Jinshan Gold Mines goes native

The largest shareholder in Vancouver-based Jinshan Gold Mines (JIN-T) with a nearly 40% stake is China National Gold, a state-owned Chinese enterprise and the country’s biggest gold producer.

The strategic partnership has brought with it many perks for Jinshan — from a seemingly endless supply of inexpensive credit to access to the Chinese mining giant’s technical expertise and pipeline of assets.

China National Gold’s general manager — Sun Zhaoxue — is Jinshan’s chairman and chief executive, while other officers like Zhanming Wu, Jinshan’s director and vice president of business development, is the head of capital markets at China National Gold.

Now Jinshan is changing its name to China Gold International Resources Corp. to better reflect its relationship with China National Gold and as of July 19 started trading on the Toronto Stock Exchange under the ticker symbol (CGG-T). Jinshan shareholders approved the name change at the company’s annual general meeting on June 17.

“The strategy is to become global,” Frank Lagiglia, head of investor relations at Jinshan, now China Gold International Resources, explained in a telephone interview from Vancouver. “They [China National Gold) want to use us as a vehicle to go out and start acquiring projects and the TSX listing helps them do that because we have access to North American markets.”

In theory of course that makes a lot of sense, industry observers say. But Jinshan could also become a vehicle for what some might argue are politically unattractive “internal” assets such as the Jiama copper-gold-silver-molybdenum property in Tibet.

In September 2009, Jinshan announced in a press release that it had signed a Memorandum of Understanding with China National Gold and another partner to acquire a 100% stake in the Jiama property. (China National Gold owns 51% of the project.)

But nowhere in the press release did it mention that Jiama is 80 km outside of Lhasa, the Tibetan capital.

The Beijing government and the government of Tibet in exile disagree over the definition of Tibet and whether its incorporation into China is legitimate according to international law.

“Leaving aside the [geo-political] sensitivity, if you’re talking about it as a vehicle to go international they’re not achieving what they said they’re going to do,” says a mining executive familiar with the company who requested anonymity. “Just jamming through an internal asset doesn’t make much sense…A more modern state-owned enterprise would say, ‘What is out there that would be attractive and make us a serious gold platform,’ but unfortunately they don’t think like that. They’re not particularly sophisticated.”

Lagiglia noted that Jinshan, now China Gold International Resources, is also looking at other possible acquisitions around the globe — from Russia and Mongolia to North America, Africa and Australia. “Whatever makes sense,” he says. “They’re not looking at exploration or anything Greenfield, it has to be very advanced stage.”

Jiama is slated to become an underground mining operation with a production capacity of 6,000 tonnes per day. The operation will produce a copper concentrate with gold and silver credits and a molybdenum concentrate.

According to an article by the government-owned Xinhua news agency today, China National Gold has reportedly completed the first phase of the project. A subsidiary of China National Gold, Tibet Huatailong Mining Development Company, started construction on the US$1.2 billion project in 2008, the news agency said.