AP; Gold steady above $1,200 as safe haven demand remains strong, silver and platinum slide
Gold prices were on the rise during the week, recapturing and steadying above the US$1,200/oz mark as safe haven demand remained strong and was not impacted by a rally in stock markets late in the week.
The yellow metal used to be seen as an investment alternative to the US dollar and normally moved inversely to the American currency and in tandem with the euro. However, gold has been treated as a safe heaven by investors in the recent weeks amid high volatility in equity and currency markets, particularly declines in the euro amid worries over Europe’s debt situation.
In another blow to the euro, the Bank of Spain decided to bail out CajaSur last weekend after the savings bank’s planned merger with smaller lenders fell through. Even though the bank represents 0.6% of the country’s financial system, the bailout had a negative impact on the markets, further muddying outlook for the European fiscal situation. EU countries have recently agreed to set up a €750 billion rescue fund to prevent the debt crisis that has hit Greece and put it on the brink of bankruptcy from spreading into other euro zone countries with massive sovereign debts, primarily Spain and Portugal. The two countries have recently been downgraded by leading rating agencies.
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Instability in global equity markets remained amid political tensions on the Korean peninsula after a South Korean warship sank after allegedly getting torpedoed by archfoe North Korea. The US quickly backed the South and the two countries held military exercises as the North threatened to respond to “provocations” with an all-out war.
Markets recovered later in the week after worries over Europe’s debt and Korea subdued, also getting help from US data released on Tuesday, when the Conference Board said that its consumer confidence index rose from 57.7 to 63.3 in May. Increased optimism about Europe’s fiscal problems helped shake off an unexpected decline in US house prices after Case Schiller index was shown to have shed 0.5% in March after declining 0.9% in February. The Federal Housing Finance Agency’s index also showed declines in house prices, sliding 1.9% in Q1.
The US figures that came out on Thursday weren’t much better. The Commerce Department said that Q1 US GDP expanded at an annualized rate of 3% compared to an initial growth estimate of an annualized 3.2% and to projections of an upward revision. According to the Labor Department, initial jobless claims fell by 14,000 to 460,000, which, however, was a smaller decline than expected. Continuing claims decreased by 49,000 to 4.61 million.
This helped keep safe haven demand high even while stock markets recovered with the FTSE 100 and the Dow Jones Industrial Average getting back above 5,000 and 10,000 respectively.
Gold rose to US$1,215/oz today, while silver and platinum declined to US$18.37/oz and US$1,545/oz respectively.
Major mining stocks fell this week. Randgold Resources (LSE: RRS) surged from 5,660 pence to 5,990 pence, silver miner Fresnillo (LSE: FRES) rose from 850 pence to 904 pence and platinum miner Lonmin (LSE: LMI) improved from 1,637 pence to 1,684 pence.
In the FTSE 250, gold miner Petropavlovsk (LSE: POG) climbed from 1,142 pence to 1,202 pence, while Aquarius Platinum (LSE: AQP) advanced from 358 pence to 376 pence and silver producer Hochschild Mining (LSE: HOC) moved up from 255 pence to 290 pence.
Large and Mid Cap News
Johannesburg and London listed PGM miner Lonmin (LSE: LMI, JNB: LON) has suffered another setback at its ‘Number One’ furnace in South Africa. The FTSE 100 constituent and world’s third largest primary platinum producer reported this morning that it had identified a leak around a slag tap hole at the furnace following its restart on May 12. As a result, anticipated re-commissioning of the furnace has been pushed back by a further 25 to 30 days.
Ahead of today’s AGM, Ferrexpo (LSE: FXPO) told investors that iron ore demand has recovered from its 2009 lows, with prices in April significantly ahead of the first quarter, and it expects to secure significant average price increases for all of its production. Consequently, the company believes it will realise a strong financial performance mainly due to the positive outlook for prices in the remainder of the year, compared to 2009 levels.
Small Cap News
Coal of Africa (AIM, ASX, JSE: CZA) has announced the appointment of John Wallington as chief executive officer and executive director to the company, along with several other key appointments.
Stratex International (AIM: STI) said that sampling of its Megenta hot spring gold discovery in Ethiopia defined extensive gold mineralisation and confirmed the “significant potential” of the Afar region, with 34% of the samples assaying more than 0.1 g/t (grammes per tonne) gold and 8% over 0.5 g/t gold with grades reaching 3.27 g/t gold.
Stellar Diamonds (AIM: STEL) told investors that it has now signed the share purchase agreement with Petra Diamonds Ltd (AIM: PDL) in respect of its acquisition of the remaining interest (51%) of the Kono kimberlite project in Sierra Leone.
Nyota Minerals (AIM, ASX: NYO) has transferred-out its interest in the SwaziGold Project to its joint venture partner, Savinara Company SA, in preparation for the asset’s sale. The transaction simplifies SwaziGold’s ownership structure and reduces Nyota’s expenditure and time commitments in relation to the disposal. The company retains its entitlement to 50% of the proceeds from the anticipated disposal.
Shares in Bellzone Mining (AIM: BZM) surged 60% this morning on London’s AIM market, following the announcement of a transformational joint venture agreement with the China International Fund Limited (CIF), for the 2.4 billion tonne JORC magnetite Kalia iron project in Guinea, West Africa.
