The ASIA Miner electronic news service this week concludes the extracts from Goldletter International"s report on China"s gold industry. In the Third Quarter, July-September 2007 issue of The ASIA Miner magazine, we present Marino Pieterse"s overview that China will emerge as the world"s largest gold producer by 2010.

This week we list the 10 largest foreign mining companies with a gold focus in China.

The suggestion has been made in the past that China does not host any sizeable, continuous gold deposit amenable to commercial production based upon the fact that the largest mine was producing in the region of 100,000 ounces gold annually with the annual average closer to 16,000 ounces.

This picture is outdated, however as production from its major national mines is growing, and production from a growing number of gold projects developed by foreign companies is coming on stream. These will contribute approximately 12.5 tonnes (400,000 ounces) of gold in 2008, equal to 5% of total production and this is expected to double by 2010.

Missing many of the sophisticated techniques of the western approach including highly sensitive geochemical and geophysical survey as well as high-end interpretation of satellite imagery, China is relatively undiscovered. This offers a high potential for successful exploration.

Sino Gold - China's largest foreign gold producer

Sino Gold, listed on the ASX since 2002, has been active in China since 1996 and has become the country's largest foreign gold producer.

The company operated the Jianchaling underground mine in the central Chinese Shaanxi Province from 1998 and the mine produced approximately 450,000 ounces of gold from 1998 to 2006.

Sino Gold received a mining licence for its 82%-owned Jinfeng project in Guizhou in June 2005 and the estimated cost to build an open-out mine is US$95 million. Construction has been completed.

Jinfeng, China's largest new mine, has an initial design capacity of 1.2 million tonnes per year to produce 180,000 ounces of gold/year at an average operating cost estimated at US$200/ounce.

The resource estimate for the project is 28.6 million tonnes averaging 5 grams/tonne gold, containing reserves of 2.9 million ounces and resources of 4 million ounces.

The White Mountain Project in Jilin Province will be Sino Gold's next mine. A feasibility study by a Chinese design institute has been completed and production is expected to start later in the year. Sino Gold plans to produce 70,000 to 80,000 ounces of gold/year at White Mountain. The mineral resource is 846,000 ounces.

The company got a secondary listing in Hong Kong in February 2007 and raised a net US$95 million in a global offering.

Canadian listed companies in China

Eldorado Gold:

Eldorado made an entry into China with the Can$59 million all-share acquisition of Afcan in September 2005. Afcan held an 85% interest in the Tanjianshan project in western Qinghai Province.

Eldorado has completed construction of an open-pit mine at Tanjianshan with commercial production starting in January 2007.

In the first quarter 38,799 ounces of gold were produced and gold output in 2007 is forecast at 120,000-130,000 ounces at cash costs of $235 to $245 per ounce.

Eldorado released a bankable feasibility study based on a 940,000 ounce reserve and measured and indicated resources of 1.03 million for a life-of-mine production of 842,000 ounces and a mine life of eight years at a cash operating cost of $226 per ounce and total operating costs of $245 per ounce, and at total capital costs of $50.2 million.

The study proposed the simultaneous development of two open-pits, with initial processing of 800,000 tonnes ore.

Eldorado is also constructing the Kisladag gold mine in Turkey which is forecast to produce 190,000-200,000 ounces at a cash cost of $210 to $220 per ounce.

The company has an exploration budget to bring on new projects in Brazil, China and Turkey.

Southwestern Resources:

Southwestern has acquired a 90% interest in Yunnan Gold Mountain Mining, the joint venture company that holds the Boka project, by contributing US$4.01 million to the joint venture and making a payment of US$1.7 million to Team 209 of the Nuclear Industry of Yunnan Province. Team 209 will retain a 10% carrier interest.

The measured and indicated resource base at Boka 1 is 31.2 million tonnes averaging 3.05 grams/tonne gold (3.1 million ounces contained gold), with an additional 8.9 million tonnes at 2.66 grams/tonne (0.8 million ounces contained gold) in the inferred category. An inferred resource at Boka 7 contains an additional 14.56 million tonnes at a grade of 2.75 grams/tonne (1.3 million ounces contained gold).

In Peru, Southwestern has two significant projects: the Liam gold-silver project with Newmont Peru and the Antay porphyry copper-gold project with Anglo American Exploration Peru. Southwestern also owns 50.4% of recently listed Zincore Metals, which holds zinc assets in Peru.

Jinshan Gold Mines:

Jinshan has earned a 96.5% interest in the CSH 217 gold project in the western part of Inner Mongolia, within the Tian Shan gold belt. The Ningxia Nuclear Industry Geological Exploration Institute has the remaining 3.5% interest.

