A new extension of the yellow brick road leads beyond the Emerald City, and tunnels clear through to China.

Although China staked its claim as the world's leading producer of gold in 2007, opportunities for global investors to participate in this industry remain few. With the consolidation announced this week, the field grows smaller still.

Vancouver-based Eldorado Gold (AMEX:EGO) launched a friendly all-stock acquisition of Australia's Sino Gold, creating a formidable intermediate gold producer with a combined market capitalization of about $5.9 billion and gold reserves of 12.7 million ounces.

The deal is a clear-cut feather in both miners' caps. Sino shareholders will receive a 21% premium to the pre-announcement valuation in the conversion of their shares to Eldorado, and will benefit from geographical diversification of assets beyond China through Eldorado's projects in Turkey, Greece, and Brazil. These include Eldorado's flagship Kisladag mine in Turkey, weighing in at 5.5 million ounces of gold reserves.

Eldorado also brings attractive iron ore assets to the table, with 9.3 million tonnes of iron ore at the Villa Nova project in Brazil. Located in the same province as Anglo American's Amapa joint venture with Cliffs Natural Resources (NYSE:CLF), Eldorado's iron ore mine joins a small subset of Brazilian production not controlled by Vale (NYSE:VALE). Commissioned just during the second quarter, Villa Nova has been placed on care and maintenance until iron ore demand recovers in earnest.

The move is deeply transformational for Eldorado as well, building the company's gold portfolio in China from just one operating mine with 817,000 ounces of gold, to three working mines chasing approximately 5 million ounces of reserves.

Sino Gold's flagship is the prolific Jinfeng mine, and its White Mountain mine continues to ramp up toward full production. Construction at Sino Gold's Eastern Dragon project is slated to begin in September, and the company also brings a strategic exploration joint venture with major miner Gold Fields (NYSE:GFI) to the table. Prior to this deal, Eldorado acquired Gold Fields' 19.9% ownership stake in Sino Gold in return for Eldorado shares, keeping Gold Fields vested in the new corporation.

For exposure to a producing gold miner within the world's most prolific gold-producing nation, Eldorado Gold will now have no peer. In terms of gold reserves, Eldorado Gold continues to chase fellow low-cost, intermediate-scale producers like Agnico-Eagle Mines (NYSE:AEM) and Yamana Gold (NYSE:AUY), but like China's economy, Eldorado's star is certainly rising.

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