Two-Thirds of Chinese Gold Mines Shut? Small Miners Face Difficult Conditions

Apparently a comment that 2/3rds of Chinese gold mines are shutting due to high costs and a low gold price was making the rounds, and a reporter from 南方都市 looked into it.

In late April, an executive from Luoyang Gold Group said only 1/3 of miners could put up with rising costs and lower gold prices. The statement is found to be over stated, but miners are indeed facing rising costs and the price of their product is much lower. Small miners, like small real estate developers, are facing very hard times. However, in some areas with heavy gold mining, the local economy would be under great pressure if many mines were shut, and its found that this is not the case.

This story sheds some light on the belief that the PBOC is supporting domestic production by furiously buying up domestic production. The PBOC could keep its global market demand low by absorbing domestic production, but then why allow mines to shut when the price of the metal is low? Instead, this industry is facing the same pressure as real estate and other industries as the nation allows market forces to play a greater role in the economy. If, for whatever reason, gold prices tumble, Chinese production may shut along with other miners around the globe.

It's unclear how much production is at risk in the current environment, likely not much even if a large number of small miners shutdown. Still, as long as demand remains strong, this will put some upward pressure on prices.

金矿成本劫 (Gold Mine Cost Calamity)

$ 1,000 / ounce gold production costs are treated as line, the price of gold has been nearly a year's time line in the vicinity of the cost shocks, making gold production this once regarded as the most reliable industry, but also "rare" into the winter.

Not long ago, the media reported that the National Gold 2/3 has been shut down. Gold day really so miserable it? Gold companies actually faced Stolen Life? Southern reporter rushed to the "China Waldo," said the Shandong Zhaoyuan City to conduct field interviews, found that "2/3 of the gold has been suspended," the statement does not fly. "Although there is no previous day gold scenery, but is far from exposing the extent not boil, or the most profitable gold mine", well-known gold analyst and vice president of the Association of Guangdong Province, Zhu Zhigang said Gold.

However, the Southern Reporter interviews also found that Chinese gold mining ills prevalent extensive, high production costs, low utilization of mineral resources, too lean (mine) love the rich (mine), this situation is not in the gold bull market cause too much impact on business. But in a bear market phase, how to enhance the fine production level, then placed in front of the gold producers a problem.

Zhaoyuan Gold tide is not now closed

In late April, was chairman of Luoyang Yongan Jinxin Group interview, said the country can barely maintain mined gold is less than 1/3.

"I also saw reports, as far as I know through various channels, Jinxin Group a few years ago a group of hoarding gold, but did not do hedging, this year the price of gold fell, making Jinxin Group severe losses." Gold Association of Guangdong Province Zhu Zhigang, vice-president of the South are revealed in an interview with reporters. Southern reporter trying to say in this regard Wing confirmation, but a number of contacts were unsuccessful. Zhu Zhigang told reporters the South, according to his understanding, the domestic gold companies do not appear to close the so-called tide.

In the end what is the status of gold production and operation of enterprises? Southern Reporter special trip to China's largest gold origin, has a "China Waldo," said the Yantai Zhaoyuan City to find out.

In Zhaoyuan City Land Bureau, for 2/3 of gold are closing argument, a staff member of the Southern Reporter categorically denied:! "How could Zhaoyuan Gold is the economic lifeline, if Zhaoyuan Gold 2/3 of all closed economy Zhaoyuan how terrible? "The staff recommends that the reporters to do mine look at the facts to determine.

Southern reporter came to the exquisite town of Shandong Gold Group Co., Ltd. Linglong Gold Mine, a staff office Linglong Gold told reporters the South on the phone, belonging to the listed company's Linglong Gold Mine, to interview a listed company is required to get approval and arrangements. "Has not received notice of the above, does not accept the interview, otherwise in the case of non-compliance, but can responsibly say that there is no closed, layoffs phenomenon."

Delicate town Lvge Village a little gold mine Chen Huasheng told reporters the South, the gold market is not good this year, gold is really no day better than the previous. "A few years ago effectiveness is good, small-scale gold master over ten million in revenue that was easy. A medium-sized gold mine (professional managers) are also hundreds of millions in revenue and now the market is not good, really There are some small mines closed, continue to open a small mine who is a high-grade gold mine, also in barely support, but like such a big Linglong Gold Mine, or in normal operation. "

Chen Huasheng told reporters the South, the main producing areas as gold, exquisite town after previous years of consolidation, small mines is running out, leaving basically medium-sized gold mine, did not exist 2/3 gold closed phenomenon. In order to confirm this statement, Chen Huasheng specifically with reporters drove to his little gold mine. Reporter saw a small pull ore carts pulled out a steady stream of ore from the pit, heap to mine. And next to mine, ore crusher issued roar, powdered ore. "My ore grade also, probably a ton of ore extracted 2.5 grams of gold, even in the current market conditions are still profitable."

A friend 陈华生 of a middle-level cadres Zhaoyuan Gold lijiazhuang Luan Township home south are also told reporters that their gold gone out of the argument does not exist.

Miners tighten their belts
Although 2/3 gold closed argument over stated, but two of the gold market downturn, operators and miners of gold life does bring a greater impact.

Southwest Securities, non-ferrous metals can be said researcher Lan, 2013 gold by the listed companies significantly impact the price of gold fell sharply, net profit fell sharply, these data are sufficient to describe the status of the entire gold industry: the days of no better than a few years ago, but still profitable, and no industry-wide crisis.

Profits have fallen sharply, meaning gold companies to tighten their belts to live, and also need to tighten their belts, but also include those gold miners to work.