In April 2006, Jinshan completed a full feasibility study based on a measured and indicated resource of 2.92 million ounces, grading 0.83 grams/tonne gold and additional inferred resources of 0.5 million ounces grading 0.78 grams/tonne gold at a 0.5 grams/tonne cut-off.

The feasibility study envisages a 20,000 tonnes/day open-pit heap leach mine, producing 117,000 ounces of gold per year from oxide and sulphide ore for the first nine years at a total cash cost of $253/ounce. The start-up capital investment is estimated at $ 32.3 million.

Jinshan has started an engineering study, being prepared principally by KD Engineering, to expand the projected gold production at CSH 217 to about 180,000 ounces per year.

The study is designed to incorporate the mining of measured and indicated resources in the Southwest Zone, which now stand at about 860,000 ounces, and additional inferred resources of 9 million tonnes, grading 0.74 grams/tonne for additional gold content of 220,100 ounces at a 0.5 grams/tonne cut-off. Results from a 5000 metre drill program indicate that the southwest mineralised zone extends towards the west.

In September 2006, Jinshan received its Mining Permit from the Ministry of Land and Resources in Beijing and construction is well advanced. The first gold pour is expected this month.

Continental Minerals:

Continental, part of the Hunter Dickinson Group, owns a 100% interest in the Xietongmen property in the Tibet Autonomous Region, where exploration in the past two years has defined a resource on a copper-gold porphyry ore body.

Continental released a resource update in January 2007 of a measured and indicated resource of 4.31 million ounces of gold and 2092 million pounds of copper contained in 220 million tonnes of ore.

The company is incorporating this resource estimate into a feasibility study, which it hopes to complete in the second quarter of 2007.

Inter-Citic Minerals:

Inter-Citic has a cooperative joint venture contract with the Qinghai Geological Survey Institute, by which it can earn a 90% interest in the Dachang gold project by investing Can$5.3 million over three years.

Dachang East hosts the existing NI 43-101 compliant inferred gold resource of 5.7 million tonnes @ 7 grams/tonne producing 1.2 million ounces of gold.

Inter-Citic has begun a 2007 diamond drill program in conjunction with its joint venture partner totalling up to 30,000 metres with the goal to further expand the company's gold resource inventory by exploring new areas.

Drilling started on a new target identified at the end of last year's exploration season. The target known as 'Little Ruby' is located north of the Dachang main zone.

Minco Gold:

Minco, formerly Minco Mining and Metals, has nine active properties along the Yangshan Gold Belt in Gansu province. These include the 2.9 million ounce Anba gold deposit in which it has a right to earn a 40% equity interest in the Yangshan Gold Mining Joint Venture (YGM) for the exploration and development of the Anba gold deposit and the White Silver Mountain, a base metal project to be spun-off to newly founded Minco Base Metals; Minco-Qinqi; and Longnan properties.

YGM will acquire a 100% interest in the Anba gold deposit for approximately $8.9 million. In addition, Minco has the option to earn a 51% equity interest in the Jinli joint venture for the exploration and development of the Changking gold deposit in Guangdong Province. The company will contribute about $7.6 million to earn its interest.

In Inner Mongolia Minco has spent about $1.5 million and earned a 58% interest in the Gobi gold project. The YBYC project in Inner Mongolia, in which Minco can earn a 75% interest by spending about $ 1.8 million over four years by December 2007, was optioned to New Cantech. In September 2006, New Cantech notified Minco that it did not want to proceed with the BYC option.

In Hunan Province, Minco holds the Gold Bull Mountain or Jinniushan Mining Licence. High grade gold zones were defined recently and an aggressive exploration program including 4500 metres surface and underground mining in 24 holes is under way.

Minco owns 14 million common shares (45.3% equity interest) of Minco Silver that were acquired in 2004 in exchange for the transfer of the Funan Property and the silver interest in the Changking Property from Minco Gold to Minco Silver. Minco's equity interest in Minco Silver represents a market value of Can$38 million, equal to 52% of the company's total market valuation.

TVI Pacific:

TVI operates the Canatuan gold-silver mine in the Philippines, which produced 45,210 ounces of gold and 608,507 ounces of silver, equal to a gold equivalent of 56,880 ounces, in 2006.

In China, the company operates a Wholly Owned Foreign Enterprise operating vehicle, Hunan Pacific Geological Exploration, focusing on gold exploration in the Golden Triangle, a highly prospective metallogenic region in China's south-western provinces of Yunnan, Guizhou and Guangxi Autonomous Region, copper/gold exploration in the Yunnan Province and copper/gold exploration in the Tibet Autonomous Region.

