China Mineral Company (“CMC”), a private enterprise formed in 2007, has been granted exclusive mineral rights by the Chinese government for a period of not less than 20 years. There is a stipulation that the company is obligated to sell to the Government 30 percent of the extracted gold at 85% of the current market price, while the Government is obligated to purchase the gold at a higher price than US$600/oz. For signing that concession, the Government has guaranteed the Company will be exempt from taxes for the period of its lease, 19 years of which are remaining.
Commencing at the beginning of 2008, the company deployed engineers to the area in order to build 8 test mines along the perimeter of the site, and today those mines are producing 40 ounces of gold per day (3,600 oz/qtr). The Company expects to significantly increase production as it moves towards the center of the site.
While the company’s sites current production costs are above-market, the guaranteed government purchases are a significant hedge against future fluctuations in gold prices, and the tax-exemption on both government and non-government sales provide a significant advantage to the China Mineral Company.
