China desperate to extend operating lives of Gold mines
Major Gold companies such as Shandong Gold, Zijing Mining and Zhaojin Mining are already in the fray for overseas takeovers, analysts said.
BEIJING(BullionStreet): China's top rank in gold production will be challenged soon unless the dragon nation find ways to extend operating lives of it's existing mines.
Apart from that China also has one of the smallest percentages of global gold-mine reserves, at less than 5%, which underscores the need for the resource-hungry giant to find its bullion elsewhere.
Analysts said Chinese gold players are definitely on the hunt for external resources, in part because the domestic quality of gold isn't as good, and also because they want access to superior gold-mining technology.
They added that while Chinese gold-mining technology can reach to depths of at most 2,000 meters below sea level, foreign technology can penetrate three times deeper.
Though Chinese have a little less than two per cent of their reserves in gold, Chinese central bank will want to get up to 10 per cent or thereabouts and that would require purchasing the next two years’ worth of western world production.
The desire for gold pushed China towards Africa to invest in commodities in order to support its rapidly expanding economy.
Country's largest gold producer, China Gold Group said it will participate in overseas acquisitions, look for resources in Africa and establish cooperation with other companies worldwide.
Major Gold companies such as Shandong Gold, Zijing Mining and Zhaojin Mining are already in the fray for overseas takeovers, analysts said.
The Chinese central bank wants to dramatically boost its gold reserves as well, to diversify its holdings and reduce its exposure to the U.S. Dollar.
The People’s Bank of China is accumulating significant volumes of gold under the radar of many less informed market participants which is bullish.
The Chinese government is secretive about its gold diversification and buying and does not disclose gold purchases to the IMF.
Therefore, there has been no official update to their holdings since the barely reported upon announcement four years ago that Chinese gold reserves had risen from just over 500 tonnes to over 1,000 tonnes.
However, China's official gold holdings amount to just 1.6% of the country's total foreign reserves, compared with more than 70% in the U.S., Germany, Italy and France.
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