Sino Gold focuses on increasing investments

PUBLISHED : Tuesday, 10 June, 2008, 12:00am
UPDATED : Tuesday, 10 June, 2008, 12:00am

Sino Gold Mining, the largest overseas investor in the mainland gold industry, will continue to boost investments in what has now become the largest gold producing country in the world.

The Hong Kong and Australia-listed company would set aside US$15 million for exploration, chief executive Jake Klein said.

With total gold output last year of 9.7 million ounces, China became the world's biggest producer of the yellow metal, dislodging South Africa from the top spot that it had held for 100 years, according to London precious metals consultancy GFMS.

'China is now the world's No1 gold-producing country but the reserve base is only No7. From our point of view, there are lots of geological prospectives that could yield additional reserves,' Mr Klein said.

China's lower costs compared with other countries, political stability and a more secure legal framework also contributed to making the mainland an attractive place for gold mining investment, he added.

Open-pit mining costs about US$1.20 a tonne in China against US$2.50 in Australia. A senior geologist and skilled mine operator would cost US$35,000 and US$20,000 a year respectively in China, compared with US$110,000 and US$90,000 in Australia, he added.

Sino Gold is conducting early-stage explorations with its Chinese joint-venture partners in three regional locations - northern China, Shandong province, and 'Golden China', which includes the provinces of Yunnan, Guizhou and Guangxi.

'These teams are exploring our existing tenements and evaluating further acquisitions in each gold belt,' Mr Klein said. Sino Gold also formed a joint-venture with its biggest shareholder, Gold Fields, to explore for deposits exceeding 5 million gold-equivalent ounces.

'Our next round of growth will come from exploration success,' said Mr Klein, adding the company was also in talks to buy more projects and hoped to seal at least two acquisitions this year.

Sino Gold is targeting to have at least 5 million ounces of gold reserves in the next one to two years, from 4.8 million ounces now. It aimed to increase annual output to 500,000 ounces within three years, from just 56,981 ounces last year as more mines came on stream, he said.

A major contribution would come from its 82 per cent owned Jinfeng mine in Guizhou that came on stream in September last year.

Other contributions would come from its 95 per cent owned White Mountain mine in Jilin, 95 per cent owned Beyinhar mine in Inner Mongolia and 72 per cent owned Eastern Dragon mine in Heilongjiang, which are still being developed or undergoing feasibility studies.

Mr Klein was confident that the company would return to profit this year on increased output and surging gold prices.

Sino Gold joins a growing list of gold miners including AngloGold Ashanti and Newcrest Mining that are unwinding hedges sealed at prices well below today's levels of nearly US$900 an ounce.

Last month, it said it would raise up to A$204 million (HK$1.53 billion) by selling new shares to existing shareholders. More than half of the proceeds would be used to close out all of its gold forward sales contracts for 279,000 ounces as of April 30 at an average of US$525 an ounce.