"We Track the Financial Collapse For You, so You'll Thrive and Profit, In Spite of It... "

Fortunes will soon be made (and saved). Subscribe for free now. Get our vital, dispatches on gold, silver and sound-money delivered to your email inbox daily.

This field is for validation purposes and should be left unchanged.

Safeguard your financial future. Get our crucial, daily updates.

"We Track the Financial Collapse For You,
so You'll Thrive and Profit, In Spite of It... "

Fortunes will soon be made (and saved). Subscribe for free now. Get our vital, dispatches on gold, silver and sound-money delivered to your email inbox daily.

This field is for validation purposes and should be left unchanged.

Who’s Next? China Finally Starts Snapping Up Gold Miners

One (perhaps the only) bright spot in the past few years’ gold market has been Chinese and Indian demand for the metal. Here’s a chart, courtesy of Ed Steer’s Gold & Silver Daily, showing that the two countries have imported a cumulative 15,000 tonnes since 2008, which is not far from the total production of the world’s gold mines in that period.

China India gold demand 2015

But physical bullion is only part of the story, and may not be the biggest one going forward. Speculation has been circulating for years that China’s miners, flush with cash from selling their low-cost output to the government, would soon start buying up the world’s in-ground gold reserves. Here’s a representative opinion from 2010:

China buying Gold Mines Instead of Gold Bullion

A top industry official from the China Gold Association told The China daily back in February that the Chinese purchase of IMF bullion would cause market speculation and volatility. Instead, China is continuing to buy gold not directly from the market but through acquiring gold mines…abroad!

Dennis Gartman reported in March: “Perhaps we are to begin owning gold mines rather than gold futures of gold ETFs. We have avoided owning mines for years, preferring the “purer” play of owning gold rather than the mines, for we fear being exposed to poor mine management, or accidents in a mine that might do damage to the equity while gold itself moves higher. But if the Chinese authorities want to own mines, perhaps we have to consider doing so also…”

Why shouldn’t this make sense? After all, where do investors want to put their money? Banks are unsafe. Stocks are unsafe and speculative. With Real Estate at least you have a tangible asset and it will hold some value despite market busts. And buying Gold Bullion, especially buying in large quantities, can cause the prices to fluctuate significantly.

The best bet? Gold Mines! Maybe even patented gold mines where the investors own both the title to the land AND the Gold in the ground. Get ready to see a huge surge in gold mine buyers, especially from China!

That was obviously a little optimistic, since mining shares have plunged in the ensuing five years. But price action notwithstanding, the speculation didn’t let up. From 2013:

5 reasons China is coming to buy your gold mine

Chinese producers are aggressively looking at picking up gold companies and mines elsewhere as domestic demand reaches record highs.

Takeovers and asset purchases by Hong Kong and mainland miners increased to a record $2.2 billion in 2013 according to data compiled by Bloomberg.

Chinese companies like Zijin Mining Group and Zhaojin Mining Industry Co are in a good position to to take a bite out of struggling North American and European-based producers because:

• Chinese gold demand is soaring and at 1,000 tonnes will overtake Indian purchases this year, but domestic deposits are less than 5% of the global total.

• Targets are cheap – the S&P/TSX Global Gold Index of the globe’s 49 biggest gold companies are down 31% this year alone.

• Domestic Chinese producers enjoy some of the lowest cash costs – Zhaojin manages $549/oz, compared with a global average of $831/oz

• Chinese and Hong Kong companies have access to cheap capital – Zijin got $4.9 billion in soft loans from a state bank for M&A

• The majors are actively looking to sell as debt levels increase and high-cost mines are mothballed – Barrick could dump as many as 12 of its mines.

Possible targets include:
• Australia’s Mali-focused Papillion Resources ($390 million)
• Toronto-based Iamgold ($2.5 billion)
• Amara Mining active in West Africa ($48 million)
• Perseus Mining ($325 million) with producing mines in Ghana and Cote d’Ivoire

While these companies are looking to get rid of a number of mines:
• Barrick Gold
• Newmont Mining Corp
• Gold Fields
• Alacer Gold Corp

Again, too early. Mining stocks are down by about half since that article was published.

But now, finally, the China-buying-all-the-gold-mines scenario has begun to solidify. From last week:

Barrick Gold Sells 50% Stake In Big PNG Gold Mine To The Chinese

In what it describes as a ‘long-term strategic co-operation agreement which outlines the intent of both companies to collaborate on future projects’ Barrick (NYSE:ABX) is to sell a 50% stake in Barrick (Niugini) Limited (which owns 95% of the Porgera gold mine in Papua New Guinea) to China’s Zijin Mining (OTCPK:ZIJMY) for $298 million in cash. Barrick (Niugini) Mining is wholly-owned by its parent company.