First Quantum Minerals (AIM: FQM, TSX-V: FM) said that the Supreme Court of the Democratic Republic of Congo rejected all arguments made by its subsidiaries Comisa SPRL and Frontier SPRL and ruled in favour of Societe de Developpement Industriel et Minister du Congo (SODIMICO), which requested the annulment of a letter of a former minister of mines to withdraw the exploration rights belonging to SODIMICO over "exclusive exploration zones" later converted into a number of exploration and exploitation licences now held by Frontier and Comisa.
Ovoca Gold PLC (AIM: OVG) said it intends to shortly seek to put in place the necessary authorities to repurchase up to 10 percent of the company's issued share capital by way of on-market share buy backs. The company does not currently have any authority to repurchase its own shares.
Mercator Gold (AIM: MCR, OTC: MTGDY) has reported a new NI43-101 Resource Estimate for the Copper Flat project in New Mexico, USA, with 107 million short tons grading an average of 0.303% copper in the Indicated resource category and 46 million short tons grading an average of 0.240% copper in the inferred category.
Herencia Resources (AIM: HER) has reported a high grade strike extension to the Cathedral vein at its flagship Paguanta zinc-silver-lead-gold project in northern Chile. The company received assay results from a further four holes in the current diamond drill program.
Thor Mining (ASX, AIM: THR) told investors that it has identified at least seven electromagnetic (EM) anomalies, with potential for future drilling, at the Harts Range exploration licence (EL24735) northeast of Alice Springs in Australia’s Northern Territory.
Prosperity Minerals Holdings Ltd (AIM: PMHL) announced that its wholly-owned subsidiary Sintex International Holdings Ltd has entered into a conditional agreement to purchase a 25% equity interest in Liaoning Changqing Cement Co Ltd from Liaoning Yan Zhou Zhu Xing Cement Co Ltd, for RMB100 million (approximately £10 million).
South Africa operating chrome miner Chromex Mining (LON:CHX) has secured US$5 million to provide funds for a DMS (dense media separation) circuit and ancillary plant improvements at its Stellite opencast chrome mine in the Bushveld Complex in South Africa, which will double its capacity to 40,000 tonnes per month.
Africa focused gold deposit developer Cluff Gold (LON:CLF, TSX:CFG) said that whilst it has granted permission to conduct due diligence to a few would-be buyers in the recent months, the company is not for sale unless it gets an offer at a “significant premium” to its recent three month trading average.
South America-focused explorer Mariana Resources (AIM: MARL) has reported bonanza grade gold intersections from its latest two scout drill holes at the Calandria Norte prospect at its Las Calandrias gold project in Argentina. The exceptional gold intercepts included up to 0.75 metres at 443 grams per tonne (g/t) gold.
Churchill Mining (AIM: CHL) said it has it has raised US$23.2 million, or £16.1 million before expenses through the placing of 16,087,700 new ordinary shares at 100p per share with institutional investors. The proceeds will be used to advance its flagship East Kutai coal project (EKCP) in Indonesia as it moves to development and production and for general working capital.
European Nickel (AIM, PLUS: ENK) has appointed Société Générale and UniCredit Bank AG to arrange a US$300 million term loan facility and US$25 million over-run facility for the development of the Çaldağ nickel laterite project in Turkey.
In a note on EMED Mining (AIM: EMED), equity research specialist Edison Investment Research said that the reconnection of the power last month at the Rio Tinto copper mine in Andalucía, Spain, marked an important milestone in the mine’s restart process. Also in April, EMED raised £8.775m which, according to Edison, will facilitate the planning and restart of the Rio Tinto mine where the company expects to be producing and selling copper concentrate in late 2011.
London Mining (AIM: LOND) told investors that its chief executive Graeme Hossie and its chief operating officer Luciano Ramos have both increased their holdings in the company.
UK asset management group WH Ireland has initiated coverage on Fiji-operating Vatukoula Gold Mines (AIM: VGM) which is currently ramping up production and modernising the Emperor gold mine, situated on Fiji’s largest island, Viti Levu.
Atlantic Coal (AIM: ATC) achieved a dramatic increase in coal sales from its flagship Stockton Colliery project in Pennsylvania, boosting its revenues from US$2.2 million to US$9.05 million during 2009 as losses shrank from US$3.9 million to US$1.7 million.
At its AGM, held earlier today, Finders Resources (AIM, ASX: FND) said the past 6 months have been a very busy period, marked by strong progress towards the company's goal of becoming a highly profitable copper producer. The company told investors that it is currently reviewing draft term sheets for its development financing, and it intends to select a preferred financier over the next few weeks.
Nyota Minerals (AIM, ASX: NYO) has entered into a final subscription agreement and an option agreement in connection with the investment from the World Bank’s International Finance Corporation (IFC). The company expects that the investment will now be concluded shortly with approximately £3.44m worth of shares and options which can be exercised for £3.87m, within the next two weeks.
Vatukoula Gold Mines (AIM: VGM) has substantially increased turnover in the first half of the financial year as its Fijian mining operation continues to ramp-up production. Turnover reached £16.5m (H109: £9.5m), and it turned to a net profit of £4m, compared to a £3.9m loss in the first half of the previous financial year.
