from primary gold mines and the rest from various non-ferrous smelting entities. Consumption of gold in 2003 was 207 t, making China the fourth-largest gold consumer in the world. Demand for gold, mostly jewellry, has risen steadily in the country.

China Gold Group was established in Beijing in 2003 and listed on the Shanghai Stock Exchange in August 2004. the memebrs of the group include former central government-owned gold companies, Companies in which China Gold Co has invested and other companies which hold government invested gold propeties.

Fujian Zijin which was a small scale state-owned company located in Shanghang County, established more than 10 years ago, has expanded rapidly with asset value increasing to Yu1.2 billion form Yu3.5 million. It owns more than 235.2 t of contained gold resources and produced 7.25 t of gold in 2002 and more than 9 t 2003 making it China's third largest producer. The company signed a joint venture agreement with the Tibet Geological and Mineral Survey Bureau in 2003 to develop the Mayoumuyan Gold Minein pulan County, Tibet. The contained resource is estimated at over 79 t. Reserves in the Zijin gold mine, owned and operated by Fujian Zijin, have increased from 5.45 t contained in proven ore to more than 200 t in the indicated category since development started in 1992. The other major gold producer in china, Shandong group produced more than 10 t of gold in 2003.

Gold production is controlled by the State Gold Bureau, which is considering a shareholding system and multi channel investment. Previous investors were only allowed to develop low-grade deposits and refractory ores, which led to dissatisfaction and stagnation in the gold industry in China.

Gold is purchased by the Central Bank at a fixed price, and due to fluctuation of the metal's prices, the bank has had to adjust the prices accordingly, resulting in producers having to increase production to cover costs.

The primary gold producing provinces in China are listed below, in order of production: Shandong (within which, Zhaojin Mining Industry Company Limited is the biggest gold miner), Henan, Hebei, Shaanxi, Heilongjiang, Liaoning and Nei Mongol Provinces.

The Xinjiang Province gold administration has made several of its gold operations available for foreign investment. These mines have combined production capacity of 4.2 t gold per year. The area remains prospective with local geologists estimating a gold resource of over 500 t in the Xinjiang area. China has proven reserves of approximately 4000t of gold situated at depths of less than 800m depth.

The Qinling Gold Belt is situated in the southwestern portion of the Shaanxi Province in Central China. It was discovered as recently as 1988 and already has several developing projects. China Clipper Gold has a joint venture agreement with the Chinese National Nuclear Corporation to develop the Pangjiahe deposit which has 320 000 oz in reserves. The Pangjiahe project is located in the Qinling belt, which has two producing mines; the Shuangwang and Baguamiao mines. Each of these mines are reported to have reserves of over 1.2 Moz each with average grades of over 3 g/t. The ore is highly refractory and China Clipper are investigating pressure leaching and bacterial oxidation methods to extract gold from Pangjiahe.

Asia Minerals has terminated its JV with the Chinese government, after spending $2 million on feasibility studies.

General Minerals Corp. has the Towerbeck gold project in the Xinjiang province, comprising several small open pit operations near the border of Kazakhstan.

Through its interests in several subsidiaries, US based Vega-Atlantic Corporation have begun producing gold at the Shangzai Gold Mine, located in the Yunnan Province. Vega are also evaluating the 400,000 ounce Lannitang Gold deposit. Vega have also completed an agreement with Yunnan Silver Industry Co Ltd over the Lemachang silver mine, also located in the Yunnan Province. Lemachang has resources estimated at containing 9Mt grading 222 g/t Ag. The joint venture aims to double production, currently at 60 000 oz silver.

Pacific Minerals has entered into an agreement with Brigade 217 (a unit of China's Nortwest Geological Bureau) over the 217 Gold Project located in Inner Mongolia. Initial resource estimates at 217 have been calculated at containing 150 Mt grading 1.2 g/t for a total resource of 5.8 Moz gold.

In China, gold ore exists chiefly as primary gold, placer gold and associated or by-product gold. Among the explored gold reserves, primary ore is the major source in the production of gold products, occupying 75%~85% of the annual output.

China has fairly good metallogenic conditions of gold deposits. Geological experts from the Ministry of Geology and Mineral Resources estimated that the total gold resources of Shandong and other 9 provinces and autonomous regions are up to 11,025 tons, while some other geologists such as Li Tong and Du Chunlin reckoned that the potential gold reserves of China are 15,000 tons. The estimation made by the Gold Geology Institute of the Ministry of Metallurgy is that there are 46 metallogenic areas and 70 prospective areas of primary gold ore with potential resources of 10,000 tons and more; and 39 prospective metallogenic areas of gold placers with potential resources of 920 tons. The above estimations show that China is possessed of abundant gold resources.