Gold kept setting new records this week, reaching US$1,322/oz on Friday and closing at US$1,318/oz.
Safe haven demand remained strong despite a flow of positive data that lifted the markets at the end of the week. This included the final reading of the University of Michigan consumer sentiment index of 68.2, which was below the previous estimate of 68.8, but much better than the expected revision to 67.
On Thursday, the US Labor Department said that initial jobless claims dropped 16,000 to 453,000, while the US GDP growth estimate for Q2 was revised upwards from 1.6% to 1.7%.
The bigger picture, however, doesn’t look that bright.
Following its policy meeting last week, the Federal Reserve acknowledged that the recovery was slowing and left the door open for more quantitative easing to bolster the economy. This left to expectations of higher inflation and a weaker US dollar, helping gold clear the US$1,300/oz level for the first time in history.
Anticipation of further quantitative easing (QE) from the Fed and weakness in the US dollar were the main drivers behind the yellow metal’s surge this week.
President of the New York Fed William Dudley added fuel to the fire on Friday, stating that the current unemployment rate of nearly 10% and low inflation increased the likelihood of deflation.
It is expected that a new round of stimulus measures could be announced after the Fed’s meeting in November.
Gold is seen as an inflation hedge and one of the main safe haven assets as its value is not influenced by economic cycles. The yellow metal tends to move inversely to equities and benefits from declines in US dollar, which makes it cheaper for holders of other currencies, boosting demand.
Gold got more support from a decision by Moody’s to cut Spain’s sovereign rating from Aaa to Aa1, reinforcing concerns over the fiscal situation in Europe, which have calmed amid lack of any negative developments in the recent weeks.
Gold gained 1.6% this week. Silver and platinum rose to US$22.09/oz and US$1,675/oz respectively.
Gold miner Randgold Resources (LON:RRS) rose from 6,485 pence to 6,510 pence, silver miner Fresnillo (LON:FRES) advanced from 1,232 pence to 1,270 pence and platinum miner Lonmin (LON:LMI) was unchanged at 1,716 pence.
African Barrick Gold (LON:ABG) held steady at 599 pence.
Petropavlovsk (LON:POG) slid from 1,225 pence to 1,099 pence, while silver producer Hochschild Mining (LON:HOC) and Aquarius Platinum (LON:AQP) were unmoved at 438 pence and 338 pence respectively.
Small Cap News
Kryso Resources (LON:KYS) will release the eagerly awaited final bankable feasibility study on its wholly owned Pakrut gold project in Tajikistan on 12 October.
Strategic Natural Resources (LON: SNRP) said there is the capacity and infrastructure to transport coal from its coal project in the Eastern Cape of South Africa to the port of East London. This means the company will be able to export some of the output from the mine, near the town of Indwe, when it is finally up and running.
Ovoca Gold (LON:OVG) said it is confident it can continue to “add ounces” to its Olcha gold project in Russia. Last month the group unveiled a maiden JORC inferred resource of 344,000 ounces at the Olcha project in the Magdan region of the country.
Kalahari Minerals (LON:KAH) chairman Mark Hohnen is looking forward to ‘value adding’ milestones from affiliate Extract Resources (ASX:EXT, TSX:EXT, NSX: EXT) in the coming months.
Amur Minerals (LON:AMC) has extended the exploration license for its flagship project where new significant targets have been identified. The mining license is currently being reviewed by Russian regulators for approval.
Caledon Resources (LON:CDN, ASX:CCD) has secured a 4 million tonnes per annum (Mtpa) export route for its coal production in Queensland, Australia. The company has been allocated 4Mtpa capacity in Stage 1 of the Wiggins Island Coal Export Terminal project (WICET), which is scheduled to come online in 2014.
Chairman of Connemara Mining (LON:CON) John Teeling said Vedanta Resources' (LON:VED) takeover of Ireland’s Lisheen mine could “offer opportunities” for Connemara Mining. Vedanta bought the Tipperary zinc operation along with other bigger mines in South Africa and Namibia from previous owners Anglo American as part of a US$1.8 billion deal, which estimated Lisheen’s value at US$308m.
Red Rock Resources’ (LON:RRR) Colombian gold mining venture is progressing ahead of schedule, and the El Limon mine’s initial capacity will be upped by 50% to 150 tons per day. The AIM listed mineral explorer and investment company has been in the limelight in recent weeks, with a dramatic jump in its share price. The company has boosted its working capital with £600,000 after placing 10 million shares at 6 pence. Edison Investment Research has recently stated that Red Rock shares could potentially be worth 20 pence, offering an upbeat outlook after analysing the progress the company made during summer.
Chromex Mining (LON:CHX) announced it has agreed to be bought by Finnish mid-tier natural resources firm Ruukki and private investment company Kermas. The pair own a separate company, Synergy Africa, which is bidding 36.5p a share, which values the AIM-listed chromite miner at £37 million.
