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St Elias to mine increasing gold demand in China

By Ariel Tung in New York | China Daily | Updated: 2012-04-20 07:52

St Elias to mine increasing gold demand in China
A shopper looks at gold jewelry at a Chow Tai Fook Jewellery Group Ltd store in Hong Kong. According to Forbes, gold demand in China doubled in the past 10 years. Jerome Favre / Bloomberg

The Vancouver-based St Elias Mines Ltd is in a good position to take advantage of China's growing demand for gold and gold-related investments, say company executives who recently journeyed to the country for the first time.

In mid-December last year, Murry Braucht, St Elias vice-president, and Duncan Bain, director at the company, met with Chinese officials and investors in Beijing to discuss St Elias' plans in China.

The medium-sized gold exploration company has 10 properties in British Columbia, Canada and Peru and a market capitalization of $200 million. Its main line of business is in discovering gold and selling it to the highest bidders - be they companies or individuals.

St Elias, which is already listed in Toronto and Germany, began receiving calls from potential investors as soon as Braucht and Bain returned from China.

Launchpad Asia, an advisory firm that arranged the trip on behalf of St Elias, said it received at least 30 calls from Chinese investment firms, brokerage companies and individuals that want to meet with St Elias representatives.

"Our hope is very high on China and on our relationship with them," Braucht said. "Right now, we are focused on building a relationship before going forward with them. We are looking at all options."

Chad Lewis, Launchpad managing director of North America, also thinks St Elias' prospects are good.

"We are extremely pleased with the quality and quantity of responses we have received," he said.

Company officials say St Elias sold about $900,000 in gold in the past five years. Most of it went to buyers in Canada and Peru.

Between 2007 and 2010, the demand for gold investment increased at a compound annual rate of 68 percent, according to a press release from the diversified holdings company Talisman Holdings Inc.

China more than doubled its investment into gold in the first quarter of 2011, buying up 90.9 metric tons of the metal as it overtook India to become the largest market in the world for coins and bars, according to the World Gold Council.

Industry experts have noted that China has been buying more gold at a time when concerns persist about the country's rate of inflation. Meanwhile, the global demand for gold is becoming stronger amid economic troubles in the United States and Europe.

Zhang Jianhua, People's Bank of China research head, recommended that China buy more gold to further diversify and protect its foreign exchange reserves.

In an article in the Financial News, a newspaper published by the central bank, he said gold has become the only "safe haven" for investors who want to avoid taking on large risks.

In November, China's Shandong Gold Group, the parent of Shandong Gold Mining Co Ltd and one of the biggest gold producers in China, was reported to have initiated a $1 billion offer for the Brazil-based Jaguar Mining Inc.

The deal, if completed, will be one of the biggest overseas acquisitions made by a Chinese gold miner.

To date, few Chinese firms have acquired gold resources overseas, although the demand for gold in the country has increased rapidly.

According to Forbes, China doubled its gold consumption in the past 10 years.

The country now takes in about 20 percent of the global supply of the metal and has 1,054 tons of gold in reserve, an amount that makes up 1.8 percent of its foreign exchange reserves.

Betting that the demand for gold will continue to increase, Jack Ma, chairman of the e-commerce and Internet services company Alibaba Group, recently bought shares of the Chinese jeweler Chow Tai Fook Jewellry Co Ltd, Forbes reported.

China's appetite for gold investments spells "good news for us", said Lori McClenahan, St Elias chief executive.

On the first day of their trip, Braucht and Bain met with Yang Mengxin, deputy chairman of the Hong Kong Mercantile Exchange. Yang is also a renowned investor and philanthropist in China.

The trip ended on Dec 13 with a meeting with Zheng Han, the owner of Wei Ye Yuan, a Beijing-based company that specializes in international trading.

Zheng, who just started a company in the US called WP International LLC, is interested in branching out into the gold investment business.

Yang and Zheng have signed a cooperation agreement with St Elias to help promote the company in China.

Although St Elias' main goal is now to become better known in China, the company is also looking forward to announcing the formation of a partnership when the time is right, Lewis said.

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