Despite China’s potential to become the world’s biggest gold producer, the Asian superpower is currently home to only three foreign gold mining companies. Fiona Collins speaks to the CEO of Australian-based Sino Gold, the company behind China’s second largest gold mine, and reports on the challenges of mining in China.

In May 2007 South African mining publication Mineweb stated that, “within the next decade, China could become the world’s biggest single producer of gold, and possibly its largest consumer”. Yet, Australian based Sino Gold is one of only three foreign companies currently mining gold in China.

Deep within the mountainous southern province of Guizhou, Sino is currently digging out a steep hillside in order to develop its 4.6 million ounce Jinfeng mine.

Sino Gold’s CEO Jake Klein emphasizes the scale of the project.

“There are actually three foreign companies who are commissioning, or in production, with mines,” Mr Klein says. “We were the first and we’re the largest, and the Jinfeng mine is the second largest gold mine in China.

“It’s got 4.6 million ounces in JORC resources. So it really is a very substantial asset in global terms. We started production in the first half of this year. Commissioning has been ongoing and we’re hoping to get to full production in the fourth quarter of this year.”

Sino Gold’s experience in China is not limited to Jinfeng. The company also managed the Jianchaling goldmine in the central province of Shaanxi, from 1998 to 2006. This has allowed Sino to develop a rare expertise in Chinese mining legislation, and as Jake Klein is only too well aware, it’s a system in which persistence really does pay off.

“Well I think I’d be the first to admit that China’s not easy!” he says. “China does have a system. It’s multi-layered in that there is the county, the prefecture, the province and then national government. In many ways I think that gives you some protection, because while it adds to the complexity of getting through the approval process, there always seems to be a higher level of government that you have the capacity to appeal to.”

While it is a lengthy process to establish a mining business in the Asian superpower, Sino Gold’s Klein believes that mining companies from other mineral rich nations, including Australia, are uniquely placed when it comes to entering into business in China.


“Really, China is desperately keen to secure its sources of raw material to secure its growth,” Mr Klein says. “And therefore in my view, China would not want to jeopardize its position with respect to getting increased access to places like Australia, by making it difficult for a foreign investor in the mining industry in China.

“So China doesn’t have any laws which actually differentiate between foreign and domestic operators of mines, it has no sell down of provisions, you get a joint venture which is generally valid for around 30 years, and like any bureaucracy, it needs the forms correctly filled in, but once it’s done we found that China’s pretty reasonable.”

Historically, Chinese gold mines have been small operations that have leaked poisonous arsenic and cyanide into the surrounding environment, killing fish and animals. Sino Gold is hoping that it can use the Jinfeng project to demonstrate better practices to the Chinese regime.

“I think China’s mining industry - and I think you would find even the most senior levels of government within China would agree - has to change,” Mr Klein says.

“The gold industry touches two of the most sensitive areas in China’s future stability, which is environmental concerns, and stability of its population in rural areas. So we’re bringing, really, an approach which has no difference to what is done in any other country in the world which has a successful mining industry.

“We’re bringing capital which we can invest sufficiently in environmental safety and community issues to make sure that the development is sustainable.“

For investor’s looking to support mining projects in China, and for mining companies considering entering into the Chinese system, Sino Gold’s CEO offers some sound advice.

“I think for investors, you know, look for a window into China that’s trustworthy, that operates to corporate governance standards, and a level of transparency that you’re comfortable with and that’s appropriate for your portfolio.”

“For companies trying to get in to China, don’t go there with a mobile phone and a brief case because you’re going to be there for a long time! So go there with a view that you really want to be there, and that you have a clear strategy as to why you want to be there, and the rewards will be yours!”