In a move that analysts consider a bullish sign for the industry, four Chinese gold producers are battling over rights to develop the promising Yangshan Gold Mine. China now produces more gold than any other country, even South Africa, and the mine is rumored to be China’s largest gold bullion deposit.
Although full financial details have not been released, the Wall Street Journal wrote last week that the government-owned Yangshan mine, located in China’s western Gansu province, “was discovered last year and is estimated to have 308 metric tons of gold reserves, according to a report last year from China’s state-run Xinhua news agency. At current gold prices of $893.50 an ounce, 300 metric tons would be worth $9.5 billion.” Shanghai-based Shandong Gold-Mining Co., unlisted China National Gold Group, and Hong Kong-listed Zijin Mining Group Co. and Zhaojin Mining Industry Co. have all expressed interest. It could cost the selected company more than $872 million to develop the mine.
Zijin has a foothold as China’s largest gold producer, but the competition for Yangshan is fierce. Within time, each company will submit their bids to the National Development and Reform Commission of China. The Wall Street Journal estimates that a decision will be made between June 25 and early July.
Despite high gold demand and a growing interest in gold hedges, one analyst warns that these companies shouldn’t expect quick cash. “The Yangshan deposit is still at a very early stage of exploration,” Julian Zhu of Deutsch Bank alerted the press. “It takes a long time to build necessary infrastructure to bring the new mine into commercial production.”