China Gold eyes Canadian purchase, but says prices still steep

VANCOUVER Thu Jan 2, 2014 6:17pm EST

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VANCOUVER Jan 2 (Reuters) - China Gold International , a mid-sized Canadian-based company with two mines in China, is eager to make an acquisition in Canada, but asset prices remain very high despite a bombed-out mining sector, a company official said on Thursday.

At a time when small- and medium-sized miners are struggling to raise funds as investors have cooled on the sector, China Gold is in the enviable position of having ready access to finance through its biggest shareholder, China National Gold, a Chinese state-owned enterprise.

China National Gold is China's only state-owned gold mining enterprise and China's biggest gold producer. It owns 39 percent of Vancouver-based China Gold and is perhaps best known for its failed attempt to buy African Barrick Gold a year ago from Barrick Gold Corp.

"You have seen market cap drops. But the asset values are still up there. People are refusing to sell at lower prices. We have tried a few times," Jerry Xie, executive vice president of China Gold, told Reuters.

He said the company would "prefer to find something in Canada" but was not willing to overpay for it.

Shares of gold and base metal companies plunged in 2013 due to weaker metal prices, soaring mining development costs and massive write-downs on acquisitions made at the peak of the mining boom. The S&P TSX Global Gold Index fell 48 percent last year.

Mergers and acquisitions have also fallen sharply, though a few deals announced last month, including Asanko Gold's planned purchase of PMI Gold, indicating that tough conditions in the industry may spur more deals as companies combine to cut corporate costs and strengthen balance sheets.

China Gold's ideal acquisition would be a property containing some 3 million ounces of gold or 1 million tonnes of copper, and with a completed feasibility study, Xie said.

In 2012, China Gold produced 139,443 ounces of gold and 25.8 million pounds of copper, but expects to expand this to 260,000 ounces of gold by 2015 and 176 million pounds of copper by 2016 following major expansions at both its mines in China.

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