China Gold International Resources, the sole overseas listed arm of the nation’s largest gold miner, China National Gold Group, will raise output, cut production costs and scout for acquisition opportunities amid lower gold prices. The Hong Kong and Toronto-listed state-owned company would lower costs by improving metals recovery ratios, material procurement cost and advanced production techniques, said Song Xin, who was promoted from Chief Executive to Chairman of China Gold in February. The gold recovery ratio of China Gold’s main profit driver, the Changshanhao mine in Inner Mongolia, rose to 54% last year from 22% in 2007. Song said it was achieved through quality control of its crushing machines to ensure consistent ore rock size, increasing the penetration rate of chemical agents used to extract gold, good equipment maintenance to minimize down time, and staff training to improve productivity. The mine’s cash production cost last year fell 14% to USD707 per ounce, while total cost declined 7% to USD866. Cost cutting is vital since the mine’s ore grade is lower than some of its rivals and the gold price fell almost 30% last year, before rising 7.3% in this year’s first quarter. China Gold’s average selling price slid 15.5% last year to USD1,362 an ounce. The company plans to double the processing capacity to 60,000 tons of ore a day. China Gold projected its gold mine’s output to rise from last year’s 130,772 ounces to 208,000 ounces this year and 260,000 ounces next year. The company also aims to raise annual copper output from 12,847 tons last year to 22,698 tons this year and 79,896 tons by 2016.

Fujian-based Zijin Mining, China’s largest gold producer, is also being hit by lower gold prices and a decline in the gold content of ore at its mainstay Zijinshan mine. High production costs meant Zijin’s future profits were likely to be lackluster. “Beneath the Zijinshan gold belt is a layer of copper ore, which will be mined, and Zijin has other gold projects with five to six tons of annual output in the pipeline,” said Helen Lau, Senior Analyst at UOB Kay Hian. “Zijin is expected to be able to maintain gold output at 33 to 34 tons in the next few years even as Zijinshan’s output dries up in 2018. The concern is if metal prices stay flat, and if Zijin’s production costs remain high given the nature of its new projects, its profit growth will likely be sluggish.” Zijin’s net profit is forecast to fall 5.6% to CNY2 billion this year, and a further 4.4% to CNY1.91 billion next year, before rising 20.8% in 2016 to CNY2.31 billion, according to the average forecast in a Thomson Reuters analyst survey.