China's Biggest Gold Producing City Halts Output After Mine Fire Kills 16

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

The fire is the latest in a series of Chinese mining accidents that left 61 people dead this month, adding to a slew of environmental incidents that had led to toxic and oil spills in the Ting River and at the nation’s largest crude terminal. China has the world’s worst coal mine safety record, with an average of about seven deaths each day in accidents last year.

“The recent environmental incidents is an outbreak of accumulated problems over the past few years,” said Luo Rongjin, a Beijing-based analyst with Bocom International Holdings Co,. “It reflects management deficiency and a long neglect.”

Zijin fell 2.5 percent to HK$5.46 at the 4 p.m. close in Hong Kong trading. Shandong Gold Mining fell 4.1 percent to 38.07 yuan in Shanghai trading. Zhaojin Mining Industry Ltd., which gets as much as 71 percent of its output from Yantai, closed unchanged at HK$18.32.

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, owned by state- owned Shandong Zhongkuang Group Co.

Temporary Closure

“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 from Jinan city today. “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 production of between seven and eight tons a year, 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.

Zijin Impact

Production at Zijin’s Longkou Jinfeng unit, targeting output of 340 kilograms this year, would be affected, China’s largest gold producer said. Jinfeng had 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, Bocom’s Luo said.

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.

Sixteen miners were confirmed dead after a gas leak at the Sanyuandong coal mine in Dengfeng city, Henan province, Xinhua reported on Aug. 5, citing the local government.

Other than Zijin’s toxic leaks, oil was also spilled at Dalian port last month, forcing the closure of the nation’s largest crude terminal. Accidents also occurred in Nanjing and Jilin, with 3,000 barrels of hazardous chemicals washed into a river and a gas pipeline explosion.

--Helen Yuan and Xiao Yu. Editors: Tan Hwee Ann, Keith Gosman.

To contact the Bloomberg News staff on this story: Helen Yuan in Shanghai at hyuan@bloomberg.net; Xiao Yu in Beijing at yxiao@bloomberg.net

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