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Speculators are bidding up gold prices to ever-new records. Moved by two principal drivers, a weak U.S. dollar and record crude oil, prices now are around $1,000 an ounce.
South Africa used to be the world’s premier gold producer. In fact, its title had been uncontested since 1905 — until China began its come-from-behind expansion, not just into global manufacturing, but into metal and mineral production.
Last year, China produced 276 metric tons of gold. Output was up a whopping 12% over 2006 and represented just over one-tenth of the world’s supply. And that was only the beginning!
China’s rapid rise to the top is due to the increased high-grade output that is generated by hundreds of small-scale mines scattered in the Chinese hinterland.
Foreign gold producers, partnering with major Chinese businesses, have recently begun setting up operations in some of China’s sparsely populated regions — bringing with them their advanced technological expertise. Due to the inevitable delay between setting up shop and actually producing sizeable amounts of gold, China’s total output is likely to expand throughout 2008 as these operations ramp up to full capacity.
One of these small, nimble mining operations is based in Vancouver and trades on the Toronto Stock Exchange. The company started production in July 2007 in China’s northern province of Inner Mongolia. By December 18, 2007, it had reached 19,000 ounces of gold.
But here’s the kicker…
The mine is set up to produce about 120,000 ounces of gold per year, which would make it one of the country’s largest producers. Its measured and indicated resources now total the equivalent of 3.92 million ounces of contained gold.
At today’s prices, that’s $3.7 billion in cold hard cash!
In addition, science backs up inferred resources estimated at 1.33 million ounces of gold.
That could be worth an additional $2 billion — and that’s just based on a gold price of $950 per ounce.
Again, total gold resources are now 3.9 million ounces in the measured and indicated categories and 2.1 million ounces of gold in the inferred category.
And the best part? You can still buy the stock for less than C$3.
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If this tiny gold miner achieves only half of what they’re projecting for this year, it is reasonable to see the share price double from today’s level of C$2.70.
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