Cluff Gold's (LON:CLF, TSX:CFG) transformation from junior explorer to profitable, cash generating gold producer was underlined by a strong set of interim results this week. The update also revealed the company's founder, Algy Cluff, is to relinquish the role of chief executive and cede day-to-day control of the business to chief operating officer Peter Spivey.
Ocean Securities published a note on Cluff saying it believes the market is underrating the Africa-focused group. A quick valuation of Cluff shows that, even based solely on the in-situ resource at the Baomahun exploration asset, Cluff looks fairly valued compared to its peers, indicating that the market is adding little extra value for Cluff’s two producing gold mines - "which we find hard to believe as they are both profitable operations", the broker said.
Nyota Minerals (LON:NYO, ASX:NYO) has raised £21.58 million to fund the fast tracking of its flagship Tulu Kapi gold deposit in Ethiopia to move it to production “as quickly as possible”. Part of the funds will also be used to carry out a regional exploration programme to discover more economic ore bodies.
Patagonia Gold (LON:PGD) managing director Bill Humphries said the company has already made considerable progress in 2010. During the first six months of the year, ended June 30 2010, The company raised £13 million, began mine construction at Lomada de Leiva and expanded its defined resources in Santa Cruz province in Argentina.
Shanta Gold (LON:SHG) has successfully raised US$20 million to fund the development of the Luika gold mine in Tanzania and advancing its exploration programmes. Shanta placed 51 million new shares at 25 pence per share, representing 28.6% of the company’s enlarged share capital.
Also thsi week, the company unexpectedly agreed an option deal with a local community in Tanzania to process abandoned tailings dumps with 500,000 tonnes of ore. Through the dump re-treatment option, with the Saza Village Council, Shanta will evaluate the economics of retreating the tailings and recovering the gold.
Frontier Mining (LON:FML) said its outlook is extremely positive after it made significant progress in the first half, despite the period being traditionally quieter due to the normal winter closure of operations. “Excellent progress has been made so far in 2010 at all active deposits,” said Frontier chief executive Erlan Sagadiev.
Electrum Resources' (LON:ECR) market value is deeply discounted to its ‘sum of its parts’ according to Edison’s head of mining research, Charles Gibson. The company formally changed it name from Mercator Gold this week.
GGG Resources (LON:GGG) chairman Peter Ruxton said the first half of 2010 was an ‘active, exciting and fruitful period’ for the company, after it committed to the development of the Bullabulling project.
Obtala Resources (LON:OBT) has generated US$744,270 in diamond sales from the Konoma alluvial project in Sierra Leone. A parcel of rough diamonds totaling 2,480 carats was sold to international buyers. These are the first diamonds to be sold from Konoma since Obtala restarted mining back in February. The stones were recovered from bulk sampling at the Bakidu mine location.
KEFI Minerals (LON:KEFI) is expecting to make significant copper and gold discoveries after actively exploring its key areas of focus in Turkey and Saudi Arabia in the first half of 2010. Despite the intense exploration programme, pre-tax losses narrowed year-on-year with KEFI making good on its pledge to operate in a cost effective manner.
African Aura Mining’s (LON:AAAM, TSX-V:AUR) New Liberty project is shaping up to be a very significant advanced gold project, said chief executive Luis da Silva. The company has reported more drilling results from the New Liberty gold project in western Liberia.
Ariana Resources (LON:AAU) aims to complete the project feasibility for its Red Rabbit joint venture within a year. In its results statement, managing director Dr Kerim Sener commented on a ‘busy and exciting’ first half.
Stellar Resources (ASX:SRZ) has completed its six hole drilling program at the near surface Queen Hill mineralization within the Heemskirk Tin Project in Tasmania, confirming the presence of a high grade tin zone.
Oracle Coalfields’ (PLUS:ORCP) recent deals have the potential to unlock the value from its Pakistan coal assets, according to Edison Investment Research. Edison analyst Warren Johnstone highlighted the two deals signed at the turn of the year, December’s memorandum of understanding with the Karachi Electric Supply Company (KESC) and January’s MoU with Lucky Cement.
Atlantic Coal (LON:ATC) managing director Steve Best has ‘great confidence’ in the company’s future performance, after enhanced production and sales in the first six months of 2010.
Noventa (LON:NVTA) has appointed mining and engineering expert, Leslie Heymann as a new director of the company. Heymann has acted as a consultant to Noventa for the past year. “With his experience as a professional engineer and a history of improving technical performance, we are confident that Leslie will bring valuable expertise and insight to the board," Noventa chairman Eric Kohn commented.
Mariana Resources (LON:MARL) promised more "exciting" news in the months ahead after its exploration efforts undertaken in the first half significantly increased the value of its property portfolio.
Large and Mid Cap News
The only pure iron ore producer listed in London Ferrexpo (LON:FXPO)has successfully renewed its debt facilities, securing a larger than expected credit line after the initial loan was oversubscribed. The initial plan was to secure a US$300 million facility, which was subsequently increased to US$350 million.