It is reported that state-controlled China National Gold Group Corporation is planning to step up presence in Central Asia, Russia and Africa as part of its plan to scout for new investment destinations.

“We are considering two new precious metals projects in these regions and expect to finalize the deals early next year,” said Tong Junhu, overseas business manager of China Gold.

The nation’s largest gold producer also said it has achieved breakthroughs in Russia and Mongolia but declined to divulge any details.

Traditionally Chinese mining companies prefer investing in Australia and Canada.

According to figures from Ernst & Young (China) Advisory Ltd, nearly 60 percent of China’s outbound transactions this has been in Australia, while Canada accounted for 32 percent.

Though resource-rich developed economies like Australia and Canada enjoy sophisticated infrastructure and legal systems, the volatile prices and rising protectionism have made it difficult for Chinese investors to clinch deals in these regions.

“There is still a valuation gap between buyers and sellers, and good deposits are impossible to find,” said Mike Elliott, global mining & metals sector leader of Ernst & Young.

In October, Baosteel Group Co, China’s largest steelmaker, was asked by the Australian government to resubmit its application to invest $240 million for a 15-percent stake in iron ore explorer Aquila Resources Ltd.

In September, the Australian Foreign Investment Review Board (FIRB) asked Yanzhou Coal Mining Co Ltd to resubmit its takeover application for Felix Resources. In the same month, China Nonferrous Metal Mining Group was blocked from investing $222 million in rare earth miner Lynas Corp.

Australian media cited a senior FIRB official as saying that the board preferred not to see foreign majority stakes in new mining projects.

About half of the 30 mergers in Australia’s mining and metals sector failed in 2009. Elliott said: “Foreign regulatory restrictions on Chinese buyers of assets require greater flexibility.”

He suggested that Chinese companies should shorten the decision-making procedure and opt for minority stakes instead of looking to control the target company to clinch the deals in a timely manner.

Outbound investment often accompanies higher risks and only full control of the project will help minimize risks, said a domestic mining executive who declined to be named.

In June, China Gold and Renova Group, a large Russian conglomerate with interests in metals and energy assets, signed a memorandum for jointly exploiting precious metals.

In 2008, China Gold acquired 41 percent of Toronto-listed Jinshan Gold Mines Inc. Jinshan owns an operating gold mine in Inner Mongolia autonomous region and has become China Gold’s offshore platform.

China Gold is the controlling shareholder of Zhongjin Gold Co Ltd, which interim report said it would acquire five gold mines in the second half of this year, adding some 100 tons of new gold reserves, the first gold stock in China.

It is reported from the two companies on Oct. 20 that Chinese two major gold producers (Shandong Gold Group Co. Ltd. and Zhaojin Mining Industry Co. Ltd.) both have plans  to  expand  annual gold output to 30 tons within five years.

“We plan  to  increase  our  annual  gold output to 30 tons by 2011, and increase our gold resources through exploration and acquisition from our current  level  of  600 tons,” a senior employee from Shandong Gold, who wished to  remain  anonymous, told Interfax at the China Mining Congress and Expo  2009  held  in  Tianjin  Municipality. This year Shandong Gold plans to  produce  around  20  tons of gold, up from 17 tons in 2008, he said.

Meanwhile,  an employee surnamed Zhong from Zhaojin Mining told Interfax that his  company  also  plans  to increase its annual gold output to 30 tons by  2014, while in 2009 it aims to produce 13 tons of gold, up from 10 tons  in  2008.

Zhaojin Mining had 150 tons of gold resources by the end of 2008 and in the first three quarters of 2009 the company expanded its gold reserves by 38 tons.

In June  this  year,  Shandong  Gold  bought the Guilaizhuang gold mine, which has  16  tons  of  gold  resources,  located  in  Pingyi county of Shandong Province. In September the group also bought a 52 percent stake in a gold  mine  located  in  Qinghai Province.

That gold mine currently contains  gold  resources  of  about  30 tons and Shandong Gold plans to spend three  years  starting  in 2010 on further exploration work at the mine, according to another Shandong Gold employee surnamed Sun.

Furthermore, Zhong predicted that international gold prices would climb above $1,100  per  ton  before  the year’s end, on speculation of strong investment  demand  for  gold globally, continuing drops in the value of the U.S.  dollar,  and  governments worldwide including China increasing their gold reserves.

U.S. gold futures ended higher on Monday as a weaker dollar boosted bullion’s appeal as a hedge against the weakening value of paper assets due to currency depreciation. Gold, little changed in London Monday, may gain on speculation a weaker dollar will boost the metal’s appeal as an alternative investment.

The Dollar Index, a six-currency gauge of the greenback’s strength, fell as much as 0.3 percent Monday. Bullion has climbed 20 percent this year as investors sought to protect their wealth from the declining dollar and as a hedge against inflation. Gold prices, heading for a ninth annual gain, reached a record US$1,070.80 an ounce on Oct. 14.

“It is still too premature to short gold,” Andrey Kryuchenkov, a VTB Capital analyst in London, said Monday in a report.

Immediate-delivery bullion added US$2.72, or 0.3 percent, to US$1,056.32 an ounce at 11:36 a.m. local time. The metal rose 0.4 percent last week, the eighth gain in nine weeks. December gold futures were 0.5 percent higher at US$1,057.10 an ounce on the New York Mercantile Exchange’s Comex division.

CME Group Inc. will allow gold to be used as collateral to back trades on its exchange, according to a member notice dated Oct. 16. Gold would be the first commodity to be used as margin on CME trades, spokesman Jeremy Hughes said by phone Monday.

