Mining Journal > Finance > Stockpile: Gold hits record; London market rebounds

Finance

The London market bounced back this week as tensions surrounding the European debt situation eased and the UK uncovered a stable, albeit surprising, new government. Notwithstanding the political optimism in the UK, markets elsewhere were uncertain, and the price of gold sky rocketed to an all-time high.

While concern over Europe's debt position still lingers, news of a €750 billion European Union rescue package bolstered London's blue-chip stocks. All-but one main market company finished the week in positive ground.

The residual uncertainty concerning Europe's financial position helped gold reach its peak of almost US$1,249/oz on May 12, before the metal dropped back slightly by the end of the week.

It was the precious metal's fourth consecutive weekly gain, and the surging value was reflected amongst the gold miners.

Peruvian gold producer Hochschild Mining plc, which also crosses as one of the world's large silver miners, led all risers with a 21% gain.

Russian-focused Petropavlovsk, widely reported to be on the verge of spinning out its iron-ore division, performed well with a 15% advance.
Mexico's second largest gold producer, Fresnillo plc, which is rumoured to be a takeover target, was up more than 12%.

Of the other gold miners, Randgold Resources Ltd and Centamin Egypt Ltd were ahead by almost 9% and 6%, respectively.

The worries in Europe didn't treat copper as favourably, with the metal finishing the week lower amid concerns about economic growth and demand on the continent.

Producers of the base metal, including major miners BHP Billiton plc, Rio Tinto plc and Xstrata plc, still managed to finish the week higher. BHPB and Rio Tinto both grew by almost 5%, and Xstrata was 3% in front.
Elsewhere, Vedanta Resources plc announced that it had agreed to buy Anglo American's zinc business for US$1.34 billion, and its share price picked up 6%. Anglo American plc marginally outdid Vedanta with a 7% gain.

Gem Diamonds Ltd shone brightly, with an 11% rise, after it said that prices for its gemstones had improved.

Meanwhile, it was generally a good week for the juniors, with plenty of corporate news moving stock prices higher.

African Eagle Resources plc, with most of its focus on nickel in Tanzania, announced a deal on a 'non-core' asset, the Miyabi gold project this week. Basically the company will dilute its stake in the project to 25% as ASX-listed, Macquarie Harbour Mining Ltd, progresses the project through to a feasibility study sufficient to enable the company to make a development decision.

Niger Uranium, which unbundled its Kalahari mineral shares as a dividend last week, recovered strongly off its ex-distribution price.
Chromex Mining, the South African chromite producer, closed a Zimbabwean acquisition early in the week. Chromex paid US$300,000 in cash and 3.47 million shares for the business. Since 2008, Waylox has owned the Trixie and Prince of Wales claims in the Darwendale area on the Great Dyke. The current mineral resource estimated on the Trixie project is approximately 1.9Mt at an average modelled grade of 13.8% Cr2O3. Chromex has initiated a feasibility study on the project.

Nyota Minerals Ltd, off the back of last week's resource increase at its Ethiopian gold project, has also just announced the appointment of Terry Tucker as chief operating officer. Mr Tucker was most recently chief executive of StrataGold Corp, an explorer in Canada and Guyana, which was eventually acquired by Victoria Gold Corp.

Oxus Gold plc was also up this week. The company announced the initiation of a US$22 million, five-year exploration programme. The initial target is to increase gold reserves from the current JORC compliant 2.4Moz to over 7Moz.

There were, however, some lower share prices.

Of the fallers, Mercator Gold plc dropped the most in the week after the company announced a placing of 120 million shares at £0.01/share. The company says the funds will be used to enable the company to implement its stated strategy of adding assets, but also realising value from its existing portfolio.

GMA Resources, which mines gold in Algeria, fell almost 25% in the week after a trading update reported that the company only had sufficient cash until the end of June to meet operating obligations. Discussions are underway with potential investors and existing shareholders to secure capital.

African Consolidated Resources plc (ACR) was also amongst the top ten fallers. A financial controller was freed on bail earlier this week in Zimbabwe after being charged with fraudulently acquiring diamond claims. ACR said the charges have no legal basis.