A model holds a gold bar issued by China National Gold Group Corp to commemorate the 2010 Asian Games in Guangzhou. [Photo / Provided to China Daily]

CGIR discovers a vast seam of the yellow metal in Inner Mongolia

SHANGHAI - China Gold International Resources Corp Ltd (CGIR), a subsidiary of China National Gold Group Corp, the country's biggest gold producer by output, said on Thursday it has discovered an ore sample indicating vast gold reverses at its mine in the Inner Mongolia autonomous region.

The company said in a statement to the Hong Kong Stock Exchange that it detected a 144.5 meter seam of gold-bearing ore with a grade of 0.92 gram of gold a ton in its Chang Shan Hao (CSH) gold mine, China's biggest low-grade gold mine and CGIR's main asset.

CGIR said the ore sample is the best it has found this year in the mine but didn't reveal an estimate of the total reserve.

Zhang Lei, a gold analyst with Oriental Security, said that the length of the seam is "very impressive", though the grade of the sample is "relatively low".

The company has drilled more than 4 km in eight exploration wells at the mine this year to further explore the reserve, and has found four ore samples that indicate significant amounts of gold.

"Based on the exploration results this year, we have strong reason to believe that the CSH gold reserve has great growth potential," CGIR Chief Executive Officer Song Xin said.

"We are working on a three-year exploration plan to boost the value of CSH."

The company began extracting gold at the mine in July 2007. As of the end of September, the company had extracted 76,905 ounces (2,155 kg) of gold from the mine, with a daily ore processing capacity of about 20,000 tons.

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The company's H share rose 1.83 percent to HK$41.75 ($5.36) in morning trading on Thursday.

Analysts believe a potential increase in the CSH reserve would provide a shot in the arm for the company's performance, at a time when the price of gold has been hitting records as investors seek safe havens to guard off excessive liquidity.

Gold for February delivery increased $7.90 to $1,413.50 an ounce on Wednesday at the Comex division of the New York Mercantile Exchange, after hitting an all-time high of $1,430 per ounce earlier this year, more than three times the price in 2002.

An October report by Goldman Sachs predicted that the metal will reach $1,650 an ounce in 2011.

CGIR raised HK$2.4 billion in a Hong Kong IPO on Dec 1 to accelerate its expansion, with 15 percent of the proceeds to be used in exploration and 30 percent in mergers and acquisitions.

On the same day as its Hong Kong IPO, the company paid $742 million to buy Skyland Mining Ltd, whose main asset is the Jiama poly-metallic mining project in the Tibet autonomous region. The mine has a proven gold reserve of 96 tons.