The metal gained to US$1,054.50 in the morning “fixing” in London, used by some mining companies to sell production, from US$1,047.50 at the afternoon fixing on Oct. 16. Still, nine of 16 traders, investors and analysts surveyed by Bloomberg, or 56 percent, said bullion would fall this week. Five forecast higher prices and two were neutral.

“The whole market is expecting to see some consolidation first before another round of buying,” said Kate Harada, a senior trader with Mitsubishi Corp. Futures & Securities Ltd. in Tokyo.

UBS AG raised its one-month and three-month forecasts for gold to US$1,000 an ounce and US$1,050 an ounce, from US$950 and US$1,000 respectively, John Reade, the bank’s head metals strategist in London, said Monday in a report. Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged for a seventh day at 1,109.31 metric tons on Oct. 16, according to the company’s Web site.

Assets in ETF Securities Ltd.’s exchange-traded products fell 5.1 percent to 8.068 million ounces on Oct. 16, its Web site showed.

An investor who recently bought shares in one of the company’s gold products made a “one-off” transaction, Nicholas Brooks, head of research and investment at ETF Securities, said Monday by phone. He declined to name the investor.

UBS also raised its one-month and three-month forecast for silver to US$16 an ounce and US$17.50 an ounce, from US$14 and US$15.50 respectively. The bank increased its three-month platinum estimate to US$1,375 from US$1,275, and its three-month palladium forecast to US$330 from US$240.

Silver for immediate delivery in London added 0.3 percent to US$17.515 an ounce. Platinum rose 0.6 percent to US$1,350.95 an ounce, while palladium lost 0.2 percent to US$328.50 an ounce.

Russian gold miner Petropavlovsk, formerly Peter Hambro Mining, said its gold production for the first nine months rose 29%, mainly due to a significant increase at its Pioneer mine. The company remains confident of delivering its full-year overall target of 500,000oz of gold.

London-listed Petropavlovsk, Russia’s third-biggest gold producer, said nine-month output rose to 346,200 ounces helped by significantly higher output from its Pioneer mine.

It said a second production line at Pioneer was successfully commissioned in September and is processing 135,000 tonnes per month of ore.

Combined year-to-date gold production at the Pokrovskiy and Pioneer mines increased by 36% to 301,500oz.

The second production line at Pioneer was commissioned in September at 135,000 tonnes per month of ore. Expected commissioning of Pioneer’s third line has been brought forward from August 2010 to March and will provide additional capacity of 135,000 tonnes per month.

Throughput at the Pioneer mills, producing about 35,000oz per month, supported the full-year production target. Joint ventures and alluvial operations contributed a further 44,700oz.

The Malomir project is on track for commissioning in the second half of 2010. The infrastructure programme at Albyn has started and production is scheduled to begin at the end of 2011. A new metallurgical testing plant in Blagoveschensk has been commissioned.

Cash operating costs for the nine months were in line with the group’s forecast.

Chairman Peter Hambro said, ‘The successful commissioning of the second stage of the processing plant at Pioneer and the fact that it has now achieved 107% of its design capacity is a powerful demonstration of the abilities of our design and construction teams. It is remarkable that this was successfully commissioned in only 10 months.

‘During our visit to China to coincide with Prime Minister Putin’s attendance at the Russo Chinese Economic Forum we agreed with the equipment suppliers that the completion of Stage 3 of the Pioneer processing circuit should be advanced to March 2010 from August 2010, thereby enabling us to expand current capacity of the Pioneer mine.

‘The success at Pioneer is a strong signal that the plans at Malomir and Albyn can be achieved.’

In April, Petropavlovsk re-acquired iron ore miner Aricom and the combined group began trading on the London Stock Exchange’s main market.

As leading economies recover, Chinese copper smelters expect consumption in the world’s top copper consumer and global prices of the metal to strengthen in 2010.

Senior executives at large Chinese copper smelters, including Jiangxi Copper, Yunnan Copper, Tongling Nonferrous and Jinchuan Group attended an exclusive gathering of copper smelters late on Wednesday in London.

They said Chinese copper consumption growth in 2010 would be supported as Beijing’s $585 billion stimulus package, launched earlier this year, would produce significant results.

“Demand for investment and stockpiling would also be steady next year,” said Niu Hao, general manager of Yunnan Copper, the fourth-largest smelter in China.

China’s consumption may rise at least 10 percent on the year to above 5.5 million tonnes in 2009, said Gan Chengjiu, chief financial officer at Jiangxi Copper.

Gan’s estimate topped the prediction made by state-backed research group Antaike which has put this year’s consumption at 5.5 million tonnes.

High availability of cash resulting from relatively loose monetary policy in China would also boost demand for copper, said an executive at Jinlong Copper, majority owned by Tongling Nonferrous which is the second-biggest copper producer in China after Jiangxi Copper.

Loose credit has prompted Chinese speculators to stock copper this year and boosted the country’s imports to record highs in the first half.

Antaike said some 860,000 tonnes of copper may be stored in private warehouses as of late September.

Copper prices on the London Metal Exchange MCU3 have doubled this year on strong Chinese demand.

The price is expected to stay strong next year and the average price would be higher as the global economy would be better than this year, smelter executives said.

A Reuters poll released on Thursday found that copper is set to extend its bullish streak in 2010, with analysts overhauling mid-year forecasts due to unprecedented financial stimulus that they expect to boost demand for base metals.

“Copper prices in 2010 should be stronger than this year,” Yunnan Copper’s Niu said.

Tight copper concentrate is also expected to support global copper prices next year, a senior executive at one of the top smelters in China said.

It is said that there is no major new copper mine to start production Next year.