Jinshan names chairman of China National Gold as new CEO

Four months after China’s largest state-owned gold producer, China National Gold, acquired a 42% stake in Jinshan Gold Mines (JIN-T, JINFF-O), the Canadian junior has named the Chinese company’s influential president as its new chief executive.

“Management changes at Jinshan reflect the ongoing commitment of China Gold to establish Jinshan as a platform for the creation of new opportunities for growth through consolidation and optimization in the Chinese gold industry,” Jinshan’s incoming chief executive, Sun Zhaoxue, said in a prepared statement.

The change at the top, made public at last week’s Denver Gold Forum, will further enhance Jinshan’s access to deal flow, exploration and advanced projects, as well as its access to low-cost, un-hedged, Chinese bank debt, Jinshan’s senior vice president of corporate development, Roger Walsh, told the gathering of investors and analysts in the mile-high city.

“China Gold provides access to very low-cost Chinese debt,” Walsh said. “It also gives us access to a significant technical team. We have access to a huge group of people that we didn’t have previously. And we have management commitment from the most senior executive.”

In a country where having connections with powerful people can be half the battle of doing business, Jinshan’s new chief executive, who is also a council member on the Shanghai Gold Exchange and chairman of the China Gold Association, will help smooth the way for the Canadian company.

China National Gold controls 20% of gold production in China, 30% of its known reserves and operates 65 mines. It has a large exploration portfolio and is the only Chinese gold company that is authorized to sell forward on world markets.

In addition to making Mr. Sun its new chief executive, Jinshan said it plans to bring on board a number of senior Chinese executives that will give its board a much stronger platform at a time of impending consolidation in the China gold market. (China is a very fragmented industry with about 1,250 small mines.)

China National Gold’s decision to acquire 42% of Jinshan from Ivanhoe Mines (IVN-T, IVN-N) in May has been a watershed for the company. “We now have the benefit of being effectively a state-owned enterprise so it gives us enormous flexibility,” Walsh said.

In addition to news of its management appointments, Jinshan unveiled a US$19.1 million un-hedged debt facility from the Industrial and Commercial Bank of China, the country’s largest commercial bank. The bridge loan, guaranteed by China National Gold, will support operations at its CSH-217 gold mine in Inner Mongolia during the installation of crushers and phase two of construction.

Walsh said a larger senior facility is expected to be arranged with the bank in the fourth quarter that will retire the bridge loan facility. Interest will be payable monthly at a rate of 6.57%.

Jinshan started producing gold at its CSH mine in China in July 2007. Gold production in June reached 4,810 ounces; in July, 5,234 ounces; and in August, 6,415 ounces, a record month.

Exploration work has demonstrated that the CSH mine has a measured and indicated resource, at a 0.35 gram per tonne cut-off grade, of 171.3 million tonnes at 0.71 gram gold per tonne, for 3.9 million contained oz gold.

Inferred resources are estimated at 1.33 million oz. gold contained within 64.2 million tonnes, grading 0.65 gram gold per tonne at a cut-off grade of 0.35 gram gold per tonne.

In Toronto, Jinshan is trading at about $1.01 per share and has a 52-week trading range of 80-$3.22 per share.

The Vancouver-based junior has 163.6 million shares outstanding.