Gold ends week at $1,100 as US dollar rebounds against euro, mining stocks mixed

Gold has had an up and down week, climbing to US$1,140/oz at one point and falling US$1,100/oz later in the week after Director of China’s State Administration of Foreign Exchange Yi Gang said its investment in gold will now be limited due to a “few factors,” including the inconsistency of the yellow metal’s price over the past 30 years that reduced its appeal as a long-term investment.

Later in the week China said that its inflation rate climbed to an annualised 2.7% in February, triggering fears of further monetary policy tightening to strengthen the US dollar and push down commodities, including gold.

China, which is the world’s largest producer and the second bigger consumer of gold behind only India, currently has US$2.4 trillion in foreign exchange reserves, including holdings of 1,054 tonnes of gold compared to holdings of 600 tonnes in 2003.

Movements in the currency markets usually set direction for precious metals, which are seen as a riskier alternative to the US dollar and normally move inversely to the American currency. Gains in the euro usually push gold higher, and Europe’s single currency’s strength was a key factor in gold’s rally to six week highs at above US$1,140/oz.

The euro performed well last week after debt laden Greece introduced a new round of economic austerity measures and conducted a successful €5 billion bond issue to meet its near term commitments to ease concerns over its ability to avoid a default. This week, however, Europe’s single currency fell under pressure after Fitch threatened to cut Portugal’s rating from the current AA if the ongoing fiscal consolidation continues at a slow pace and proves insufficient.

However, the euro gained later in the week after Portugal conducted a successful bond issue to raise US$1.34 billion and the Swiss National Bank led its interest rates unchanged to push the US dollar down to three week lows against the euro and the Swiss franc.

The yellow metal fell back to US$1,100/oz later in the week as the US dollar climbed after Friday's US economic data turned out mixed as retail sales showed an unexpected increase of 0.3% in February instead of an expected decline, while the University of Michigan consumer sentiment index fell.

Major mining stocks were mixed this week as some companies managed to perform well, while others fell to track declines in precious metals. Gold producer Randgold Resources (LSE: RRS) failed to recover from sharp falls earlier in the week, while peer from the FTSE 250 Petropavlovsk (LSE: POG) ended the week with strong gains amid speculation about a possible spin off of its iron ore assets.

Silver and gold miner Fresnillo (LSE: FRES) finished lower after a volatile week, while midcap silver producer Hochschild Mining (LSE: HOC) fell sharply. Blue chip platinum miner Lonmin (LSE: LMI) defied the trend, recovering from early declines to post weekly gains, while Aquarius Platinum (LSE: AQP) only managed to trim losses on Friday.

Gold traded at US$1,100/oz on Saturday, while silver and platinum slid to US$17.07/o and US$1,605/oz respectively.

Large and Mid Cap News

Gold Resource Corporation (OTC:GORO, ETR:GIH) confirmed this morning that Hochschild Mining (LON:HOC) has increased its holding to 28.7% after it subscribed for 600,000 shares in a private placement and acquired a further 440,500 shares in the market.

Small Cap News

At its Paguanta project in Northern Chile, Herencia Resources (AIM: HER) said it has discovered a new vein of visible mineralization which includes massive sulphides. The new discovery is the result of the first two drill holes of its 2010 drilling campaign, and the holes confirm the presence of a new, fifth vein at Paguanta approximately 75m south of the high grade Cathedral vein.

Coloured gemstone producer Gemfields (AIM: GEM) reported revenues of US$12 million for the six months ended 31 December 2009 compared to just US$0.34 million in H1 2008 after two successful emerald auctions in July and November 2009 that raised the company US$11.5 million.

Thor Mining (AIM, ASX: THR) said its half yearly pretax losses amounted to £534,000, which was about in line with a £500,000 loss in H1 2008 as the company reduced administrative expenses by more than 60% in response to lower molybdenum and tungsten prices.

In its first-half results statement, Discovery Metals Limited (ASX: DML, AIM: DME) said it has made significant progress and is on the cusp of moving from being an exploration company to becoming a mine development company. In the six months ended 31 December, it continued to focus its activities on the Boseto copper project in north-west Botswana. During the period, Discovery also signed a joint exploration agreement with the Japanese government agency, JOGMEC, to develop its Dikoloti nickel project in eastern Botswana.

Africa focused gold deposit developer Cluff Gold (AIM: CLF) outlined a 2010 drilling programme and updated the resource estimates for two of its major projects today, saying the reserves at Kalsaka were sufficient for a further three and a half years of production at the current plant capacity of 1.6 Mtpa (million tonnes per annum).

West Africa operating iron ore exploration and development company Bellzone Mining announced its intention to join the AIM market with a US$100 million fundraising. The company has already developed and defined a maiden inferred iron ore magnetite JORC resource of 2.4bn tonnes at its wholly owned Kalia project in Guinea.

Both Libertas and Westhouse Securities issues a note on Discovery Metals (AIM&ASX: DME) in anticipation of the upcoming release of the bankable feasibility study (BFS) for its flagship Boseto copper and silver project in Botswana that will follow a positive pre-feasibility study completed in 2008. Both firms have given the miner a 'buy' rating with Westhouse upping its price target, expecting the BFS along with rising copper prices to boost the share price in the near term.

