London Stockpile: Gold on AIM makes gains

Finance

Investors shunned the larger precious-metal producers in London this week, while gold minnows proved to be the stars of AIM.

On the Main Board, International Ferro Metals had the largest increase. The South African ferrochrome producer is releasing a production update on Thursday, and its share price rose 6.5%, reaching a market capitalisation of over £180 million on Friday.

Also making good gains was Czech coal producer New World Resources. The firm improved more than 4% over the past five days.

A coal outlook from Barclays Capital, released during the week, bodes well for producers, with the firm predicting averages of US$84-90/t in 2010. BarCap said: “Coal prices have started this year with a bang, easing memories of the March quarter 2009, from which it saw little upside.” Coal prices will be pushed higher by supply bottlenecks in Australia and South Africa, higher-than-expected Indian and Chinese imports, and disappointment in Indonesian exports, analysts said.
Behind New World in this week's ranking was copper producer Antofagasta and Ukraine iron-ore miner Ferrexpo; both up about 1.5%.

Antofagasta’s fortunes were little impacted by news that the exploration licence at its massive Reko Diq joint venture in Pakistan may be altered or revoked. Antofagasta holds 37.5% of the copper-old project, as does Barrick Gold. The remainder is held by a local development agency. Reko Diq is one of the world’s largest deposits, estimated to contain 38Moz of gold and 21.5Mt of copper.

Of the big-four diversified firms, Xstrata, BHP Billiton and Rio lost a bit of ground, while Anglo American had dropped a significant 4.6% by Friday.

Gold stocks were out of favour on the main board; with Randgold sliding about 3% and Petropavlovsk falling 6%. Silver-gold producer Hochschild also fell 6%, and Fresnillo, the world’s largest primary-silver producer, was the Main Market’s biggest loser, down more than 7%.

Vatukoula Gold Mines was an investor favourite on AIM, rocketing more than 70% and firming its value to nearly £100 million. The Fijian producer had an increase to its modest ore reserves, which now stand at 1.9Mt at 10.9g/t Au for 680,000oz (based on a gold price of US$750/oz and projected operating costs of US$107/t).

Horizonte Minerals strengthened an impressive 38%, but capped at only £7 million, the firm has a long way to go before it fulfils its investment potential.

Kyrgyz-focused Chaarat Gold Holdings has been making a bit of noise in London lately and drill results this week pushed the company up more than a quarter. Chief executive Dekel Golan said these results will be included in a revised resource statement to be released during the quarter.

Kazakh gold producer and explorer, KazakhGold Group Ltd, was AIM’s biggest faller; down 25%.

Allied Gold, currently undertaking a takeover of Australian Solomons Gold, fared poorly, down more than 10%.

Also struggling was £568 million company Coal of Africa, which lost about 8%.