Gold in China? You Won't Believe It...
by Dr. Steve Sjuggerud
September 29, 2006
Thousands of companies in Canada are looking for gold right now. Many of them trade on the Canadian stock exchange.
The thing is, chances are slim for another major gold discovery in Canada. The gold rush has been on in Canada since gold was first discovered in Quebec in 1823.
With thousands of companies looking, the unfortunately reality is, annual gold production in Canada has been falling. Annual gold production in Canada has fallen to under 200 tons a year. It’s now down 30% over the last 10 years.
Meanwhile, China – yes China – is in the exact opposite position.
China’s annual gold production now tops 200 tons a year. So – yes – China produces more gold than Canada. But can you name a real Chinese gold company?
China – believe it or not – is now the world’s fourth largest gold producing nation.
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While gold production in China is increasing dramatically, production in the “traditional” gold countries of Australia, South Africa, and the U.S. is decreasing fairly quickly. (Each of these countries produce between 200 and 300 tons a year).
Again, China’s gold production is already over 200 tons annually... and it’s ramping up fast. It is not a question of “if” China will surpass all these traditional gold-producing countries, but “when.”
China is a great opportunity… as the gold industry is fragmented and in need of money. Also, importantly, it’s underexplored. Major gold mining companies will no doubt be coming in soon.
There are some direct plays on Chinese gold as well… When I lived in Australia earlier this year, I got to know Gavin Wendt of FatProphets.com Gavin was voted as one of the top three resource analysts in Australia last year.
Two weeks ago, Gavin met with the CEO of what he says will be, “China’s biggest gold producer within the next few years.”
This company, “has now built up more than a decade’s operational experience in China.” This, of course has, “established the company’s reputation and operational credentials in the minds of the Chinese authorities.”
Gavin initially recommended this stock to his readers in March of 2006. The stock is still cheap now. Gavin estimates the company is trading at a P/E of about 10, based on his earnings estimate for 2008. This firm is a cheap entry into China, considering it’s early in the country and it’s “all-up discovery cost” so far has been a dirt cheap US$10 per ounce.
The point of this letter today is to show you that China will soon surpass the big three (South Africa, Australia, and the U.S.) in annual gold production. It is not a question of “if,” but “when.” And that there are reasonably priced ways to get in on it.
As I looked into it, I couldn’t believe it. China is already number four in the world, and yet the Chinese gold industry is significantly underexplored and undercapitalized.
In a world where it seems that all the large gold deposits have been discovered (Canada is a good example), China may actually be the place where the next big discovery comes from.
China is in the news every day now for its consumption of commodities. In a decade’s time it will be in the news for the production of at least one commodity: gold.
When I first heard about “Chinese gold,” I thought it had to be some sort of marketing gimmick for gold companies… like adding dot.com to your name in the late 1990s.
But Chinese gold is no gimmick. It’s real. And it will be very big business. Buying companies with reasonable exposure to Chinese gold, at reasonable prices, will probably turn out to be a smart thing to do in the long run.
P.S. I can’t give away Gavin’s Chinese gold recommendation. That wouldn’t be right for his subscribers (at FatProphets.com).
If you’re interested in finding out what it is you’d have to become a FatProphets.com subscriber. For more about the good research my Australian friends are doing, visit them at www.FatProphets.com
