JOHANNESBURG (miningweekly.com) – Increasing access by foreign entities to cheap Sino capital and accelerated safety and environmental regimes more in line with world best-practice will continue to drive China’s transition into the world’s newest and largest gold producer, said Australia-based Sino Gold.

Sino Gold, which operates the second largest gold mine in China, the Jinfeng mine, said that the revolution in China’s gold industry had 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 president and CEO Jake Klein told the Paydirt 2009 Australian Gold Conference.

“The change in circumstance in the sector since the local gold revolution started in 1995 is profound and the global equities market should expect it to continue,” Klein said.

“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.

He noted that Australian gold production had in the last ten years, collapsed by about 32% and would have been worse if it had not been for the development of Newcrest’s single mine at Cadia Hill, in New South Wales.

“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.”

He added, however, that while China now hosted four foreign gold mines, two of them owned by Sino, the country still only hosted 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 through China’s cheap and increasingly available capital, and drive the transition process which was 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 oz to 16 000 oz of gold a year, yet sit on known ore mineralisation that has barely been drilled,” Klein said.

As a result, this was 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 was, 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, Klein stated.

“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 one-million ounces, it is now five-million ounces and continuing to expand and we expect to produce around 180 000 oz this calendar year,” Klein said.

“Its cash operating costs are also coming down from $400/oz in calendar 2008 to $375/oz in the latest December quarter,” he said.

“The mine is now reaching a reliable performance level, and that is the potential that awaits the broader gold sector in China through organic and new mine opportunities open to foreign entities.”

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