Monday, December 9, 2013

Cookie doubts the glorious victory of the proletariat: gold mining in China

Funny thing....

Kitco - China could pace gold production in 2014. Check out these quotes from the Cookie Monster:

“In China, I’m still waiting for someone to show me where the big production’s coming from,” said Brent Cook, geologist and founder of Exploration Insights. “I would love to see a list of the top ten mines in China and what they’re producing. I’m not aware of any big mines, aside from a few big porphyry copper mines, any mines that are producing a lot of gold.”
“All the major mining companies went over there looking, I went over there as well, and no one to my knowledge made an acquisition, except for Eldorado and one company out of Australia, and no one found a big new ‘Carlin Trend’ or anything like that,” Cook said.
“None are impressive, yet they are the biggest gold producer,” Cook said. “Something’s funny here.”

I'd think China would have stunningly prospective geology for gold, what with that big suture from Tibet to Yunnan, and maybe the mountains in Sinkiang. But I guess if anyone should know about prospectivity it's Cookie and his friends, and he's suspicious, so that's interesting to me.

So I went to the USGS to look at 2012 China mine production. It was 370t, and assumed Chinese mineral reserves were 1900t.

That's a depletion rate of about 20%; notably, this is twice the depletion rate of Canada, the US or Peru. Russia, Uzbekistan, Ghana and PNG are down around 5%.

So either the USGS has really, really, really shitty data on Chinese gold reserves (which would be surprising since they're professionals), or China is depleting their gold reserves like crazy. Or, maybe, China is also discovering and delineating ~400t of new gold reserves per year?

I'd wonder what Cookie has to say about how easy it is to define 400t/y of gold reserves. Is it doubtful that you can mine 400t/y, or is it only doubtful that you can replace 400t/y?

So anyway, maybe China just depletes so fast because they have no interest in optimizing production rates to maximize NAV and IRR? Cos after all, the State has a completely different reason to mine gold.

If nothing else, it's an illustration that you should never rely on free-market models for mining; some countries don't use the free market.

1 comment:

  1. Amazing Chinese gold production is a whackaloon goldbug shibboleth. And just another phony stat from the land of phony stats.