In early 2006, TVI and Phelps Dodge Exploration entered into a co-operative agreement referred to as Yunnan copper/gold project.

Mundoro Mining

Mundoro is focusing on the feasibility stage of its 79% owned Maoling gold project in Liaoning Province, in which it first became involved in 1999.

The company completed a pre-feasibility study in June 2005 which demonstrated the value of a large scale open-pit mine, producing an average of 328,000 ounces of gold per year for eight years at a total cash operating cost of US$187 per ounce. New construction will take 18 months.

Mundoro has identified two deposits; Zone 1 and Zone 4. The indicated and measured resource of Zone 1 is 161 million tonnes grading 0.92 grams/tonne gold containing 4.8 million ounces gold. In addition, Zone 1 has an inferred resource of 63 million tonnes grading 0.8 grams/tonne gold containing 1.6 million ounces gold and Zone 4 has an inferred resource of 95 million tonnes grading 0.9 grams/tonne gold containing 2.8 million ounces gold.

Golden China:

Golden China completed its business combination with Michelago of Australia in December 2006, holding the bacterial oxidation plant in Shandong Province.

The company's gold projects include the advanced stage Nibao refractory gold deposit in western Ghuizou Province, within the Golden Triangle, and the Beyinhar gold project in Inner Mongolia.

In February 2007 Golden China released its first resource statement on the 95%-owned Beyinhar project, identifying measured and indicated resources of 475,000 ounces and an inferred resource of 130,000 ounces. As well, the company confirmed continuity of a high-grade sulphide gold zone and announced very positive results associated with a scoping study on the oxide resource. The full study will be followed by a revised resource statement in October 2007 and a feasibility study by the end of the year.

In September 2006, Golden China significantly upgraded the Nibao gold resource estimate, establishing a first NI 43-101 compliant measured and indicated resource estimate totalling 6.82 million tonnes, grading 2.49 grams/tonne with a cut-off grade of 0.5 grams/tonne, resulting in a total of 547,000 ounces of contained gold and an inferred resource of 6.52 million tonnes at 1.46 grams/tonne, containing 305,000 ounces of gold.

Golden China's drill programs at both projects have now set targets of having total resources in excess of 2.5 million ounces during 2007, including continuing to expand the indicated and measured resources.

In February 2007, Golden China signed a new off-take agreement with Hellas Gold to buy an additional 100,000 tonnes of gold concentrate over three years, which will generate an additional 25,000 ounces of gold/year at BioGold. Expansion of the bacterial oxidation plant is anticipated for completion by the end of 2007, and is expected to increase treatment capacity from 100 tonnes to 200 tonnes/day.

Maxy Gold:

Maxy Gold holds a 75% interest in the Midu gold project in Yunnan Province. Under the terms of the Co-operative Joint Venture Contract Maxy Gold will contribute US$750,000 over two years to earn a 70% interest in the Joint Venture Company Yunxin for the Midu project. Activities are focused on the Muluozuo gold project, which is being drilled.

In October 2006, Maxy Gold signed four letters of intent with mining subsidiaries of the Western Mining China Group to jointly explore gold and base metal properties held by Western Mining in Tibet and Qinghai Province in Western China.

In February 2007, Golden China closed a private financing with Western Mining totalling Can$2.25 million. Western Mining Co Group is one of the largest Chinese mining companies and is involved in mining metallurgy, refining, research, production and sale of alloy, non-ferrous minerals trading, research and exploration and business development of lead, zinc, copper and other non-ferrous metal resources.

Part of the strategic alliance with Western Mining group is the Huangnan copper-gold project, which consists of two large exploration permits totalling 203sqkm in Qinghai Province, Western China. The two copper-gold polymetallic prospects are the Duoba-Jijiemu permit and the Danbolongwa permit.

More than 20 mineralised occurrences, each of a different nature, have been identified in the region and at least seven of these are medium to small-scale operating copper, gold and copper-gold mines in the vicinity of the permits. The main producers are: Shuangpengxi Gold Mine; the Jiangligo Copper Mine (2.5 million tonnes at 0.5 to 0.9% copper); and the Qiadong Copper-Silver Mine (0.6 to 1.5% copper).

In May last year, Maxy announced the original sale of the Niuliong gold project in Yunnan Province to Federal Mining Group of Hong Kong for Can$7.3 million and has recently completed a supplementary agreement with Federal Mining group to sell the remaining project areas in the former Luchun Joint Venture Project for an additional Can$1.2 million in cash. Southwestern Resources owns 10% of Maxy Gold.

