New Silk Road: How China's $16 billion fund will impact the gold mining industry
As part of its Silk Road initiative to revive the historically important international trade route, China has established a $16 billion fund for gold-related investment to increase the country’s trade influence of the precious metal.
The $16 billion investment fund – led by Shanghai Gold Group and Shaanxi Gold Group -- will focus on investing in gold projects, including the launch of gold-backed exchange-traded funds and buying stakes in listed gold companies and mining firms.
According to Shanghai Securities News, over 60 countries are taking part in the fund that is expected to raise the amount in three phases.
The investment fund will be 35 percent owned by Shanghai Gold Group and 25 percent by Shaanxi Gold Group, with the remaining amount owned by financial institutions.
The “New Silk Road aims to create an economic zone by developing trade and transport infrastructures that extend from Shanghai to Berlin--over one third the circumference of the earth. Earlier this year, President Xi Jinping said he hoped annual trade with the countries involved would exceed $2.5 trillion in a decade.
According to economist Song Quinghu, the fund may also boost China’s power over the world gold market and could increase the use of the yuan in pricing gold. China is currently the world’s biggest producer of gold and second-biggest consumer.
Tang Xisheng of the Industrial Fund Management Co. told Xinhua: “China does not have a big say in gold pricing because it accounts for a small share of international gold trade. Therefore, the Chinese government seeks to increase the influence of RMB in gold pricing by opening the domestic gold market to international investors.”
The New Silk Road will require the construction of high-speed railroads, road and highways, including energy transmission and distribution networks and fiber optic networks. It also plans to bring massive opportunity to the mining industry.
“It’s a good bet that giant iron mining companies like Vale, that have seen their business fall to a thirteen-year low, are currently busy figuring how much steel goes into construction of a new, high speed 8,000 mile railroad,” said Robert Berke from Oilprice.com. “If the project is successful, it could very well spark a boom across the entire depressed international mining, commodities, and construction sectors.”
Still reeling with its own struggles, the mining industry could use a boost from Asia very soon.
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.