Chinese Gold Miners Continue to Gobble Up Gold Companies

Chinese gold companies continue to pursue and acquire mining companies aggressively. 

The Buyouts: 

  • Continental Gold Inc. was acquired for C$1.3 billion in early March by Zijin Mining Group Co. The company’s asset, the Buriticá Project, is the most advanced underground gold mining operation in Colombia. Buriticá is one of the world’s largest high-grade gold projects, with production scheduled to begin in 2020. Mineral reserves are estimated to be 3.7 million ounces of gold with 8.4 g/t of gold (13.7 million tons).
  • TMAC Resources entered into an agreement in early May with one of China’s biggest gold producers, Shandong Gold Mining, to sell the company for C$230 million. TMAC’s Hope Bay Property is a high-grade gold district with established Measured and Indicated Mineral Resources totaling approximately 5.17 million ounces of gold at an average grade of 7.4 g/t Au and Inferred Mineral Resources totaling approximately 2.13 million ounces of gold at an average grade of 6.1 g/t Au. However, the Canadian government is currently reviewing the buyout as Shandong Gold Mining Co. Ltd. is a Chinese state-owned enterprise.
  • Guyana Goldfields was acquired by Zijin Mining Group for C$323 million on June 12th.. Zijin won the bidding war as it valued the company 35% higher than the previously accepted offer from Silvercorp Metals. Guyana Goldfields is a mid-tier gold producer primarily focused on the exploration, development, and operation of gold deposits in Guyana, South America. Its 2019 production guidance was between 145,000 – 160,000 ounces. 
  • Cardinal Resources was acquired by Shandong Gold Mining for A$300-millio on June 18. Cardinals Namdini Project has a Proved and Probable Ore Reserve of 5.1 Moz. 

It is worth noting; China is already producing the most gold in the world. 

The recent acquisition spree by Chinese companies should send a signal to the market that the country will be strategically utilizing the precious metal in the future with regards to it being a reserve asset. 

It was interesting to learn from Zerohedge that Beijing is beginning to sound the alarm about the dollar’s reserve currency status: 

Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, delivered a strong warning on the U.S. currency last week, which might explain all of the gold mining takeovers.

He made four points in a speech at the Lujiazhui Forum in Shanghai:

  •  The Fed is the de facto central bank of the world. When its policy targets its own economy without considering the spillover effect, the Fed is “very likely to overdraft the credit of the dollar and the U.S.”
  • The pandemic may persist for a long period of time, and countries keep throwing money at the problem with a diminished impact. “It is recommended that you think twice and reserve some policy space for the future.”
  • There is no free lunch. Watch out for inflation.
  • Financial markets are disconnected from the real economy, and such distortions are “unprecedented.” It’s going to be “really painful,” when the policy withdrawal starts.

Is China preparing to issue a gold-backed currency? Only time will tell, but there have been plenty of rumblings since 2008 of China pushing a gold-backed yuan.

If more companies continue to be gobbled up by Chinese mining companies, there certainly seems that something strategic is going on behind the scenes. 

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