Diggers and Dealers: China’s $11 billion surge on Perth Mint’s gold brings miners their aura


The seemingly insatiable hunger from China for Australian minerals goes well beyond bulk commodities like coal, iron ore and increasingly LNG.

Despite China being the largest producer of gold in the world, exports of Australian gold to the middle kingdom have soared in the past six years.

The Perth Mint sold $11 billion worth of bullion to China last year alone, and demand continues to climb.

Demand is so strong that Perth Mint brings in gold from mines in other countries like Papua New Guinea and New Zealand, and jewellery from south-east Asia that is refined down to the Mint’s signature 99.99 per cent gold bullion.

It gives added impetus to the gold miners, gold hopefuls, financiers and service companies which have descended on Kalgoorlie-Boulder in Western Australia for the 26th Diggers and Dealers mining conference.

The three-day conference will also feature a growing number of the tech metal companies which have shot to the fore as renewable energy infrastructure and storage requirements grow.

The tech metals complex includes minerals like lithium and cobalt and despite not being metals, the complex also includes rare earths and graphite.

But it is gold miners large and small, local and international, that will — as always — dominate proceedings.

For thousands of years gold has maintained its allure and status as a both a currency and a currency storage, or so-called safe haven.

Geopolitical risk and response to events like the election of US President Donald Trump and the Brexit decision for the UK to leave the European Union are helping drive a 21st century gold boom.

In Australia, the lower dollar means the international gold price of around $US1,250 sets the price for an ounce of gold in Australian dollars around $1,590.

Perth Mint gold winging its way to China

The historic Perth Mint has been refining gold silver and turning them in to high quality bullion for well over a century.

In recent times India had been a strong market, but import tariffs introduced by the Indian Government in 2011 had the mint looking for new markets.

Management put a concerted effort into securing a Chinese market, and in 2014 the Perth Mint became the first foreign refinery accredited on the Shanghai Gold Exchange.

The Perth Mint’s chief operating officer, David Woodford, said they moved into the Chinese market through international bullion banks.

“There are 13 banks in China that have a license to import and we have direct supply agreements with seven of those,” he said.

“Gold mined in Australia has certain attributes, like being much lower in PGEs (the platinum group of elements) than gold mined in South Africa for instance.

“Also our refining process which is the Miller refining method uses chlorination, and includes an electrolytic refining process.

“Exports have more than doubled from 100 tonnes in 2011 to 232 tonnes last year, worth $11 billion dollars.”

Why does China want Australian gold?

The Chinese relationship with gold goes back many thousands of years, and the country itself produces the highest amount of gold annually, with Australia at number two.

Chinese-born Dianmen Chen says he is not surprised that demand for Australian gold is rising in China despite that.

China’s largest gold mining company Zijin, took over Australian mining company Norton Goldfields in 2015 after being a majority shareholder since 2012.

Mr Chen was a former CEO of Norton Goldfields and the international gold industry veteran is now a specialist with advisory and stockbroking firm Argonaut Securities.

He has just returned from a trip to his home country where he said the rapidly growing middle class, and environmental considerations, are feeding in to the Australian-gold buying frenzy.

“In the first six months of this year, China produced 240 tonnes of gold, but demand is very high,” he said.

“They actually used 330 tonnes of gold in jewellery making, so [with] gold the demand is nearly two and a half times local production.”

Dianmen Chen says a lot of gold mines in China are getting near their end of their productive life, and their are many concerns about their environmental impact.

Gold industry at a glance:

  • 66 operating gold mines across the nation
  • 80,000 people living in gold mining towns or regions
  • 26,000 directly employed in gold mining
  • Contributed $4.5 billion this financial year
  • 280 tonnes of gold produced in 2016
  • Australia is the second largest producer after China

Source: Gold Industry Group

“It’s pretty difficult to just ramp up production in China, it’s becoming very hard to find new deposits. Existing mines having declining grades, and there are now a lot of restrictions and regulations,” he said.

Gold wealth stored in the form of jewellery is very popular.

“Why not? Jewellery is nice to have and very popular,” Mr Chen said.

“My friends and family have it and we’re just ordinary Chinese people.

“So I can see that in the future, with China becoming the number one wealthy country in the world, gold is a good commodity [to mine] in the long term.”

By Babs McHugh
ABC News


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