"A few years ago the company's profit is good, go down the types of jobs, often meeting a month salary plus bonuses million and there are a variety of benefits; This year the market is not good, no adjustment of the basic wage, but wages have benefits sharp decline in a month will be able to receive around 5000-6000 yuan, various benefits are discounted not go down the types of jobs, lower wages, generally newly recruited around 3,000 yuan, older workers are able to get 4000. - 5000 yuan. "Linglong Gold Mine in doing trackless vehicle maintenance technician Zhang told reporters the South.

As a state-owned gold mine, even when the gold market price is not good, exquisite gold income workers is relatively secure, but for those in the small gold miners working, the day can not be compared with the previous years. "Delicate gold in our eyes is that the iron rice bowl, those of us who work in the private small gold mine is mud bowl. Good times, but also a monthly income of seven or eight thousand, but do live is probably one of the iron rice bowl times;. market downturn, are likely to leave at any time, too unstable, I now have more than 3000 per month income, but gold can not be compared with the iron rice bowl of workers, we eat to live than the iron rice bowl much worse. "in an exquisite small gold mining town in Hunan guy to Bo told reporters the South.
Gold fell to cost area?

Rise to a "2/3 gold closed," the main basis has spread, that is, the price of gold has fallen to cost areas, many companies have been unsustainable.

Long-term studies of gold Zhu Zhigang told reporters the South, the data show that in 2008 the South African gold production cost less than $ 500; 2010, the international gold price is still $ 600 / ounce, gold producers have a profit at all. This year, from a global perspective, gold is not a substantial increase in production costs, the average mining cost about $ 700 / ounce (equivalent to approximately RMB 150 yuan / gram). Open-pit mining, high-grade gold, lower production costs, the South African average of one ton of ore to extract gold 5 grams or so. Those who need to dig deep mines, or low-grade gold, mining costs will be much higher. If the cost of capital plus a variety of gold costs about $ 1,000 / ounce (220 yuan / gram), the international price of gold at $ 1,300 / ounce, the domestic gold price is about 257 yuan / gram, from the price point of view, the current major gold producers are still profitable. "Some poor gold may be a loss, but this is not a common phenomenon. Said 2/3 gold closed, I do not agree with this argument. Can only say that the gold of the day no previous comfortable."

Little gold mine 陈华生 Southern reporter also revealed that despite his condition Linglong Gold Gold relative to a lot worse, but a ton of ore powder can also be extracted from about 2.5 grams of gold, is still profitable. "We have here a higher gold grade, if the grade is low, a ton of ore smelting only take less than 2 grams of gold, it is difficult to sustain a."

Obviously, $ 1,000 / oz this average cost line, basically has been recognized by the industry. "However, the majority of our gold grades are relatively low, coupled with extensive small gold mining, some of the gold mining costs close to or above the current price of gold is the existence of the phenomenon, which appeared closed gold is normal phenomenon." Zhu Zhigang stressed.

Daily gold mesh CEO, gold analyst Zheng Kai of Southern Reporter said, for gold companies, mining costs, labor costs, equipment costs are on the rise in recent years to, while gold fell 28% in 2013, a number of mining Gold and poor technical condition of the lower end of the business, the impact is most obvious. "Many gold dealers hoard goods or mining costs are in 2013 before the bull market phase, lack of cost consciousness, falling profits it expected. Some gold for domestic enterprises, if there is no effective hedging loss will be very serious. "

[Observation]
"Favor the rich and snub the poor" days coming to an end

Gold continued to fall so that large gold mining profits has shrunk dramatically, even in the face of small gold crisis of survival, which makes accustomed to the good old days of the gold business a hard time to adapt.

Southern reporter interviewed found that when Zhaoyuan, many small-scale gold owners are perplexed about the future. "I do not know when the price of gold will be able to rebound in the current market, the only eke; .. If the price of gold continues to fall, the only way is to close the" tens of millions of borrowers took over a small gold mine in the south are reporters Zhang complained. Such complaints, not only in Zhaoyuan Gold business owners in the presence of gold production in other places --- Chenxi County, Hunan Huaihua, Yuanling County, many small gold miners have the same confusion. "On a 20-year gold mine, previously crushed hole, just hit the gold vein on the developed, hit gold veins money after bad. They are now guarding the gold, the days are sad." Yuanling Xiao Xiang Hui small gold miners in an interview given full Southern Reporter telephone interview exclaimed.

However, the Southern Reporter in the interview also found that the reason why the small gold sad day, in addition to the gold market price is not good, there is an important reason, is operating too extensive, less cost-conscious. Before Zhaoyuan Lvge a small village of gold, the reporter found that a large number of low-lying ore is discarded at the roadside. Locals told reporters the South, those lower grade gold ore is ore. "Small miners Xianpinaifu is a common phenomenon, high-grade ore have been spend, low-grade ore was abandoned. Previous years, there are also some large gold case, but in recent years, emphasis on low-grade and medium-sized gold gradually mined gold. "

"Good day accustomed, in the previous bull market in gold is to open to open the printing press, not many people are concerned about the cost and now the gold market to go bear, extensive operation has been difficult to sustain. Appear small gold phenomenon is closed Warning, if not promptly change ideas and medium-sized gold, to fine operators to benefit in the near future is likely to face the same dilemma. "Zhu Zhigang analysis said," a lot of advanced foreign gold producer in the price of gold higher when it is adopting both rich and poor, the poor multi-sampling sites, sampling sites less rich; gold dropped when multi-sampling sites rich, the poor little mining point to adjust costs through such means but in the country. No matter the level of the price of gold, the rich want to eat first, which planted a lot of problems. proven gold reserves in China only ranked third in the world, but gold production has 7 consecutive years ranked first in the world, which is very important One reason is that predatory exploitation through this round of adjustment, the market mechanism will play a role to promote the transition to the fine gold companies. "