Anglo Asian Mining (AIM: AAZ) has posted a monthly record by producing 4,007 oz (ounces) of gold in February, bringing the total production from Gedabek in Azerbaijan to 18,855 oz since its commencement in July and marking a substantial increase from January and December, when the output amounted to 3,483 oz and 2,863 oz respectively.

Edison Investment Research said that Red Rock Resources (AIM: RRR) associate Jupiter Mines (ASX: JMS) has been re-rated following its proposed transformational deal to acquire a 49.9% stake in the Tshipi manganese project in South Africa for A$245m. The analyst report noted that Jupiter’s share price has risen by approximate 29% since the deal was announced on 1 March 2010. Jupiter’s shares closed at AU$0.305 on the Australian Securities Exchange (ASX) on 8 March.

Medusa Mining (ASX/AIM: MML: TSX: MLL) has announced a one for ten bonus issue of shares to all shareholders of the company.

Landore Resources (AIM: LND) said drilling at the Junior Lake-Lamaune gold prospect in Ontario continued to intersect widespread gold mineralisation, including 0.6 metres at 118.66 g/t (grammes per tonne) gold, and announced  staking additional claims for 9,472 ha (hectares) in the Keezhnik Lake area 20 km (kilometres) from its Miminiska Lake property.

In response to speculation in the Daily Mail, UK COAL (LSE: UKC) said it is "not aware of any proposal from the group's major shareholder or any other source". Whilst refuting the media reports, the company informed investors that it has received a very early stage merger proposal from an unnamed party.

Stratex International (AIM: STI) reported on the progress made in the full year 2009 today, which included three alliances to fast-track its four major projects in Turkey, new targets defined at the Oksut project and expansion into Ethiopia.

London Mining (AIM, OSX: LOND) has expanded its JORC-compliant resource at the Isua project in Greenland to an Indicated Resource of 114Mt (million tonnes) and Inferred Resource of 837Mt respectively, grading 37% and 36% Fe respectively.

Discovery Metals (ASX/BSE: DML; AIM: DME) has awarded the Boseto copper concentrate sales contract to Transamine, a global nonferrous raw materials trading company.

Based on the results of 2009’s exploration season, Chaarat Gold (AIM: CGH) has increased the JORC compliant estimate tor the Chaarat project, by 670,000 ounces to 4.009m oz. The 2009 drilling results consisted of 25 new core drill holes totalling 5,357m and four cross-cuts totalling 307m, the drilling covered 11 project areas along a 6km strike length. The results were incorporated into the project’s resource database and SKR Consulting carried out the JORC-resource estimate.

Sunkar Resources (AIM:SKR), a Kazakhstan focused mining company developing the Chilisai Phosphate project, confirmed this morning that it had met its minimum requirement to produce 1 million tonnes of phosphate in 2009.

Norseman Gold (AIM, ASX: NGL) has revised its production guidance for the current year down to 65,000 from the previous targets of 75,000 to 80,000 oz as production from the  Bullen Decline continued to disappoint, though the production forecast for the next financial year was left unchanged at between 105,000 and 110,000 oz (ounces).

In an analyst note on Solomon Gold (AIM: SOLG), London-based stockbroker Fairfax said it is looking forward to steady news flow throughout the next six to twelve months, following the company’s reorganisation and refocusing.  The broker anticipates further growth through the realisation of the value created by the changes of the last year.

Finders Resources (AIM, ASX: FND) has received official approval to change its financial year-end from 30 June to 31 December to align the balance dates of companies in the group, which will be effective from 31 December 2009 with the first financial report for the six months ended 2009 set to be released on 16 March.

Altona Energy (AIM: ANR) has appointed Peter Fagiano as senior executive in charge of project technology to join the Arckaringa Joint Venture (JV) management committee, which is responsible for the JV’s operations and decision making on all key matters.

Australia operating exploration company Thor Mining (AIM, ASX: THR) has appointed Trevor Ireland as a non-executive director. The appointment is the second major initiative for the company this year under its new growth strategy, the group said. Ireland is a geologist with more than 40 years experience in minerals exploration and corporate management.

Firestone Diamonds (AIM: FDI) has been selected by De Beers’ joint venture with the Namibian government, Namdeb Diamond Corporation, as the preferred supplier and operator for the Dredge and Floating Treatment Plant (FTP) project at Namdeb's diamond mining operations in Namibia.

Kalahari Minerals’ (AIM: KAH) said it is highly encouraged by the news that its 40.41% owned associate Extract Resources (ASX, TSX: EXT) is on track with its Definitive Feasibility Study (DFS) for the world-class Rossing South deposit at the Husab uranium project in Namibia.

African-focused Discovery Metals (ASX/BSE: DML; AIM: DME) has reported that latest drill results highlight continuation of Plutus‐Petra mineralisation for 15 km beyond the current 11 km strike length boundary of the existing mineral resources.