Mining Journal > Finance > Stockpile: Gold companies take advantage of improving market

Mining companies on London’s main market showed improvement this week to recover some of the significant losses that have hampered global stocks during August.

Gold companies were the best served as they rode the ongoing record run from the precious metal, which continues to be viewed as a safe haven against flailing economies.

Centamin Egypt Ltd, last week’s biggest faller, reversed its performance to be the week’s top gainer with an advance of more than 24%.

The Australian-based gold producer relinquished almost a third of its value last week after reporting that 2011 gold output from its Sukari mine in Egypt would be lower than forecast in the range of 200,000-210,000oz.

Another Australian-based gold miner and recent addition to the main board, Allied Gold plc, was the next best performer by adding almost 19%. Gold companies Central Rand Gold Ltd, African Barrick Gold plc and Randgold Resources Ltd also made substantial improvements by gaining 15%, 10% and 9% respectively.

Major mining groups BHP Billiton and Rio Tinto were marginally higher after both announced new deals to the market.  

BHPB, which added 4% for the week, signed a heads of agreement with Leighton Holdings to purchase its HWE Mining subsidiary for US$735 million.

Meanwhile, Rio Tinto, along with Mitsubishi Corp, offered A$1.49 billion (US$1.54 billion) to buy the minority shareholding in Coal & Allied Industries, valuing the company at A$10.6 billion. Rio Tinto nudged 1.5% ahead.

Of the remaining ‘large-cap’ companies, Xstrata plc added 3%, while Anglo American plc dropped 3%.

The most notable fallers for the period included Namakwa Diamonds Ltd and New World Resources NV, which finished 14% and 7.5% lower respectively.

The trend continued on AIM, with gold stocks taking up the top two spots on the gainers list. GMA Resources plc, with assets in Algeria, added 35% in the week, and Australia’s Norseman Gold plc was up by 31%.
Neither company reported news in the week, although by last Friday both had shed over 75% of their share price value for the year so far.

Shares in Beowulf Mining plc gained by a fifth in the week, after the Swedish iron-ore explorer said it had completed drilling on its Kallak South deposit.

Clive Sinclair-Poulton, executive chairman of Beowulf said: “We now intend to incorporate the results for both Kallak South and the ongoing additional 1,500m drill programme at Kallak North into the independent JORC assessment and I therefore look forward to announcing a maiden inferred resource estimate for both of the Kallak deposits before the end of this year.”

Baobab Resources plc was also up about 20% in the week. The company said it expects to release a resource estimate on the South zone of its Massambe iron-vanadium-titanium project in Tete, Mozambique during August.

Overall “a dramatic improvement in drilling productivity” on the project has enable the campaign to “get back on schedule” at Massamba, according to the company.

Ben James, Baobab's managing director said: “From results received to date, Baobab is confident that, by Q4 2011, it will have exceeded its earlier guidance of an expected global resource of 300mt.”

Namibian Resources plc was the biggest faller with a 33.3% drop. The Namibian-focused contract diamond-mining company has been suspended, along with all other contractors to Namdeb Diamond Corporation Ltd (the joint venture between De Beers and the Namibian government), owing to accidents that have occurred at Namdeb’s operations.

The company said: “We emphasise that we have not had any major incidents or accidents during our mining activities at Pomona during the period of our contract.”