China Inc has increased its stake in WA gold to 13 million ounces after swooping on St Barbara's mothballed Southern Cross operations.
China Hanking Holdings said yesterday it would buy the Marvel Loch mine, sent into care and maintenance by St Barbara late last year, for $22.5 million plus the assumption of environmental obligations.
Hanking said it had agreed to invest at least $50 million on Marvel Loch in the hope of eventually producing 200,000oz of gold a year. St Barbara produced 97,400oz from Marvel Loch last financial year but then mothballed the underground mine and 2.4 million tonne a year processing plant, saying further development was not economic.
It is understood the Hong Kong-listed company, better known as an iron ore producer, believes satellite deposits already identified in the tenement area can feed the mill for another 10 years.
The move on the 2.4moz resource base at Southern Cross takes Chinese control of WA gold assets to more than 13.1moz.
Last year Zijin Mining paid $229 million to acquire Norton Gold Fields while Shandong Gold invested $227.5 million to acquire a 51 per cent stake in Focus Minerals.
Other mothballed projects are set to come back into production under Chinese owners.
Minjar Mining, picked up by Shandong Tianye Gold Mining in 2010, has filed applications with Federal environment regulators to return the Minjar gold mine to production.
WA dealmakers expect Chinese investment in local gold projects to ramp up over the next year, with existing players on the hunt for opportunities to extend their presence and other Chinese miners circling.
PCF Capital managing director Liam Twigger said Chinese buyers were "very comfortable" with Australian assets but were more likely to invest at the project level than engage in outright takeover plays.
"The appetite is strong but they would rather either deal directly or they deal jointly through strategic partnering," he said.
Chinese players have so far been reluctant to pay big premiums for operating mines, preferring to pick up cheaper assets and pump in development capital down the track to turn their operations around. Yesterday, Norton Gold Fields announced it would spend $38 million to bring its mining fleet in-house. The money will come from a $105 million credit facility with the Industrial and Commercial Bank of China.
"They're replacing equity - equity is too dilutive at the moment, or it's non-existent, so people are looking for joint venture partners or a sale through a strategic partnering process," Mr Twigger said. "And one way or the other, those end up coming with funding out of Asia."The Hanking deal for Southern Cross includes payment of 15 per cent of the net profits from operations to Perth-based junior 3D Resources, which brokered the deal.
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