While China has now been the world’s largest producer of gold for the past seven years, there have always been questions asked as to whether the current level of gold output (430 tonnes in 2013) is sustainable. Now figures out of The Bureau of Raw Material from the Ministry of Industry and Information Technology suggest that there certainly are sufficient gold resources available to retain this position for the foreseeable future.
According to a report on Asia First Chan Yanhua, Director of the Bureau has said that reserves found through geological prospecting had been increasing faster than the country’s mining rate – and had seen a substantial rise over the past three years. The Bureau put China’s gold resources as being 8,200 tonnes (263.6 million ounces), which it says is only exceeded by known South African resources of 31,000 tonnes (close to 1 billion ounces).
While total resources and economically mineable reserves are not the same thing – a fact borne out strongly by the South African situation where grade and depth of resources preclude most of them being exploited at current gold prices on any kind of commercial basis, the Chinese figures do at least give credence to the likelihood that the country will be able to retain, and perhaps increase, its current output levels and comfortably maintain its global No. 1 producer status. It currently produces around 65% more gold annually than global No.2 miner, Australia – and almost 140% more than South Africa’s current production, although that country dominated world gold output for most of the last century.
With its centrally planned economy and its gold mining companies also effectively all state controlled, profitability may well not pose the same kind of issues it would for shareholder-owned companies as in much of the rest of the world. One would thus expect Chinese mining companies to mine gold according to government, rather than shareholder, needs – even though some will have a degree of equity investment. Caveat emptor!
There is, of course, also much speculation that China has been quietly building up its government controlled gold holdings similarly, but not reporting any increases to the IMF until it considers it politically expedient to do so. At Mineweb we would not be at all surprised if China is now the world’s No. 2 holder of gold as well, ahead of Germany whose central bank retains around 3,387 tonnes. The U.S. is comfortably in first place here with holdings reckoned to be 8,133.5 tonnes – but speculative reports suggest that China may well be aiming ultimately to exceed this figure, taking the view that its gold reserves will stand it in good stead in any changes which might be forthcoming in the world financial order – and in particular in any move to replace the U.S. dollar as the world’s reserve currency.