Goldrea Resources:

Goldrea completed an agreement with Rushan City to buy up to 80% of the operating 1750 tonnes/day Daye Gold Mine in Shandong Province for Can$16.3 million.

The mine produced 65,000 ounces per year up to 2005. It is now operating at 2400 tonnes per day from underground and custom milling of surrounding properties.

The Daye Gold Mine has a NI 43-101 compliant indicated resource of 331,175 ounces of gold and an inferred resource of 275,968 ounces.

Expenses to date are approximately Can$1.8 million and include trenching, geochemical and geophysical surveys, mapping, drilling of 20,000 metres in 87 holes and the sinking of 200 metres (660 feet) of a five-compartment concrete-lined shaft designed for an ultimate depth of 254 metres.

Goldrea has earned a 74% interest in the lease surrounding the Daye open-pit as well as all mineral rights 150 metres below the top of the existing open pit by spending Can$2 million over four years by the end of the first quarter this year.

Sparton Resources:

Sparton owns a 39% interest in Yunnan Sparton Minerals (YSM) along with Chinese partner Starry (51%) and Yunnan Nuclear Exploration Team 2001 (10%). The joint venture owns the Luxi gold project in Yunnan.

Initially, Sparton owned 81% of the Luxi project having to spend US$1.5 million over a three-year period, but sold 41% to its Chinese partner for Can$2.8 million. In 2006, 12,000 metres of drilling was completed and over 350,000 ounces of new primary gold resources have been identified.

A RMB 2 million (Can$ 300,000) exploration program is underway, consisting of a minimum 2000 metre reverse circulation drilling and approximately 1000 metres of core drilling, which will be done with USM owned equipment.

The drilling will initially concentrate on extending (outside the mine area) the mineralization previously located in the Guanlingpo Mine. Subsequently, the exploration plan is to undertake similar work in the Bajaowa and Mabozi targets in the larger YSM 250sqkm exploration area.

Elsewhere in Yunnan, Sparton will proceed with a bulk uranium extraction test program on coal ash from the Xiaolongtang Power Station, owned by Chinese Guodian Power Corp. The testing work will be done by the Beijing Number 5 Testing Institute under the direction and supervision of the company's process engineering consultants, Lyntek Inc. of Denver, Colorado, USA. The project is fully supported by the China National Nuclear Corporation.

Sparton also acquired the "208" production assets in Inner Mongolia, consisting of heap leach operations which produced 3,500 ounces of gold and 35,000 ounces of silver in 2006.

Neo Alliance Minerals

Neo Alliance has received the only new mining licence approval for the entire Province of Gansu in 2005, including the company's Majiahe gold property, which poured its first bar of gold in July 2006 with commercial production expected in the fourth quarter of 2007.

The current NI 43-101 compliant resources indicate 3.33 million tonnes grading 1.34 grams/tonne gold, containing 143,650 ounces of gold.

In October 2006, Neo Alliance signed an option agreement to acquire the Xuefeng gold properties in Hunan Province and having an exploration area of 720sqkm.

The Brigade 407 of the Bureau of Geology and Mineral Resources Survey and Development of the Hunan Province has provided a state-approved Chinese resource classification (non NI 43-101 compliant) of 60.5 million tonnes of gold with an average grade of 9.76 grams/tonne, containing about two million ounces of gold.

Also in October 2006, Neo Alliance acquired an option to a 70% interest in the Xujiabo properties in Hubei Province for a total consideration of RMB 10 million (Can$1.42 million) to be paid in stages over two years.

The transaction includes a 3.22sqkm mining licence that expires on January 1, 2009; a business licence that expires on June 5, 2023; a 50 tonne per day flotation plant for gold ore; talc processing equipment; and an option to acquire rights to the surrounding 60sqkm as an exploration area.

Current reserves, according to Chinese standards, are 62,690 ounces of gold and 1.44 million ounces of silver at an average grade of 4.68 grams/tonne gold and 71.7 grams/tonne silver. In addition, a Chinese government team prepared a state-approved historical resource estimate of 870,202 tonnes of talc.

Australian listed companies with a gold focus in China

Leyshon:

Leyshon has earned a 70% interest in the Zheng Guang gold-zinc project, in north-west Heilongjiang Province, by spending US$5.9 million on exploration within three years under a 2003 agreement with the Qiqiha'er Brigade of the Heilongjiang Bureau of Geology and Mineral Resources.

In May 2006, Leyshon calculated an inferred resource of 16 million tonnes averaging 1.8 grams/tonne gold (930,000 ounces contained gold), 0.4% zinc (64,000 tonnes contained zinc) and 5 grams/tonne silver (2.6 million ounces contained silver).

