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Eric Ng

China has been the world's largest gold producer for five consecutive years and is poised to overtake India as the largest consumer this year, but its miners of the precious metal lack scale and efficiencies.
The mismatch between output and efficiency highlights the need and opportunities for consolidation of the fragmented sector as well as technology upgrades, say analysts.
Weng Zhanbin, the president of Shandong-based and Hong Kong-listed Zhaojin Mining Industry, said China's top 10 gold miners produced 184 tonnes of bullion last year, based on China Gold Association's figures.
On the other hand, the world's largest gold miner, Canada's Barrick Gold, alone produced 240 tonnes of the precious metal.
Only five Chinese gold miners have an annual output of more than 10 tonnes, while the remaining 700 small miners together produced just below 120 tonnes.
"The lack of industry concentration means low metal recovery ratios for the industry," Weng told the China Mining Congress.
"We propose raising the barriers to entry for the industry to speed up industry consolidation and standard upgrades," he said.
The Ministry of Industry and Information Technology drafted an industry consultation document on policies to drive industry consolidation in 2010, but they have yet been enacted.
The paper proposed that small operators with a daily raw ore mining capacity of less than 100 tonnes be closed by the end of last year, those mining less than 150 tonnes be shut by the end of next year, and mines digging less than 200 tonnes a day be boarded up by the end of 2015.
It also proposed that project developers must fund at least 30 per cent of the required investment from their own sources instead of externally.
Song Xin, the chief executive of Hong Kong-listed China Gold International Resources, noted China's largest gold mine produced 16 tonnes last year, compared with 40.9 tonnes from the world's largest mine.
"The energy-efficiency of small miners is relatively low and their safety and environmental protection standards are also weaker," he said.
China has been the world's largest gold mining nation since it overtook South Africa in 2007, and was expected to remain the leader this year, with output forecast to rise to about 380 tonnes from 360 last year, Weng said.
"But since China has many small miners, the average level of mechanisation is low, and the industry relies on low labour costs to compete, which is not sustainable," he added.
He also said that the western and central regions of the country remained under-explored.
Richard Goldfarb, a geologist at the United States Geological Survey responsible for Asia research, said once Chinese miners modernised their technology en masse, larger mines would be discovered and developed.
Goldfarb noted that typical mainland gold deposits found so far have two million to three million ounces of resources, compared with 10 million to 50 million elsewhere.
The World Gold Council has projected that mainland China's gold demand will climb 20 per cent this year, driven by investment needs, overtaking India as the biggest consumer.


Gold miners let down by size and equipment

The Chinese dragon will overtake India as the world's biggest consumer of gold this year. Photo: Reuters

China is becoming the world's biggest consumer of gold. Photo: Reuters

Business

Commodities

Many operators do not have the machinery and efficiency and they rely on cheap labour, which is not sustainable, say mainland producers


Gold miners let down by size and equipment

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Many operators do not have the machinery and efficiency and they rely on cheap labour, which is not sustainable, say mainland producers

Many operators do not have the machinery and efficiency and they rely on cheap labour, which is not sustainable, say mainland producers