London Stockpile 13-11-09 - Miners flat

Reports

Publishing Date: 16 Nov 2009 10:20am GMT
Author: Blake Wilshaw

Miners flat

By Blake Wilshaw

It was a mixed week on the London Stock Exchange with uncertainty creeping into the market.

There was no clear lead from the US, and despite another record in the US-denominated gold price, producers of the precious metal were flat.

Big-cap miners were also stable, trading at roughly 5% either side of their share price from a week earlier, and making marginal gains against London’s benchmark indexes; the FTSE AIM and the FTSE All-Share, both of which were up a few percent.

After the recent scramble for gold stocks, there was a notable relaxation this week, with the Main Market’s big producers, Randgold, Petropavlovsk and Hochschild, static.

An RBC Capital Markets gold conference in the City was fortuitously-timed, coinciding with another peak in the metal’s value. Top brass from global gold leaders were quizzed on how high gold could go but, of course, none were willing to stick their necks out with a prediction.

Doug Guzman, RBC’s head of global investment banking, said: “Whether the gold price has risen to all-time highs in response to investors looking for safe haven investments, or as gold prices respond to the monetary and fiscal stimulus being applied by central bankers and governments, investors have benefited from holdings in physical gold and gold stocks. At RBC, we expect gold to continue to benefit from this stimulus and trade up to the US$1,200 level late this year or early 2010.”

Keynote speaker, economist and author of the Gloom Boom & Doom Report, Marc Faber said gold had found a new safe level at US$1,000/oz which it was unlikely to fall below.

Indeed, most analysts quizzed by Mining Journal this week agreed with Dr Faber, confident that the US$1,000 mark was a floor for the gold price.

So with gold stocks uninspiring, it was up to iron-ore, coal and base-metals producers to lift London’s mining market. New World, Xstrata, and Ferrexpo were the highest gainers, up about 7%. BHP and Rio Tinto’s London shares firmed 6%.

On AIM, African Diamonds was a top performer, adding about 30% to its share price, spurred by the receipt of an option to increase its stake in the AK6 kimberlite project in Botswana to 40%. The deal was facilitated by De Beers selling its 71% interest to Lucara for US$49 million. De Beers had been stalling on development of the project, and now with Lucara on board it could be in production by 2011.

African Diamonds has proposed a downscaled US$63 million development, producing 400,000ct/y, compared with the original US$320 million plan. A further US$25 million could boost production to 1Mct, according to the company.

Pangea DiamondFields had an intraday rise of 30% on the news of a recent sale of diamonds from its Cassanguidi project, which yielded an average price of almost US$148/ct.

Silver-gold explorer Mariana Resources had another strong week, up more than a quarter. The company plans to raise at least £2.6 million to carry out further exploration at its Calandria South project in Argentina. Since announcing the discovery in October, the company’s share price has almost doubled.