Transcripts

China's Gold Rush

SUSIE GHARIB: China has become the world's fourth largest gold miner, behind South Africa, the U.S. and Australia. It produced 240 tons of gold last year, with much of that coming from small mining companies. But with China looking to ramp up prospecting and to upgrade mining technology, big foreign firms are gaining a foothold in the Chinese market. Nick Mackie reports from China's western Qinghai province.

NICK MACKIE, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is Eldorado Gold's (INAUDIBLE) Over 24 hours, the dump trucks cart over 1600 loads from the pit. The Canadian management knows that around 80 are economical to process, which means that today's gold price of over $650 an ounce, every bucket load of quality ore generates $1200 in revenues. Eldorado Gold is North America's first gold producer to buy in China. With a $72 million investment in plant, processing and mining equipment, plus infrastructure, the company has established a presence on Qinghai plateau with a view to expanding operations in China over the next five years.

On this site in remotest Qinghai, a 12-hour drive from (INAUDIBLE) the provincial capital, the exploration licenses cover an area of 130 square miles. Eldorado owns 90 percent of a joint venture with two local companies. Mining rights authorized to date grant access to over 30 ton of gold, which will take 12 years to ship. Norm Pitcher is Eldorado Gold's chief operation officer.

NORMAN PITCHER, CHIEF OPERATING OFFICER, ELDORADO GOLD: This was a fairly reasonably high investment here and not that the Chinese couldn't do it, but you're sort of putting that money in first. And what they would like to do is sort of start small and build their way up.

MACKIE: While China has gradually opened up the once-closed gold production sector to foreigners in recent years, the government is now raising the (INAUDIBLE) threshold to cut out the small players and focus instead on companies that will help intensify prospecting, plus invest heavily in processing technology and environmental monitoring. But as Norm Pitcher explains, so far only a few big players have committed to the (INAUDIBLE)

PITCHER: People (INAUDIBLE) because of the restriction on investment previously. Now obviously that's starting to loosen up and I think within the next five years, I'd be surprised if you didn't see more majors coming in here. It's just really a matter of they've been testing the waters and they're not quite sure how hot or cold the waters are basically.

MACKIE: With the market growing, one difficult test now is to find experienced staff. Thirty-four year old Zhao Hongxu, an ore mill foreman, is not the only one here who was lured from a competitor over a thousand miles away. Working an eight-hour shift, two weeks on, two weeks off, Mr. Zhao earns $1200 per month, which is equivalent to four years income in rural Qinghai.

TRANSLATION OF: ZHAO HONGXU, PRODUCTION FOREMAN, QDML: We feel that working here is quite nice. Our working hours are not excessive. We have enough time off and if we go home, the company will pay the air fare.

MACKIE: Over the next three years, China intends to produce over a thousand ton of gold and verify up to 5,000 ton in reserves. As more gold mines are licensed and if gold prices remain high, expect to see a bidding war not just for the rights to mine, but also for the men and women on the front line. Nick Mackie, NIGHTLY BUSINESS REPORT, Qinghai, China.