BALTIMORE, MD-Chinese officials from the provincial administration of land a resources confirmed this week that a gold major discovery was discovered at a mining base in the mountains of China's Shaanxi Province.

The Shaanxi province is located in the very heart of China. Boasting a population of more than 36 million in an area of over 200,000 square kilometers (77,225 square miles), Shaanxi includes most of the middle stretch of the Yellow River and portions of the Loess Plateau.

The Shaanxi province gained worldwide attention in March 1974, when local farmers uncovered what would become one of the great archaeological finds of the 20th century while drilling for a water well.

8,099 life-size terracotta figures of warriors and horses were buried in a tomb that was built over two thousand years ago to protect its occupant, Qin Shi Huangdi, Emperor of Qin. In addition to the warriors, an entire man-made necropolis was excavated by hand for the emperor. Construction of this mausoleum began in 246 BC and is believed to have taken 700,000 workers and craftsmen 38 years to complete.

The emperor was buried near the 350 square meter earthen pyramid seen behind the warriors in the photograph above. But Qin Shi Huangdi's tomb has remained unopened until this day. Excavators are still searching for a way to completely seal off the area around the tomb to prevent corrosion from exposure to the outside air.A more recent discovery was unearthed in the Shaanxi province that will likely attract a different kind of treasure hunter: Gold exploration geologists.

There's Gold in Them Thar Qinling Hills
The Shaanxi provincial administration of land and resources announced the discovery of a new deposit that contains at least 2.56 million ounces of proven gold reserves in Zhen`an county, a remote fog-shrouded area of the Qinling mountains. This is the large gold deposit ever found in the Shaanxi province.The deposit is estimated to contain 16 million tons of ore grading +5 grams per ton, including 2 million tons of oxidized ore which is much cheaper and easier to process into bullion.

In the ground, this deposit is worth nearly $2 billion at current gold prices. And even using a relatively high production cost of $300/oz and a rather unrealistic low long-term gold price of $500/oz, this deposit should still rake in over half a billion dollars total.

Earlier this year, explorers discovered the Yangshan deposit west of Shaanxi in the Gansu province. Yangshan is estimated to contain roughly 5.2 million ounces of gold. Other large multi-million ounce gold deposits have also been discovered in the region such as in the Shandong and Heilongjiang provinces.

A brief search this morning for publicly-traded exploration companies working in the Shaanxi province yielded nothing. However, a few companies with property interests in the surrounding provinces of Gansu, Sichaun, Inner Mongolia, and Henan can be seen below:

Other publicly-trading companies that have investment interests in the area include:

• AngloGold Ashanti, which owns 8.7% of Dynasty Gold;
• Ivanhoe Mines, which owns 43% of Jinshan Gold; and
• Zijin Mining Group, which is one of the world's largest gold producers and is listed on the Hong Kong Stock Exchange under the code 2899

Chinese gold production increased over 15% during the first half of 2007 over the first half of 2006. According to figures from the National Development and Reform Commission, China's gold output from January to June totaled 3.9 million ounces and the country is speculated to take the spot as world's second largest producers in 2007.As the China continues to find large gold deposits, I expect to see even more speculative exploration money to stream into the country.