Stockpile: Golds fail to fire on higher metal price

The London main board’s gold stocks failed to track momentum in the dollar price of gold this week, with only African Barrick Gold Corp showing slight gains.

Russian producer Petropavlovsk plc and South African miner Central Rand Gold Ltd were actually the biggest losers, shedding 9% each.

Perhaps the performance of dual-listed Randgold Resources plc helped explain the reason, as the company’s American Depository Receipts (ADRs) traded up over 3% since last Friday, while in London the shares (in sterling) were down 2%, reflecting the dollar's continued weakness.

In fact, the dollar index, tracking the US currency with a basket of others, fell almost 9% in the September quarter. On Friday morning the Australian dollar hit a two-year high against the greenback.

Another notable underperformer was Vedanta Resources plc. The company’s subsidiary Sterlite Resources plc was this week ordered by a court to shut its Tuticorin copper smelter in the south of Indian for environmental reasons.

Turning to stockmarket gainers, Ferrexpo plc, the Ukraine iron-ore pellet producer, secured a new US$350 million debt facility this week.  Not only does it allow the company to progress with key expansion projects, but the new debt is cheaper and more than the facility it replaces.

The company’s share price rose the most in the week with a gain of over 6%.
The nickel price, on its longest rally in over three years, helped boost shares in Talvivaara Mining Co by nearly 6% in the week.

The company also just hosted a site visit to its namesake mine in Finland. A research note from Liberum said: “Our overarching impression was that the group remains firmly on track to deliver production at a rate of 50,000t/y by 2012 and minor operational challenges in the near-term have been overcome.”

In the small caps, El Salvador and Nicaraguan gold and silver explorer Condor Resources plc continued gaining this week, now nearly triple its value from a month ago. In its half-year results announcement on Wednesday, the company highlighted that on September 1, El Salvador’s government announced the awarding of a contract to investigate the strategic environmental evaluation of metallic mining in the country after a three-and-a-half year freeze.

Condor’s chairman, Mark Child, said: “The hope is that the government adopts recommendations from the EAE, amends the current mining law accordingly and issues permits.”

Overall there was not a lot of corporate news behind the increase in share prices of AIM’s other winners. It wasn’t much different for the fallers.

Shares in European Goldfields plc finally took a breather this week after three months of solid gains. Favourable permitting and environmental news has seen the stock nearly double to a market capitalisation of over £1.2 billion.

Coal of Africa Ltd shares lost 6% on Friday alone, after the company released financial results showing an A$101.4 million loss for the year to end-June.