China, already the world's No. 1 gold producer, could become an even bigger force with the expected discovery of several large deposits in the next five years, a leading explorer said on Wednesday.

Andre Gauthier, who is credited with discovering deposits such as Peru's La Arena and Argentina's El Pachon, said western China holds the most promise.

He has discovered two small deposits in China and sold them to mining companies to help finance the search for the industry's next major gold find, which is in high demand as global output is falling and prices are near records.

"I think there will be two or three big mines discovered in the next five years in China, easily," he told Reuters at a gold conference in Peru. "The potential is tremendous, especially in western China."

China produced about 275 tonnes of gold last year, making it the world's top miner for the first time and eclipsing South Africa and the United States. Output in China is growing, even though some regions are relatively unexplored and global gold production has fallen.

Gauthier also thinks China -- where about half the miners work for firms in the informal sector -- produces lots of black-market gold that does not show up in official statistics.

Perhaps 170 tonnes of extra gold is not accounted for in the Asian country, he said, where consumption is also growing rapidly. Total production, from the formal and informal sectors, could be closer to 445 tonnes, he said.
Gauthier, who heads the exploration company Maxy Gold Corp, said foreign companies arriving in China need to be savvy.

"You have to have a Chinese partner who can make sure you will go into production and safeguard any discoveries you make," he said.

He is much more optimistic about new finds in China than in Africa or the Americas, but his company is still prospecting in Peru. He favors southern Peru and is shying away from northern Peru, where community opposition has halted mine development over environmental fears.

"The south of Peru is totally under-explored and up at 4,000 meters (about 13,000 feet) there are fewer people, so I think the potential is good," he said.