Porgera, in production terms, is one of the world’s larger gold mines. Barrick’s share of gold production in 2014 was 493,000 ounces at all-in sustaining costs of $996 per ounce. Barrick’s share of proven and probable mineral reserves as at December 31, 2014, was 3 million ounces of gold.

From the Zijin standpoint this will all be a part of the overall Chinese move to secure supplies of strategic metals from around the world to meet its future needs. And China considers gold as very much a strategic metal on the economic front, particularly as it tries to increase its global trading influence over the next few years – which seems to be a key aim of the nation’s government. A $298 million outlay for a share in annual production amounting to 250-275,000 ounces of gold in a single year strikes one as a pretty good deal for the Chinese – and Porgera has an expected mine life of at least another five or six years, and this may well prove to be a conservative estimate.

Despite the “win-win” rhetoric, it’s clear that at this point in the gold price cycle the power is with the deep-pocketed Chinese while the many, many miners who brought expensive mines on-line just in time for financing to dry up are there for the taking. So — just based on current market conditions and leaving aside long term strategic considerations — it’s reasonable to expect plenty of similar deals in the next few years, and that the end result will be Chinese control of reserves that dwarf the bullion now sitting in its bank vaults.

Whether this is a buy signal for the gold mining sector remains to be seen. A falling gold price would, without doubt, more than offset the occasional merger. But in a world of stable to slightly higher gold prices, the presence of big Chinese buyers would make the dominant question “who will they buy next?” and that’s great news for the takeover candidates.

14 thoughts on "Who’s Next? China Finally Starts Snapping Up Gold Miners"

  1. ” China Finally Starts Snapping Up Gold Miners “….
    FINALLY? They’ve BEEN doing it for some time!
    They’ve gotta do everything they can to ‘launder’ the nearly
    two trillion in US Bonds they hold.
    How much will the Dollar be worth in six years…Do the math!

  2. I really don’t understand your math this would be a money-loser for China. According to your estimates, optimistically the mine has 6 year’s production left at 275,000 ounces per year (both are your high-end estimates) and Zijin Mining bought a 50% stake. So if gold trades at $1200 an ounce (very optimistic), with a cost of $996 to extract, then Zijin Mining is paying $298 million for a business whose profit return will be $204 x 0.50 x 275,000 x 6 = $168 million. So they will lose 44% of their investment. The only way they can turn this around is for either gold to skyrocket in price per oz to at least $1400, or for the mine to go on for LONGER than 12 years. Both of these prospects seem pretty slim at the moment.

    1. SIX YEARS??..I’d be willing to bet gold will be at least $2000 ($20,000?) by
      THEN!!!!
      Also keep in mind China is trying every way they can to launder the nearly
      TWO TRILLION US BONDS they are holding….
      “If it’s written on paper, it’s only worth the paper that it’s written on”!
      HOW MUCH DO U THINK OUR US DOLLAR WILL BE WORTH IN 6 YRS?
      It’ll be long gone by then and we’ll be on SDRs or some other funny money
      unless the Chinese swoop in with a ‘Black Swan Dump’, backing their
      yuan with gold, silver, and other commodities.

    2. I don’t know to what extent Zijin is controlled by the Chinese government, but China’s leaders don’t care about price or % returns. They only care about ounces.

      1. Yeah. It is more like buying insurance for them.

        When the worldwide house of cards eventually topples, they will most likely launch a gold backed currency.

      2. Nobody knows exactly how and when things will play out but I can see the possibility that when it does go fiat currencies will be pretty worthless and people may regret not having converted more of it to tangibles, PMs especially.

        Imagine having millions of dollars that suddenly can’t buy much, maybe aren’t even accepted.

    3. Your definition of money needs reviewing.

      China is spending FIAT currency, which it does not want to hold, in a world which is in a currency war with virtually everyone debasing their currencies.

      The Chinese are actually buying “real money” precious metals and offloading the worthless printed paper promises.

      When the big reset of failing or failed currencies occurs the value of real money (ie. gold and silver) will rise significantly , so offloading “paper dead presidents” now for an undervalued asset will have been a superb move.

      The big reset may be controlled or may be the result of the next market crash or some other trigger point . It may be tomorrow or it may take two years.

      Getting some PM’s and holding outside the banking system is what is going to help the average Joes, effectively copying the Chinese/Russians/Indians by offloading FIAT currency and reducing digital savings.

Leave a Reply

Your email address will not be published. Required fields are marked *


Zero Fees Gold IRA

Contact Us

Send Us Your Video Links

Send us a message.
We value your feedback,
questions and advice.



Cut through the clutter and mainstream media noise. Get free, concise dispatches on vital news, videos and opinions. Delivered to Your email inbox daily. You’ll never miss a critical story, guaranteed.

This field is for validation purposes and should be left unchanged.