Canadian company seeks gold in Gansu
By Xie Ye (China Daily)
Updated: 2004-03-24 10:33

Canadian Silk Road Resources, a Toronto-listed mining company, signed an agreement yesterday with local authorities from Gansu Province to jointly explore gold prospects in the northwestern region.

The deal is another strike by a row of foreign companies to tap one of China's vast regions for mineral resources.

Under the agreement, Silk Road and Gansu Qinqi Minerals Co Ltd, a wholly owned subsidiary of the Gansu Bureau of Geology Mineral Exploration and Development, will form a joint venture to search for gold in Luqu, Xiahe and Hezuo in Gannan of the province. The exploration area covers 2,000 square kilometres.

Silk Road holds 70 per cent in the joint venture, while the Chinese partner takes the remaining 30 per cent.

The Canadian company is expected to pour in at least US$5 million over three years during the initial exploration phase. It will shoulder all of the exploration risks.

Should there be commercial findings, the two companies will jointly invest in development and production, and split the costs and profits according to their shareholdings. The investment in the development period is expected to run up to US$500 million.

Silk Road President and Chief Executive Officer Aleen Palmiere said the prospect of the exploration area is attractive.

"We know there is gold there. The only question is whether it is economically feasible to produce," Palmiere said.

China has become one of the major consumers of many minerals in the world such as copper, aluminium, iron ore and gold.

The increasing consumption has outpaced production, leading Chinese mineral imports to grow at a double-digit rate for a decade.

And the demands from China have driven many metal prices, such as gold, silver and platinum, to multi-year highs on global markets.

Under these circumstances, reinforcing mineral exploration has been listed as a priority of the government's agenda, said Land and Resources Vice-Minister Shou Jiahua yesterday at the sideline of the signing ceremony.

And foreign capital should play a major role in boosting the mining industry in China, Shou said.

"Foreign investment will not only bring capital to China, but promote technology, create jobs and increase the nation's conscience for environmental protection," Shou said.

She said the government is amending regulations to cut red tape to encourage foreign investment in the industry.

Palmiere said more and more foreign investors have come to China to tap these resources since 2000, when China started to encourage foreign capital in the sector. It has become much easier to invest with the improvement of the investment environment.

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