China¡¯s CCTV takes aim at foreign gold miners

BEIJING, May 11 (Reuters) - State-run China Central Television has run a show that sharply criticized foreign mining investors in China, and suggested the country might tighten restrictions over investment in the sector.

CCTV's half-hour segment, entitled "Who Moved my Gold Mine?", focused primarily on Australian miner Sino Gold (SGX.AX: Quote, Profile, Research)(1862.HK: Quote, Profile, Research) and its Jinfeng mine in Guangxi province, in southwestern China, which will be China's second-largest gold mine.

The show, run last week, was aired at a time Australia's Foreign Investment Review Board (FIRB) has asked many Chinese firms to re-submit pending applications for mine investments there, and could reflect growing Chinese impatience as approval delays pile up, Australian mining sources said.

It also reflects a growing sense that China has opened too far to foreign investment in a number of industrial sectors, including natural resources, which are sensitive in many countries.

"Over 70 foreign miners are active in China, mostly in gold, and this has the utmost attention from the NDRC and other leaders. Rules on foreign mining are being revised," said Ma Hongtao, the anchor for 'Economic Half-hour', which aired the segment.

The National Development and Reform Commission, or NDRC, is China's top planning body. It has lost much of its planning clout thanks to China's economic reforms, but is still a powerful body with authority to approve all major projects.

China's Ministry of Land and Resources has actively sought foreign investors to develop remote or difficult deposits, and ensure China has the minerals to feed its fast-growing economy.

But there is a growing movement to isolate some strategic minerals, including metals like indium, tungsten or rare earths, from foreign ownership, build reserves and limit exports so that China can ensure supply when needed in the future.

Critics of too much openness in mining have also complained that foreign speculators have flipped properties without fulfilling exploration quotas.

Meanwhile, only relatively small miners are active, since many foreign investors remain wary that they would not gain the right to develop any large or lucrative deposits they found.

"PRECIOUS RESOURCES"

"Gold mines and other resources are strategic resources, and foreign miners that transfer joint ventures to controlling companies endanger industrial development and economic security," Ma said.

"Investment in some regions is good, but it needs to be done on an equal basis. Losing control over our strategic resources could create contradictions in mining regions, pollute our environment, affect local development and upset our harmonious society."

He concluded his report by asking 'relevent departments': "What should be done about our precious resources?"

The show reiterated an announcement by the State Council last year, which restricted foreign mining in gold and other rare metals to joint ventures.

It accused foreign miners, in particular Sino Gold, of buying reserves at a low cost and enjoying tax holidays under Beijing's policy of encouraging development in the poor and remote West.

Sino Gold said in its December quarterly report that it would forego its tax holiday, which was supposed to last through 2010, in return for upgrades to roads and power lines. That brings its effective in tax rate to the national rate of 25 percent.

It is extracting gold from Jinfeng's striped, white and grey ore with sulphur-loving bacteria, a technology still rare in China.

Sino Gold and Canadian Eldorado Gold Corp. (ELD.TO: Quote, Profile, Research) have so far been the most successful in developing working mines.

The CCTV report also focused on the Boka project in Yunnan province, which it called "yet another world-class mine controlled by foreigners." It did not mention that developer Southwestern Resources Corp. (SWG.TO: Quote, Profile, Research) in August said it would sue its former chief executive for falsifying assay values and inflating the size of the resource there.

International gold prices are now over $880 an ounce, compared with around $260 an ounce in April 2001, when Sino Gold entered the Jinfeng venture.