Jinshan goes native

The largest shareholder in Vancouver-based Jinshan Gold Mines with a nearly 40% stake is China National Gold, a state-owned Chinese enterprise and the country’s biggest gold producer.

The partnership has brought with it many perks for Jinshan — from seemingly endless supply of inexpensive credit to access to the Chinese mining giant’s technical expertise and pipeline of assets.

China National Gold’s general manager — Sun Zhaoxue — is Jinshan’s chairman and chief executive, while Zhanming Wu, Jinshan’s director and vice-president of business development, is the head of capital markets at China National Gold.

Recently, Jinshan has changed its name to China Gold International Resources Corp. (CGG-T) to better reflect its relationship with China National Gold. Jinshan shareholders approved the name change at the company’s annual general meeting on June 17 and its shares began trading under the new ticker symbol on July 19.

“The strategy is to become global,” Frank Lagiglia, head of investor relations at China Gold International, explained in a telephone interview from Vancouver. “They (China National Gold) want to use us as a vehicle to go out and start acquiring projects and the TSX listing helps them do that because we have access to North American markets.”

In theory, of course, that makes a lot of sense, industry observers say. But China Gold International could also become a vehicle for what some might argue are politically unattractive “internal” assets such as the Jiama copper-gold-silver-molybdenum property in Tibet.

In September 2009, Jinshan announced in a press release that it had signed a memorandum of understanding with China National Gold and another partner to acquire a 100% stake in the Jiama property. (China National Gold owns 51% of the project.)

But, nowhere in the press release did it mention that Jiama is 80 km outside of Lhasa, the Tibetan capital.

The Beijing government and the Tibetan government-in-exile disagree over the definition of Tibet and whether its incorporation into China is legitimate according to international law.

“Leaving aside the (geo-political) sensitivity, if you’re talking about it as a vehicle to go international, they’re not achieving what they said they’re going to do,” says a mining executive familiar with the company who request-ed anonymity. “Just jamming through an internal asset doesn’t make much sense. . . A more modern state-owned enterprise would say, ‘What is out there that would be attractive and make us a serious gold platform,’ but unfortunately they don’t think like that. They’re not particularly sophisticated.”

Lagiglia noted that China Gold International is also looking at other possible acquisitions around the globe — from Russia and Mongolia to North America, Africa and Australia. “Whatever makes sense,” he says. “They’re not looking at exploration or anything greenfield, it has to be very advanced stage.”

Jiama is slated to become an underground mining operation with a production capacity of 6,000 tonnes per day. The operation will produce a copper concentrate with gold and silver credits and a molybdenum concentrate.

According to a recent article by the government-owned Xinhua news agency, China National Gold has reportedly completed the first phase of the project. A subsidiary of China National Gold, Tibet Huatailong Mining Development Co., started building the US$1.2- billion project in 2008, the government- owned news agency said.