You may have seen the item in last week's Features post describing China's recent climb to the top in global gold production.
While the Mineweb article cited China as the world's number 2 producer, just behind South Africa in terms of gold production, a recent Financial Times article holds China up as the new number one producer of gold.
Here are some excerpts from the FT article, "Rewards spur China gold rush".
"China’s mini-gold rush made it the world’s biggest producer in 2007, the first time any nation has surpassed South Africa since the late 19th century.
“Because of the higher gold price, companies with enough capital are lifting production,” said an official of the China Gold Association, citing one mine in Shanxi province planning to quadruple output over the next two years.
Gold production in China rose by 12 per cent to reach 276 tonnes in 2007, according to GFMS, the London-based precious metal consultancy, ahead of South Africa, with 272 tonnes."
An accompanying map shows the existence of gold mines spread throughout the large country, and the article states that China, "has more than 1,300 licensed gold mines and more than 1,000 gold mining companies, according to official figures".
Much of the gold production comes from "small, semi-private mines" which mine low-grade ore, now profitable due to recently higher gold prices. It is also noted that the lack of environmental regulations, compared to those prevailing in western countries, has helped to reduce costs for the mining companies.
The situation seems somewhat reminiscent of the Chinese coal-mining industry, with its many small-scale mines and environmental hazards. An overwhelming number of mine accidents and fatalaties in recent years led to increased media scrutiny of China's coal mining industry and calls for tighter regulation and closure of unsafe, and often unlicensed, mines.
While China's metals mining industry has yet to draw any similar comparisons, we do have to wonder when concerns about the environmental toll from metals mining will start to mount.
Pressure over environmental regulations, along with the exhaustion of smaller, less sustainable deposits, may lead to widespread consolidation in the Chinese gold mining industry over the next several years. It may be that larger companies with wider project portfolios would have an easier time dealing with regulatory measures and associated costs than companies centered around smaller mines.
Will mid-size and large-scale gold producers come to dominate the country's metals mining industry? Or will the precious metals mining industry stay relatively fragmented, with many smaller producers? It will be interesting to see how the future of metals mining in China plays out.
For more on the current and future state of Chinese and global gold production, please see Hard Asset Investor's recent article, "Gold Mining Output 2008".