Shandong firm mulls local, global acquisitions

Shandong Gold Group, the second-largest producer of gold in China by output, plans to acquire Osino Resources, a Canadian gold exploration company with sizable reserves in Namibia, for $273 million, in addition to acquiring the latter's exploitation rights in China.

The group is also evaluating several other acquisition projects, both at home and abroad, the company said.

The company's total gold reserves are about 2,000 metric tons, next only to Zijin Mining, while reserves from domestic mines stand tops nationwide.

In China, major gold miners dominate the production of gold.

According to data put out by the China Gold Association, domestic gold production from large-scale enterprises last year amounted to 142.32 metric tons, accounting for 47.88 percent of the national gold production.

Among these, enterprises such as Zijin Mining, Shandong Gold Group and Chifeng Gold achieved a gold production of 60.38 tons from overseas mines, marking an increase of 18.28 percent compared to the previous year, it said.

Shandong Gold Group will buy a controlling stake in the operator of a gold mine in China's northeastern Inner Mongolia autonomous region through its subsidiary Shandong Gold Mining.

Shandong Gold Group will acquire a 70 percent stake in Baotou Changtai Mining for $66 million, which owns the mining and exploration rights of the Tolgoi Gold Mine in Inner Mongolia and a mineral beneficiation plant with an ore processing capacity of 200 tons per day.

The Tolgoi mine has proven gold reserves of 16.1 tons and an expected output of about 400 kilograms for this year, Shandong Gold Group said.

The acquisition will bring Shandong Gold Group over 16 tons of new proven gold resources, which may grow to more than 20 tons as the exploration progresses this year, the firm added. The Tolgoi mine will also be Shandong Gold Group's first gold mine in western Inner Mongolia.

This is the third gold mine acquisition that Shandong Gold Group and companies that it controls has announced this year.

In addition, it plans to invest $1.4 billion to acquire the exploitation rights of China's largest single gold mine, which has 444 tons of minable gold.

China's gold output could pick up this year as the economy recovers and consumer confidence improves, said Zhao Xiangbin, chief strategist at Beijing Gold and Forex Fortune Investment Management.

Domestic producers have been lifting gold output amid high prices to maximize margins, Zhao said.

Shandong Gold Mining, which is also one of China's biggest producers of the precious metal, discovered the country's largest gold deposit last year, which contains 580 tons of gold in the northwestern region of Shandong province.

The average grade of gold from the newly discovered deposit at the Xiling mine in Laizhou is 4.26 grams per ton, making the find potentially worth more than $28.4 billion, it said.

The Xiling gold mine is located in the region between Laizhou and Zhaoyuan, the two coastal county-level cities of Yantai in Shandong.

The region is one of the largest gold production areas in China, with gold reserves and output ranking first in the country, according to the China Gold Association.

The Xiling gold mine, which extends more than 2,050 meters, is a representative of deep prospecting projects.

The gold reserves have been detected to have an average gold grade of 4.26 grams per ton and gold reserves in the mine are mainly distributed at a depth of 1,000 meters to 2,500 meters, making Xiling the deepest gold mine discovered in China, said Feng Tao, vice-general manager of Shandong Gold Geological and Mineral Exploration Co Ltd.