Mining Journal > Finance > Stockpile: Gold record buoys London market

Gold spent part of the past week in record territory to spur the shares in the producers of the metal higher on the London market.

On July 14, gold rose to a record US$1594.45/oz, an 11% rise for the year, as debt concerns in the US and Europe continued to grow.

Silver was also reaching highs, albeit of the two-month variety, at US$38.11/oz. It was a silver producer, Fresnillo plc, that paced the resources industry on the main market with a gain of almost 14%.

Fresnillo, the world’s largest primary producer of silver, reported that production was 7.2% higher to a record in the June-end quarter following the start-up of the Saucito mine in Mexico.

Beyond Fresnillo, a number of gold companies recorded notable gains for the past week.

African Barrick Gold plc, which has been working to overcome issues at its Tanzanian operations, added close to 8%. The company’s only news this week was that it has appointed Tanzanian national Juma Mwapachu as an independent non-executive director.

Russia-focused producer Petropavlovsk plc, which has fallen nearly 30% this year, was 6.5% ahead to be at its highest point since mid May.

Of the other gold miners, Randgold Resources Ltd and Centamin Egypt Ltd both added about 4.5%, while South American silver producer Hochschild Mining plc advanced 3%.

Centamin this week announced it had agreed to purchase PLUS-listed Sheba Exploration plc, which owns assets in Ethiopia, for £7.5 million (US$11.9 million) in cash and shares.

Meanwhile, BHP Billiton fell more than 4% over the week, with about half of that drop taking place after it announced a friendly takeover of US shale-gas producer Petrohawk Energy for US$12.1 billion in cash and an assumed US$3 billion in net debt.

The deal is the diversified group’s second foray into this "unconventional" energy sector after the acquisition of Chesapeake Energy Corp’s assets in Arkansas earlier this year.

All of the major mining companies suffered falls, with Xstrata plc’s 2% drop the slightest of the large caps. Rio Tinto's shares fell about 3% in value, while Anglo American plc was the hardest-hit with a 5% decline.

On AIM, two gold exploration companies were the top performers this week.

Aureus Mining Inc was the top gainer of the AIM's resources companies this week with an 18% rise. The gold exploration company announced drill results from feasibility drilling at its New Liberty gold project in Liberia.

Highlights within the 25 holes included 5.3g/t over 13m and 3.6/t over 33m.

A note from Evolution Securities said: “In addition, the group is underway with lots of exploration work which we believe could demonstrate the potential for more gold within the Bea Mountain licence area in Liberia.”

Not far behind with similar gains was Minera IRL after the company also announced positive drilling results from its Escondido project in Patagonia, Argentina.

“The discovery of high grade gold and silver mineralization at Escondido gives a new
perspective to this project.” said Courtney Chamberlain, Executive Chairman of Minera IRL.

The share price of Minco plc fell the most this week with a near 17% fall. The company agreed to sell Xstrata plc its 23.6% stake in the Pallas Green zinc project in Ireland, following differences on how the project should be explored in future. The company will receive US$19.4 million from the sale.

Minco’s only remaining mining interest following the deal will be its 33% stake in Xtierra Inc, a Canadian listed explorer in Mexico. Xtierra is completing a feasibility study on the Bilbao silver-zinc project in Zacatecas.