Placer Chairman lobbies for new Chinese mining act

Speaking at the Canada China Business Council in Toronto, Placer Dome (PDG-T) Chairman Robert Franklin used his time to speak bluntly about the regulatory problems facing foreign gold explorers in China, and to ask for changes to the country’s mining act.

Below is an extract of that speech:

“Since 1997, Placer Dome has been pursuing exploration and mine-development opportunities in China.

Currently, the project we’re most excited about is our co-operative joint venture with the Shandong Zhaojin Group, a leading gold producer in China. We’re working on an exploration project in the Zhaoyuan region.

There are significant challenges for securing opportunities in China, but Canadian companies should not be deterred from trying to participate in what is the fast-growing market in the world.

However in the extractive industries, a foreign company does not have secure title at the exploration stage, and currently there is no assurance that successful exploration will lead to a development permit.

To date, no foreign company has been successful in developing a mine in China.

In its approach, China is committed to observing and abiding by the rules of the World Trade Organization, but in the case of the gold industry, there are obstacles.

China has a permitting process that provides for spending of up to US$30 million on exploration and evaluation of a project on a regional basis, then it is necessary to apply to the central government for a permit to develop and exploit the project.

In the case of gold, the central government currently has a policy that allows discretionary power to deny a development permit if, in the government’s assessment, the project is ‘high-grade.’

The definition of ‘high-grade’ is not stated, and there is no policy to deal with compensation for a foreign entity to recoup the value of its discovery.

These may sound like daunting issues, but the Chinese government is encouraging foreign investment in mining and professes a commitment to change their practices.

China’s mining act is being amended, and we hope the process will address the challenges for a foreign company mining in China.

Prime Minister Martin and Trade Minister Peterson plan to visit China in January, and that can provide an excellent opportunity to draw attention to the need for change to the mining act at the most senior levels of the Chinese government.

We hope they will do so in the context of reciprocity. The Chinese, as my colleagues have expressed, have an interest in acquiring Noranda (NRD-T) through China Minmetals. Reportedly, the Chinese are interested in possibly acquiring Husky Energy.

Personally, I have no objection to the flow of capital to acquire these assets, in either country, but I think the rules should be reciprocal.

The goal of our co-operative joint-venture in China is to progress from exploration through mining and development of a world-class gold mine producing in excess of 300,000 oz. per year with a total investment of some US$300 million.

There are no restrictions on Chinese companies owning and operating assets in Canada, with unfettered legal right to those assets which they acquire.

The same should be true for a foreign company operating in China.

The Chinese government must be made aware of this situation and commit to amending their laws to permit equal treatment of Canadian resource companies operating China.

I’m hopeful that, through our co-operative joint venture, we will succeed in finding and developing a major gold reserve in China.

But as is the case with gold exploration anywhere, the risks are high.

Fortunately, there is a long history of gold production in China, and the geologic potential in the area of our joint venture is excellent.

Officially, China produces some 200 tonnes of gold per annum. Unofficial estimates suggest that another 120 tonnes of gold is smuggled out of the country annually.

China has not built large-scale gold mines, and that is an experience and expertise that Placer Dome is able to provide.

Sustainable development is becoming more of a common expression in China. I have heard China’s commitment to the rule of law, to transparency and to openness. China’s commitment to those principles has attracted large investment flows into manufacturing and other sectors of its economy.

It is beginning to attract investment in mineral exploration. I look forward to the day when a major investment in mine development will occur in China. That day — with reasonable amendments to their mining act — hopefully is drawing near, and then China will witness the full contribution that mining can make to sustainable development.

I hope that Placer Dome is amongst the leaders at that time.”