2010-08-11 11:59

Shandong Gold slides 4 percent, Zijin Mining declines 2.5 percent

BEIJING - China's largest gold-producing city halted output after a fire at a mine killed 16 workers, prompting investors to sell shares of Zijin Mining Group Co and Shandong Gold Mining Co.

Yantai city, which normally accounts for 15 percent of the nation's bullion output, ordered safety checks at most mines on Aug 7, Zijin said on Tuesday in a statement to the Hong Kong exchange. Shandong Gold said four of its mines are affected.

Related readings:  Zijin Mining H1 profit jumps 40% on rising bullion prices  China's largest gold producer shuts mines for checks  China to further open gold market: PBOC  Zijin to cut output; earnings impact mild

Zijin fell 2.5 percent to HK$5.46 (70 US cents) in Hong Kong trading on Tuesday.

Shandong Gold Mining fell 4.08 percent to 38.07 yuan ($5.62) in Shanghai trading on Tuesday.

Yantai, in Shandong province, has about a tenth of China's gold resources, according to the city government. The nation is the biggest bullion producer.

The fire, caused by overheated power cables, took place at Luoshan Gold mine, run by State-owned Shandong Zhongkuang Group Co.

"Officials from Yantai are doing a check-up of our ventilation, drainage and power supply systems today," Lin Pufang, Shandong Gold's company secretary, said by phone on Tuesday. "If we meet all the requirements, we'll probably be able to resume production as early as tomorrow."

The company doesn't expect a "major impact" on production, Lin said. Linglong Gold Mine, Jiaojia Gold Mine, Sanshandao Gold Mine and Xincheng Gold Mine are controlled by Shandong Gold in Yantai.

Zhaojin operates six mines in Yantai with a combined annual output of between seven and eight tons, said spokesman Li Jia. Total gold production last year was 11.3 tons according to its annual report. The company expects production to resume soon after checks, Li said.

Production at Zijin's Longkou Jinfeng unit, targeting output of 340 kilograms this year, would be affected, China's largest gold producer said. Jinfeng produced 161 kilograms of gold in the first half, Zijin said. Work at Longkou Jintai, an exploration unit, was also halted, it said.

Shandong accounted for about 1 percent of Zijin's output last year, and the main issue for the company is still the toxic spill at its Zijinshan mine last month, said Luo Rongjin, a Beijing-based analyst with Bocom International Holdings Co.

Zijin last month leaked toxic waste into the Ting River in Fujian province, poisoning almost 2,000 tons of fish, in the industry's worst spill in two years.

"China is at a period with rapid industrialization and urbanization, in which there's a large gap between production safety conditions and the requirement of safety development," Luo Lin, chief of the State Administration of Work Safety said in a commentary published on Aug 1, according to the government agency's website.