Mining Journal > Reports > London Stockpile 20-11-09 - Juniors shine

Reports

Exploration stocks were in favour on London’s AIM market this week, with a resource upgrade and drilling results resulting in big gains for two juniors. Other sectors fared less well and the FTSE AIM index fell less than one percent.

But it was another lacklustre week for the majors, with no big movers among the City’s biggest mining firms. This was reflected in London’s benchmark index, the FTSE All-Share, which was flat over the five days.

Good news from China. Figures from the National Bureau of Statistics showed the country’s economy remained vibrant, with industrial output up 16% year-on-year to the highest level in 19 months. Retail sales jumped more than 16% and fixed asset investment increased a third in October, versus the year-ago period. However, the Chinese data had little impact on UK stocks, although Dahlman Rose & Co said it was good news for copper producers, as China’s internal supply capability won’t be able to keep pace with its demand requirement. “But over the near-term, we anticipate that copper prices may be range bound as the country imports less material, possibly leading to further upward pressure on exchange inventories,” the firm said.

Kryso Resources shareholders will be pleased with their returns, as the company soared more than 30% on the back of an upgraded resource at its Pakrut gold project in Tajikistan; making it Stockpile’s best performing stock for this week.

Estimated resources now stand at 2.8Moz. The company completed a prefeasibility study for the project in 2008, outlining a potential 100,000oz/y open-pit and underground operation, at forecast cash operating costs of about US$300/oz.

Further evidence that UK investment houses have got back their appetite for juniors was the rise of Vane Minerals, up nearly 30% with a report that drilling at the Wate uranium joint venture in Arizona had returned hits of up to 0.47% U3O8.

It was another impressive week for Petra Diamonds, which soared nearly 10% after announcing it will double its stake in South Africa’s Cullinan mine to 74%. The company is also raising about US$100 million to help pay down debt, strengthen the balance sheet and fund the acquisition. The other 26% in Cullinan is owned by black economic empowerment partners.
Dual ASX/AIM-listed Norseman Gold had a strong week, firming more than 10% from a week earlier. The company, which produces from its namesake gold operations in Western Australia, has had a phenomenal year, valued at a woeful 2p in January, the stock was trading at 70p this week, an early Christmas present for investors.

Allied Gold had a rough week, falling more than 10% after opening on the Toronto market this week with plans to raise more than C$155 million (US$145 million). The firm, which is already listed in London and Australia, said the equity offering will be priced “in the context of the market”. The majority of funds raised will be put towards development of the Gold Ridge deposit on Guadalcanal. The deposit is being acquired through the takeover of Australian Solomons Gold.

Over on the main board, Czech coal producer New World Resources fell slightly, despite an improve output forecast. The company also said it expected higher prices from annual contracts, currently under negotiation. During the September quarter, the company generated positive net operating cash flow for the first time in two quarters.
Meanwhile, Lonmin, the world’s third-largest platinum producer, gained 8% as it targeted a 25% increase in production. The company is looking to achieve 850,000oz/y from its Marikana and Pandora assets by 2013, timed to take advantage of an expected
“demand rebound” for the white metal.

BHP Billiton and Rio Tinto were flat This suggests the markets were sanguine about an announcement from the the European Confederation of Iron and Steel Industries (Eurofer) that the planned Pilbara iron-ore joint venture was fundamentally against the interests of the steel industry. “In a global market already dominated by an oligopoly with just three suppliers – Vale SA, Rio Tinto and BHP Billiton – and in which the price of iron ore has already reached a historical high, a joint venture is fundamentally against the interests of the steel industry,” Eurofer director general Gordon Moffat said.