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Who's Next? China Finally Starts Snapping Up Gold Miners
Submitted by John Rubino via DollarCollapse.com,
One (perhaps the only) bright spot in the past few year’s 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.
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’IvoireWhile 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.
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Due to central bank price suppression, gold is trading below the marginal cost of production.
It's cheaper to buy gold than it is to mine gold and a lot less work too.
Go figure.
If someone will sell it to you. You're sure not going to be getting large quantities out of COMEX.
This is actually a smart move, it lets them guarantee supply to the exclusion of others, doesn't impact price discovery since it'll be a private transaction, leaving the existing gold price low so they can keep accumulating whatever is available on the open market, and lets them get all their future gold at cost, which will likely be well below the price.
The main risk is that the mines get nationalized out from underneath them, but by the time that happens the shit has definitely already hit the fan, since it would be a huge admission by the people doing the nationalization that gold was money, was needed, and likely that the rest of the monetary system was imploding.
Well the comex contract is for physical delivery, so if you buy a large quantity (using a broker that allows for taking delivery) and hold to expiration, you will either be taking delivery, the price will skyrocket while shorts cover, or the manipulation scam will be uncovered (default of contract delivery).
And it's not in China's interests for any of those things to happen... yet. Any state-level actor of even modest size could blow up the gold trade with a tiny amount of money relative to their economy, it just hasn't been in anyone's interest to do so.
Im pretty sure the COMEX can settle in cash if it wants to.
Problem is that most of the miners' balance sheets prove they are just as adept at financial engineering as they are with designing tunnels and ... dams.
http://www.cbc.ca/news/canada/british-columbia/mount-polley-mine-tailing...
Not for Comstock Mining (LODE) their costs are around $750/oz to mine and they are located in Nevada.
Paid for with UST Bills?
Follow the money. China loans America real money and gets US Treasury paper in return. They get a measly quarterly return. Then China uses these T-Bills and bonds to purchase gold, copper, and other commodities that skyrocket in value when inflation comes roaring back.
Then they use SOME of this real money to loan to the US for its next cycle of Zimbabwe printing.
Rinse and repeat.
Something has to give. We cannot make money in paper gold or paper silver. We cannot make money in oil. We are damned stupid to invest in the s&p500 and Dow, at this juncture.
My wife won't even give me nookie anymore.
Let's see?! Possess green certificates, or their 1's and 0's equivalents, that aren't even good as toilet paper, or a gold mine?
Can I call a friend?!
Liberty is a demand. Tyranny is submission..
End the FED.
Guillotine the Fed. Audit the heads.
Liberty is a demand. Tyranny is submission.
Dam smart move when the FED is depressing the gold price got to hand it to them they get it ...
"• 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."
Right now China is at over 946 tons YTD
https://www.bullionstar.com/blogs/koos-jansen/will-the-renminbi-be-fully...
Like I said before. Buy the dips in gold, silver, and the miners. Not the ETF gold and Silver, the American Eagles! At least that is what I'm doing. Still holding GDX and GDXJ at losses. Whatever, they will bounce eventually.
I was first! At least before China.
The reasoning is a little lacking in this article. By buying out gold mines and then diverting the production to China this will still inflate the price of gold given that the amount of gold flowing to the markets will be restricted, hence causing a price rise due to restricted supply.
Only when people start demanding physical
Gold is a vital part of a recession plan.
http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/
Here are some more signs of a coming recession.
http://michaelekelley.com/2015/05/29/mergers-and-acquisitions-set-record...
http://michaelekelley.com/2015/02/20/fed-warns-of-two-bubbles/
http://michaelekelley.com/2015/02/24/would-you-pay-39-more-than-asked/
Here is how to get your mind off this stuff.
http://michaelekelley.com/category/humor/
Good luck!
Bernanke and the other Keynesian central banksters:
Gold is a relic of the past.
Wait until China offers a gold backed Yuan.
What would Confucious do ?
Caitlyn Jenner likes gold.
15k tons? Lol. Absolutely drawfs usa holdings of supposedly 8k rehypothecated tungsten in fort knox, and that is just the tip of the iceburn. China rumors to have anywhere from20-30k tons.
Just a repeat after 1929. PMs went down with everything else. Mining stocks took a hit but then they stabilized and rallied - leading the way for the next bull market.
That is why I suggested only having some money in PMs. Mining stocks is where it you will want to be.
So now you're quoting Gartman without making fun of him? Give me a break.
Gold is, at best, a short-term opportunity. Longer term, there is still a long way down to go...
http://www.globaldeflationnews.com/gold-elliott-wave-update-for-week-end...
lol u suck
Viva BRICS
The West which has always been pirates, theiving, conniving, evil, blood thirsty, immoral ,
is now to be dethroned.