Gold Miners Run out of SitesDespite a rising demand for gold in China, the mining sector is running short of proven gold resources.The sector must beef up efforts in gold resource prospecting to satisfy a mounting demand, said Wang Dexue, director with the Gold Administration under the State Economic and Trade Commission (SETC). The sector is aiming for an increase of 300 tons to 350 tons in new proven gold reserves and a gold output of 175 tons this year. With improvements in the people's living standards, gold demand will continue to rise because most of them see the metal as a symbol of wealth, said sources with the World Gold Council. Gold demand on the Chinese mainland increased by 7 per cent to 205 tons last year, making the country the world's third-largest gold consumer, the sources said. Gold market deregulation in the country, which Wang has confirmed will begin within about two years, will further stimulate demand. "Although gold demand growth is very encouraging to the sector, shrinking proven gold reserves have bottlenecked its sustainable development," Wang said in an interview with Business Weekly. By the end of last year, proven gold reserves decreased to 2,300 tons from 2,400 tons at the end of the country's Eighth Five-Year Plan (1991-95). Many of the country's gold resources have been squandered by small, low-level gold mines, which hold nearly half of the total proven reserves. At present, there are more than 1,200 gold mines across the country, among which the small ones hold the lion's share of properties. The sector will strengthen gold resource prospecting in the western region to break the bottleneck, in line with the central government's call for all-out efforts to develop the region, Wang said. Only 27 per cent of the proven gold reserves are in the western regions, which cover more than half of the country's total territory. The sector is in dire need of gold prospecting funds, Wang said. "But with the country's financial reforms deepening, the sector is losing government financial assistance," Wang said. The government invested only 100 million yuan (US$12.05 million) in gold prospecting annually during the past three years, compared with about 500 million yuan (US$60.24 million) from 1986 to 1996. A special fund for gold prospecting will be abolished next year, Wang said. In addition, the individual mine operators' abilities to reinvest in their own operations is limited because many of them are in dire financial straits because of a gold price slump in recent years, Wang said. "The sector must explore more fund-raising channels, especially foreign investment, to fuel its gold prospecting," Wang said. Foreign gold companies have been permitted to invest in the gold sector in line with interim central government provisions guiding foreign investment. But exclusively foreign-funded gold mines are still banned. The SETC and the State Development Planning Commission are also studying how to remove barriers against foreign investment in the gold sector and how to use foreign investment in risky prospecting for gold resources, said the SETC sources. Companies from the United States, Canada, Australia, Singapore and the Hong Kong Special Administrative Region intend to co-operate with domestic gold mines in more than ten projects. The country's approaching accession to the World Trade Organization and gold market deregulation will help accelerate the sector's foreign investment attraction, Wang said. |
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