China’s gold mining industry is the largest in the world. The country overtook South Africa as the largest producer of gold in 2007 and it has held on to that position for over 11 years. In 2017 China produced 426.14 tons which is more than 13% of the gold produced globally. The country has also identified 13,195.60 tonnes of unmined reserves. Gold exploration and production is spread across 400 gold mining companies. The top four companies are Shandong Gold, Zijin mining Group, China National Gold Group (China Gold) and Shandong Zhaojin Group. These four companies are part of the 13 companies that take the lion’s share of the gold output in China.
Chinese mining companies have also made international investments to expand their production output. This has boosted their gold reserves by 800t. For example, Zijin Mining Group has acquired numerous mining assets in countries like Tajikistan, Kyrgyzstan, Australia, New Guinea and the Democratic Republic of Congo. These transactions have increased the company’s gold output. Other Chinese mining companies have made significant inroads globally in support of the government’s “Belt-and-Road” initiative.
The Chinese gold market has faced some challenges over the last couple of years. For instance, the gold mining production fell by 6% between 2016 and 2017. The industry was hit by low gold prices. Increasing safety regulations and the rising costs of production. In 2017 the cost of production was approximately US$914/Oz and it has increased by 2.15%. The mining output in China fell by 3% between January and March 2018. This adds to the 6% drop recorded in 2017 by the China Gold Association. China produced 101 tonnes in the first quarter of 2017 whilst in the first quarter of 2018 it only produced 98. For instance, the environmental regulations surrounding the management of hazardous waste has listed cyanide tailings that are unavoidable in gold mining as a danger. Cyanide is absolutely crucial in gold production. There might be other alternatives but the might not be cost-effective.
The drop in output from China has been offset by the 8% growth from Russia, the No.3 producer and the 6 % growth from the US. Australia’s output was flat and Canada’s production rose by 5%. The top miners in the world also seem to be struggling. For instance, the No.1 mining company Barrick reported a 20% drop in the first quarter. On the other hand, Russia’s top miner, Polyus reported a 13% growth in the first quarter. However, the company has been embroiled in political issues. Its majority shareholder was sanctioned for being part of the plot to murder ex-Russian spy Sergei Skripal in Britain. The company’s stock price sank by almost one-fifth. Russia may have had some trouble since sanctions were instituted against it by the West over its annexation of Crimea, however Moscow’s Central bank has bought over 70% of the country’s gold output increasing its reserves to the same levels as China.
The same problems affecting gold production in China might be the same reasons behind the overall global slump in gold production. Environmental regulations are necessary not only for the safety of the people working in mines and living close to mines but they are also important for long term health of the land where gold is being extracted.