[London] Growth in gold mine output from number one producer China is set to slow significantly in coming years in the face of declining ore grades and waning profitability, analysts Business Monitor International said on Friday.
Lower mine production will pave the way for rising imports to meet persistent strength in demand from Chinese consumers, BMI analyst Xinying Chia said, while domestic mining companies will also look overseas to boost production.
In an interview with the Reuters Global Gold Forum, Hong Kong-based Chia said Chinese mine output growth was expected to slide to 0.9 per cent in 2018, from around 6 percent this year. "Many domestic miners are grappling with the problems of depleting reserves, falling ore grades and rising cash costs,"Chia said. "Falling gold prices will compound the impact of these challenges by reducing economic mine reserves and eroding miners' profit margins," she said. Gold prices have fallen by more than a quarter since the beginning of 2013.
Growth in Chinese mine production has been swift in recent years, with production volumes more than doubling in tonnage terms in the decade to 2013, according to data from GFMS analysts at Thomson Reuters.
China took over from South Africa as the world's biggest producer of the metal in 2007, and last year also became its biggest consumer, ahead of historic number one India.
Foreign expansion is likely to be a growing priority for Chinese mining companies, Chia said. China's largest listed gold producer Zijin Mining Group has expressed an interest in overseas acquisitions.
State-owned China National Gold Group Corp has also had talks with world number one gold miner Barrick Gold about potential partnerships. "This is a sign of things to come," Chia said. "We expect more Chinese miners to team up with western miners going forward in order to reduce funding cost and increase the chances of developing a project successfully." She said she expected the hunt for gold mining assets outside China would gather pace in years to come, with Australia, Peru, Canada, Colombia and the United States all attractive destinations for investment. "Zijin Mining launched a US$1.3 billion fund in August 2014 for the overseas acquisitions of mining assets due to falling production at its Zijinshan mine in China," she said.
Growing political ties between China and Africa will also spur the development of projects in Ghana and Congo, she added.
(Reporting by Jan Harvey, editing by William Hardy) Reuters 2014-10-17T12:28:01.000Z(VersionCreatedDate) 2014-10-17T122801Z-1145591958-L6N0SC2OZ-RTRMADT-0-CHINA-GOLD-MINING.txt nnnn