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Is Barrick still central banking's agent in the gold market?

Section: Daily Dispatches

11:24a ET Friday, September 14, 2018

Dear Friend of GATA and Gold:

The report from today's South China Morning Post that is appended is interesting for a couple of reasons.

First, it shows that a big gold-mining company owned by the Chinese government continues to invest heavily in new mines -- now with another three quarters of a billion dollars -- "confident that an upward trend in gold prices will emerge within the next 12 months."

... Dispatch continues below ...


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Second, it highlights another connection between the Chinese government and Barrick Gold, their joint ownership of the second-largest gold mine in South America, the Veladero mine in Argentina.

A particularly intriguing connection between the Chinese government and Barrick was brought to your attention by GATA the other day via a report in the Financial Times. The newspaper noted that the Chinese government has appointed a committee to advise it on relations with the United States and financial and economic reforms and the committee will be co-chaired by the chairman of Barrick Gold, John Thornton, a former Goldman Sachs executive. The committee's members, which include leading Wall Street bankers, have been invited to Beijing in two days:

In federal court in New Orleans in 2003 Barrick admitted that, with its borrowing and leasing of central bank gold, it had become the agent of central banks in regulating the price of the monetary metal:

Soon after that admission, which came during a lawsuit charging the company with rigging the gold market, Barrick announced that it would discontinue leasing gold. But the mining company's growing closeness with the Chinese government implies that China not only considers gold crucial to the world financial system but also wants gold mining intermediaries in the West.

Is Barrick still helping central banks manage the gold market?

There might be some interesting financial journalism to undertake here upon Thornton's return from Beijing. Can gold investors continue to count on gold market reporters and analysts to refrain from asking gold mining executives the most important questions?

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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State-Owned Miner Shandong Gold Plans $768 Million in Hong Kong Initial Public Offering

By Yujing Liu
South China Morning Post, Hong Kong
Friday, September 14, 2018

Shandong Gold Mining, one of China's largest miners of the precious metal, is seeking to raise as much as US$768 million in a Hong Kong initial public offering to fund overseas expansion.

The company is offering 327.7 million H-shares at between HK$14.7 and HK$18.4 (US$1.87-2.34), according to its filing to the Hong Kong stock exchange.

The state-owned domestic holding company of Shandong Gold is also listed in Shanghai with a market capitalisation of 43.6 billion yuan (US$6.3 billion).

The firm controls and operates 12 domestic gold mines and accounted for 6.6 percent of China's gold output in 2016,. The country is the world's largest producer of the yellow metal.

Officials said the company plans use the funds to partially repay US$972 million worth of debt it took on to buy a half stake in the Veladero mine, Argentina's largest mine and the second-largest in South America, from Canadian miner Barrick Gold in June 2017.

"To achieve our goal of becoming one of the world's top-10 gold miners by 2020, we have to expand our international assets," said chairman Li Guohong.

"This can be done only by overseas mergers and acquisitions, so we have to open up to the international capital markets."

The timing of the listing is tricky as Hong Kong's benchmark Hang Seng Index dipped into bear territory on Monday amid escalating trade tensions and a strengthening US dollar.

The market has already been stretched by several mega-sized listings this year, including smartphone maker Xiaomi, telecommunications tower operator China Tower, and food review and delivery giant Meituan Dianping.

The listing also comes as gold prices have become increasingly volatile, and are now in a five-month decline.

The spot gold price has fallen 11 percent since April, as climbing US interest rates have driven an inflow of capital into the country and into investment in its currency.

But Li said the company was confident that an upward trend in gold prices will emerge within the next 12 months, with interest rates steadying in the US by the end of next year.

Increasing geopolitical intensions will also fuel the demand for gold as a safe haven, he added.

The company counts the Shanghai Gold Exchange, the world's largest spot physical gold exchange, as its top client, making up 73 percent of its sales in 2017.

Revenue reached 51 million yuan last year, up from 49.1 million in 2016 and 28.8 million in 2015.

The price of the Hong Kong offering will be set on September 20 and shares will start trading eight days later.

CCB International, China Securities International, and ICBC International are joint sponsors of the listing.

Shandong Gold Group, the domestic holding company, will own 46.64 to 47.69 percent of the firm's shares after the float, depending on whether an over-allotment option is exercised to increase the IPO's value.

The company's gold reserves stand at 339 tonnes.

It has already expanded its operations domestically out of from Shandong, the largest gold producing province in China, to northern regions including Inner Mongolia autonomous region and Gansu province, as well as the southeastern province of Fujian.

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