It is proposed to start gold production this year with trial mining and heap leaching of near surface gold ore, followed by the rapid expansion of production to more than 100,000 ounces of gold and 200,000 ounces of silver within three years. The project's current design has an estimated initial capital cost of US$27 million at an estimated production cost of $225 per ounce.

Tianshan Goldfields

Tianshan has earned a 90% interest in the Gold Mountain project in Xinjiang Province.

The Arxi open-pit gold mine is mining a low sulphidation epithermal deposit and is producing 30,000-40,000 ounces per year from a resource of 21 million tonnes at a grade of 5.8 grams/tonne gold for 3.8 million ounces contained.

Tianshan defined resources on three deposits at Jinxi, Yelmand and Mayituobi. Global resources total 2.8 million ounces of gold, with 1.7 million ounces indicated category, at an average grade of 0.9 grams/tonne, and the remainder is in inferred resources.

The work program for 2007 will include a scoping study for a potential open-pit and heap leach mining operation.

United Kingdom listed companies with a gold focus in China

Griffin Mining:

Griffin has constructed the first foreign-owned and operated mining and processing plant in China at Caijilaying, Hebei Province, in which it has a 60% equity interest (40% owned by government agencies) and 100% financial interest until the fourth year of commercial production.

Griffin has invested $20 million into the development of Caijilaying and then construction of an underground mine and processing facilities to process some 300,000 tonnes of ore/year, consisting of zinc, metal in concentrate, gold, silver and other associated metals for a minimum of 14 years.

Since commissioning about 18 months ago, throughput has doubled from 200,000 tonnes of ore/year to more than 400,000 tonnes of ore/year and will be upgraded to processing of more than 500,000 tonnes of ore/year by the end of 2007, rising to 700,000 tonnes of ore/year in 2008.

In 2007, Griffin will also begin producing a second concentrate which will contain gold, silver and lead. The resource base has been recently increased from 1.2 to 3 million tonnes of zinc metal, from 0.2 to 1.6 million ounces of gold and from 13.9 to 53.7 million ounces of silver (under Australian JORC Code classification).

Central China Goldfields:

Central China has four projects located in some of the most prolific belts in China. Two of these projects, Nimu and Snow Mountain, have flagship status.

The Snow Mountain project is in the Baima area in the western Qinling Gold Belt of central China. The company's partner, the Sichuan Bureau of Metallurgy and Geological Exploration, has calculated inferred resources of the QQS, SGP and SND deposits in the Snow Mountain project of about 610,000 ounces, 200,000 ounces and 140,000 ounces of gold respectively.

In 2006, Central China started drilling and aditing the Sangpanguo deposit at 120-200 metre intervals. Based on this work, mineralization has been confirmed to exist to a depth of 200 metres. Initial international standard resource calculates (reported to Australian JORC standards) indicate inferred resources of 210,000 ounces at an average 3.22 grams/tonne gold, using 1 gram/tonne cut-off grade.

Central China commissioned a scoping study at the Baima area (Songpanguo-Hujiagou, Shiuniujia and Gaojiaimo exploration licences) to be conducted by independent mining consultant AMC Australia in early June. Detailed geological mapping and trenching started at the Shang Peng Zi Licence area in Snow Mountain.

In April 2005, Central China signed a Memorandum of Understanding (MoU) to enter a cooperative Joint Venture Contract with Shandong Zhengyuan Geology and Resource Co over the Dong Mao Hu Gold Mine and two exploration properties in Inner Mongolia.

Zhengyuan reported that the mining area has total inferred resources of 4.2 tonnes of gold (135,000 ounces) in the Chinese 332,333 and 334 categories. Exploration work is under way to test Chinese standard resources and exploration potential.

The Nimu copper-molybdenum project in Tibet, consists of five contiguous exploration licences and two separate licences. The total area of the project is 134sqkm.

Geologically, these licences are part of the Gangdese plutono-volcanic area, which in the past few years has been shown to host large copper deposits such as the Qu Long deposit, which has five million tonnes of contained copper and the Xietongmen deposit, which has measured resources of 106 million tonnes grading 0.49% copper and 0.7 grams/tonne gold for 1.1 billion pounds of contained copper and 2.4 million ounces of contained gold.

Marino Pieterse was a key presenter at The ASIA Miner Investing in Mining Conference held in Sydney in May. His topic explored the opportunities of investing in gold. For more information on Goldletter International go to www.goldletterint.com or e-mail: info@goldletterint.com