S
uddenly, it seems, China has
discovered a lot more gold. Or
they already knew it was there and
just didn’t own up. Or they haven’t
discovered a lot more gold and their reserves
are actually declining. Who would know?
One possible answer to this conundrum
came from one of those people who add
comments to online articles.
In this case it related to a post about the
uncertainty about China’s real gold resource.
h is fellow added that China was deliberately
providing incorrect information about
gold – and almost everything else – in order
to cause “complete chaos in the minerals
and currency markets”. Sounds plausible to
anyone who remembers the chaos caused in
the 1990s by China’s metals dumping.
h e reports have varied from China
running out of gold within a few years to the
Middle Kingdom producing a bounty of the
yellow metal.
h e Chinese news service Xinhua recently
proclaimed China’s proven gold reserves
stood at 12,100 tonnes.
An oi cial, Zhang Yongtao, also
announced that by 2020, China would lit
gold mine output to 500 tonnes a year.
h e US Geological Survey, in its 2017
summary, estimated remaining Chinese gold
in-ground reserves at 2000 tonnes, out of a
world total of 57,000 tonnes.
As the USGS noted a few years ago, China
is producing 15% of the world’s gold but has
only 3.5% of the known in-ground reserves.
As the World Gold Council noted four
years ago, the rest of the world’s reserves
will, based on 2013 output, last an average
19.7 years.
China’s at the present rate of extraction
would last only 4.3 years – if that 2000
tonnes i gure was correct.
Reuters was reporting in early 2015
that Chinese gold output was set to slow
considerably. Quoting Business Monitor
International, Reuters was reporting
declining ore grades, depleted reserves and
waning proi tability that, taken together,
meant China would have to raise its imports
of gold “to meet the persistent strength in
demand from Chinese consumers”.
However, even then, no one could actually
pin down what the likely i gure was.
While the USGS and others sources
were talking about depleted reserves,
in 2015 China’s reserve i gure was 6000
tonnes according to the Ministry of Land
and Resources, or between 15,000 tonnes
and 20,000 tonnes according to the China
Geological and Mineral Survey – which tells
you something about Chinese i gures, if
nothing else.
Here is more confusion. In 2013, China
Daily was reporting the country’s number
one gold producing area, Zhaoyuan County
in Shandong province was at the end of its
golden days: the city had 68 gold mines but
local authorities were concerned many of
these would be exhausted within 15 years,
partly due to the cranking up of output to
meet domestic demand for gold.
h e mines in Zhaoyuan had dropped their
actual extraction average from 4 grams per
tonne to two grams, while costs were rising
by about 8% in 2012, due to more expensive
equipment, power and labour.
However, this year Shandong Gold Group
reported a discovery in that province of
a gold mineralised structure 2km long by
67m in width, containing an estimated 12.3
million ounces with an average grade of 4.52
grams per tonne.
Naturally there was no JORC-type data
such as drill hole details.
h is comes on top of the Ministry of Land
and Resources saying China has discovered
resources totaling more than 1130 tonnes in
2016.
Yet Shandong Gold and others are still
pushing ahead with foreign gold acquisitions.I’m sorry, but I don’t think we can be
satisi ed as to the exact state of China’s
domestic gold industry.
However, there seems no doubt that
the consumption trends are obvious, with
the Shanghai Gold Exchange now with 10
million client accounts – and most of them
buying more than just a few ounces a year.
Moreover, as one China expert noted,
gold retailing is very much still a coastal city
thing. h ere are an estimated 375 million
Chinese in outer provinces that still have no
access to gold shops.
Wait until they do.
Meanwhile, it is actually quite important
to know what China’s gold resource position
is, especially if you are an investor in local
gold stocks.
At er all, either China could be producing
a l ood – or at least, a l ood-ette – of metal or
triggering a supply crisis.Panic anniversary
Speaking of supply crises, it is the 180th
anniversary of the Panic of 1837, caused by a
shortage of gold and silver.
h e metals were the only recognised
currencies in the US but private banks
printed their own banknotes ostensibly
backed by gold and silver holdings.
Of course, they printed far more notes
than the metal in their vaults. h e money
printing i nanced a boom in the building
of railways, canals and factories. Sound
familiar?
However, then President Andrew Jackson,
a gold bug it seems, ordered federal agents to
refuse any paper currency.
h e notes immediately became valueless
because the banks did not have enough gold
and silver with which to redeem them.
Financial carnage spread across America
and recovery did not occur until the 1840s.
A story to warm the cockles of gold bug’s
hearts, if ever there was one.48 AMM December 2017 http://www.miningmonthly.com
China gold
Robin Bromby on the China gold conundrum.
Do they or do they not actually have it?
Robin Bromby
Modified image: iStock.com/adam_golabek