This week it was announced that their Madagascan assets are being taken over at $4 a share – for which you’ll get cash – while their other Southern African assets are being rolled into a new company, for which you’ll get a share.

If you bought, and I hope some of you did, you can treat yourself to a new frock…

Pan African’s story shows the enormous possibilities that lie in the junior mining sector, even in this bear market. But the takeover, which came from Asia Thai Mining, has wider implications, which I’ll come to in a moment. You can’t argue with a quick profit, but, given the breadth and depth of Pan African’s assets, I think Asia Thai have got themselves a bargain.

Another exciting opportunity – for the whole mining sector

Meanwhile, Jinshan (CA:JIN), another junior mining company I have been recommending (and which I own shares in myself), has had some exciting news, which also has enormous wider ramifications.

Jinshan is a Canada-listed gold producer in China. After several years of exploration and development, its mine finally went into production last summer. By the end of this year it should be producing at a rate of just over 100,000 ounces a year at a cash cost of between $350 and $400 per ounce. It’s a very nice little junior mining story, thank you very much.

Then last week it was announced that China’s largest state-owned gold mining company, the imaginatively-named China Gold, had bought a 42% position in the company.

Why have the Chinese done this? And what is the significance for Jinshan?

Firstly, it gives Jinshan access to a great deal of money – the same money, ultimately, that made the 12% purchase of Rio and now is building a stake in BP – and Jinshan will be making serious acquisitions. Previously these would have been limited by Jinshan’s $450m market cap. Not anymore. Deals can be done for cash now, meaning less dilution for shareholders, and for much larger companies than would previously have been possible.

If any such acquisition happens – and I hear they want to have made one by autumn – surely a listing in Hong Kong will be on the agenda, which will significantly raise the company’s profile.

Are the Chinese trying to create a new reserve currency?

The Chinese, on the other hand, want access to Jinshan (for that, read Canadian) mining expertise. China is the largest gold producer in the world. The country has hundreds of mines, but, astonishingly, Jinshan’s modest 100,000-150,000 ounce producer is one of the biggest.

In other words, despite being the world’s largest producer, China’s mines are underexplored and underdeveloped. Jinshan president Jay Chmelauskas reckons they could be operating at as little as 10% of their potential. Jinshan head of exploration, Keith Patterson, feels that China has as much exploration opportunity as anywhere. This is a man who not so long ago went out into Argentina with a pick and a notepad and helped make the Navidad discovery, now regarded as the biggest undeveloped silver deposit in the world.

China is a great sponge. The Chinese will hoping that they can learn from Jinshan. They will be refining, if you’ll forgive the pun, their gold mining expertise. For Jinshan it means they will gain access to many of China’s existing gold mines and no doubt acquire some of the better ones.

This is yet more evidence, if you needed it, of China’s unquenched thirst for resources. But Jinshan is a gold miner. Why would the Chinese want gold? Do the Chinese govt all want new earrings? What could possibly interest the Chinese about gold mining?

Richard Russell, the veteran US newsletter writer, observed a few weeks back that China is the largest gold producer in the world and the largest holder of dollars. As the dollar implodes, could it be, he suggested, that the Chinese have designs on global reserve currency status? If so, they will have the dollars and the gold to back it. This Jinshan deal might be further evidence of Chinese monetary aspiration.Can you imagine our glorious Labour government doing anything similar?

The good times are ahead for junior miners

The deal also has ramifications for the junior mining sector. Admittedly, the Chinese are buying a stake in a Chinese gold mine. But all the same, Jinshan is – or was – a junior. This is a first, and it could open the floodgates. Don’t forget the Asian takeover of Pan African. It’s possible that we are seeing the early stages of a wave of cash-rich Asian takovers of undervalued junior miners. The junior mining sector is coming alive, my friends – enjoy the ride.

You are not going to see the fireworks you saw with Pan African. But Jinshan is in a nice steady uptrend. It is now making the transition from junior to significant player, and I would expect to see the stock some 50% higher within 12 months, possibly more. I recommended it as a buy below $2.50 and I maintain that recommendation. If you’re impatient or you think it won’t make it back down to $2.50, you may want to start accumulating here. I’ll leave that to you. But if you believe in gold and you believe in China, you should own some Jinshan.

Source: http://www.moneyweek.com/file/45537/why-you-should-buy-this-chinese-gold-miner.html

For the tale of the tape, the TSX Exchange tacked on 0.41%, while the TSX Gold Index added a modest 0.1% and the TSX Venture Exchange, Canada’s largest junior exploration bourse, ended the session 0.38% lower with declining issues swamping the advancers by a 548 to 432 margin on good volume of a tad more than 194 million shares traded.

Teck Cominco went out shopping and elected to buy Global Copper. The price tag is C$425 million in cash and stock. Of interest to the major is Global’s Relincho copper-molybdenum deposit in northern Chile. Global shareholders will receive C$3 in cash and 0.2 of a Teck Class B share for each Global share, plus the holders will get one share of a new company called Lumina Copper. If the market price of Teck Class B shares is less than C$45 per share, Teck will pay additional consideration, in cash or Teck Class B shares, such that the consideration payable for each Global share has a value of C$12.

If at closing the market price of Teck Class B shares exceeds $55.00, the number of Teck Class B shares to be issued will be reduced so that the value of the consideration per Global share does not exceed C$14. The new Lumina will hold all assets of Global other than the Relincho project, including Global’s interest in the Taca Taca and San Jorge properties in Argentina, some C$10 million in cash and a 1.5-per-cent net smelter return royalty in respect of the Relincho project, payable commencing in the fifth year after the start of commercial production. Global ended the day up C$2.78 at C$13.91, while Teck dropped C$0.91 at C$45.70.

Asia Thai Mining Co. has offered to by all the shares of Pan African Mining at C$4 each. On completion, the company aims to transfer C$2.5 million in cash and all of the non-Madagascar assets to a new company. Pan African ended the day up C$1.02 at C$3.79.

Skeena Resources tagged some nice holes on its advanced Malpica copper-gold project in Mexico’s Sinaloa state. Highlights included 112 metres running 0.949% copper and 0.427 gram gold per tonne. The project hosts a historic resource of 29 million tonnes grading 0.64% copper. Skeena ended the day up C$0.055 at C$0.30.

Gold Eagle Mines got a boost after reporting a 4.2 metre intercept averaging 29.85 grams gold per tonne at its flagship Gold Eagle property in Red Lake, Ontario. Gold Eagle ended the session up C$0.32 at C$9.13.

A stock to watch is Spur Ventures. Shares in the Chinese phosphate producer were halted pending news at C$0.68. Spur announced a deal with a private Chinese company to complete a C$11.34 million equity private placement and to pursue strategic investments in China and elsewhere in Spur’s fertilizer business. The Chinese entity will acquire 18 million units of Spur at C$0.63 per unit, which will make it Spur’s largest investor.

The more speculative junior issues continue to struggle as investors elect to take money off the table on almost any uptick. We will see what Tuesday trading has in store.