China has to find another way of satisfying its voracious appetite for gold. And the way they’ve done that is by mining the stuff. According to Grant Sporr, of Deutsche Bank “China is currently the largest producer of gold at 11.9 million ounces in 2011...”
Not only do they mine a lot of gold, they also keep a tight hold of it once it’s out of the ground. But they’re not content. That’s why they’ve been sniffing around looking to buy more mine capacity overseas. That brings us to Africa…
Buying miners could be a great business
China has the biggest currency reserves in the world, but their gold holdings are pretty insignificant. According to the World Gold Council (2010 figures), the EU has nearly 16,000 tonnes; the US over 8,000 tonnes, while China has a trifling 1,000 tonnes. China needs to catch up.
They can do that by buying mines. By doing that, they'll also avoid bidding up the price of gold. And that’s a fantastic benefit for China. If they can lock into African gold in the ground at today’s prices, all they need to do is get the stuff out of the ground and they could be building their gold holdings for years to come.
I’ve previously argued that the gold miners are cheap. Today, most of the large miners are trading on earnings multiples in the low teens. I’ve not seen them this cheap before
Datafeed and UK data supplied by NBTrader and Digital Look.
While London South East do their best to maintain the high quality of the information displayed on this site,
we cannot be held responsible for any loss due to incorrect information found here. All information is provided free of charge, 'as-is', and you use it at your own risk.
The contents of all 'Chat' messages should not be construed as advice and represent the opinions of the authors, not those of London South East Limited, or its affiliates.
London South East does not authorise or approve this content, and reserves the right to remove items at its discretion.