Stockpile: Metal price gains help shares recover some ground

A small gain in metals prices helped commodity shares recover some lost ground following recent sell-off in global markets.

Both gold and copper were up for a third consecutive day on Friday, but still trading well below recent historically-high prices.

Copper was trading above US$7,200/t by morning in London, having ended the previous week below the US$7,000/t mark.

Spot gold was steady at US$1,653/oz, a gain of 1.8% for the week. The metals were respectively trading above US$9,000/t and US$1,800/oz a month ago.

The FTSE Mining Index followed, adding 6.4% since last Friday, with the largest four components, Anglo American plc, BHP Billiton, Rio Tinto and Xstrata plc all in positive territory for the week.

The top gainer of the four was Rio Tinto after the Mongolian government accepted the refusal of Ivanhoe Mines Ltd and Rio Tinto renegotiate the investment agreement for the Oyu Tolgoi copper-gold mine, one of the world’s largest mining projects.

In recent weeks the government had invited the partners to enter talks concerning acquiring an additional 16% interest in the project (from 34%), but was met with a joint response that rejected the proposal.

There were a handful of companies that did experience share price weakness. Shares in Talvivaara, which owns a nickel mine in Finland, were a fifth lower by Friday morning.

Pekka Perä, the founder of Talvivaara Mining Company plc, has decided to resign from his role as chief executive officer, once a successor is found.

In addition the company released a production update showing that in the three months to end-September 3,300t of nickel were produced, compared with 3,951t in the previous three-month period.

The company also announced that it may produce as little as 16,000t in calendar 2011, compared with guidance of 30,000-35,000t at the start of the year.

Allied Gold, which released a quarterly production report, fell 13%. The company said 36,085oz were produced in the September quarter. Production at Simberi in Papua New Guinea was lower than planned owing to higher than expected rainfall.

Production in the current period was also expected to be at the lower end of a 14,000-18,000oz range owing to a pinion gear failure at the mill. Gold Ridge performed as planned and output of 18,000-23,000oz is expected in the December quarter.

The AIM Basic Resources index was also up slightly for the week.

Shares in Bellzone Mining plc, with iron-ore assets in Guinea, were up 25% after it was revealed that a subsidiary company of the company’s partner, China International Fund, had purchased 3.9 million shares.

European Goldfields Ltd was up 17% having secured US$750 million funding package to develop its Skouries and Olympias projects in Greece in a deal with Qatar Holding LLC.

The deal forms part of a 2010 memorandum of understanding signed between Greece and the Middle Eastern state, earmarking US$6 billion in investment.

The two projects contain approximately 7.7Moz of gold within total reserves, along with significant silver and base metals.