Now
China sources newly mined gold from the USA By Resource News
| June 25, 2010 · 9:10 am
We are now used to China sourcing huge volumes
of metals from external sources to drive its industrial
machine forwards, but the latest announcement from Coeur
d’Alene Mines on its deal to have its gold concentrates
purchased and processed by China’s largest gold producer
suggests that precious metals are on China’s vast
shopping list too.
China is already the world’s largest
gold miner, and many analysts now assume – following
the country’s announcement last year that it had been
building up its gold reserves for six years unknown to the
West – that it is still expanding its gold holdings
in a way that does not necessarily show the gold going into
official reserves. And now it appears to be looking elsewhere
to purchase supplies of the yellow metal without overtly
impacting the market.
What is significant, perhaps, is that this
suggests that China’s commitment to gold is both ongoing
– and likely to increase. The country, through its
financial institutions and state television advertising,
has been persuading its ever growing middle classes to purchase
gold (and silver) as a good investment. There seems little
doubt that the state is doing the same thing itself as a
means of diversifying its huge reserves.
Coming back to the Coeur deal – as
my colleague Dorothy Kosich noted in her article today on
the company’s new Kensington mine in Alaska (Coeur
Mines’ controversial Kensington Alaska gold mine now
a reality), “The gold concentrates produced at Kensington
will be processed by China’s largest gold producer
China National Gold through an agreement that is the first
of its kind between a state-owned corporation of the People’s
Republic of China and a U.S. precious metals mine………China
Gold will be paying upfront, which means that in terms of
timing, Coeur will get paid seven days after shipping vs.
the typical two-three months that most concentrate producers
must wait, while the metal is being processed at the smelter/refinery.”
This is obviously a very attractive deal
for Coeur, speeding up its cashflow, although it covers
a relatively small amount of gold for the Chinese –
but the very fact that this has been put into place suggests
that other similar deals are likely to be negotiated with
other new producers going forwards. It also means that China’s
appetite for gold just cannot be satisfied by its still
growing domestic gold mine output – as we noted above
already the world’s largest.
If indeed it is China’s plan to increase
its gold holdings, but while maintaining an orderly market
in the yellow metal, it is a smart move. The main reason,
almost certainly, that China did not buy the IMF gold on
offer – or even a large hunk of it – would be
that to do so would have sent a very overt signal to the
market and that the gold price would have skyrocketed as
a result. Such a movement in the price might have been seen
on global markets as a vote of no confidence in the dollar
– and with China’s huge dollar-related foreign
exchange holdings this would not suit its long term economic
policy either.
To buy newly-mined gold production at source
is thus a clever ploy. It is not interfering with the gold
market directly by being seen to buy, but picking up gold
which is actually never reaching the market. It can then
move the gold into some interim holding capacity which does
not have it showing up in its official reserves until, and
unless, it wishes to make this statement to the markets.
The fact that, as a result, less gold is actually reaching
the market has a substantially smaller impact on it than
the overt purchasing of bullion itself.
The move has to be seen as long term bullish
for the gold price and is yet another way of limiting downside
risk for gold investors. GATA has for a long time been railing
against what it sees as gold price suppression by the gold
banks and governments, but probably none of this has the
potential impact for control of the gold market which can
be, and probably is being, exerted by the Chinese –
but because this is broadly positive for gold it may not
be in that organisation’s interests to comment yet
it is an equally manipulative policy if indeed it is in
effect!…read more at the Mineweb.