got jinshan?
While the prospects for CSH 217 look good, as they do at Jinshan’s other project at Dadiangou, where 780,000 ounces has been defined in the inferred category, the real potential for his company now lies with his Chinese partner. China National Gold is the largest gold miner in China, and China is now the largest producer of gold in the world. Yet China National Gold itself only produces 78 tonnes, or about 2.5 million ounces, of gold a year. Of that about one million ounces comes from the company’s own refinery, treating feed from other mines. China National Gold’s own mines are all generally small, typically producing around 20,000 ounces a year and, even at a gold price of US$900 an ounce, many are barely profitable.
Mr Chmelauskas believes the real potential for his company now is to help China National Gold improve its operations through the provision of technical expertise. It’s early days into the relationship yet, but Mr Chmelauskas is clearly going to want something in return for providing China Gold with the know-how to improve output and profits from these operations. His targets are the big sites, and he indicates that Dadiangou is probably not the scale of operation he would like to pursue.
It might, though, prove very attractive to his new partners and could well be sold to China Gold for a figure that would allow Jinshan to retire the rather expensive C$55 million of debt that it’s carrying that pays a 12 per cent coupon. Access to Chinese funding is also a big attraction. Jinshan is China Gold’s only investment in a western resource company and it seems to have secured first mover advantage. While its poor start as a miner is not the best way to begin, it now looks as if it’s going to end up with a commanding position in the Chinese gold mining industry |
