Gold was on the rise during the week amid continuing volatility in global equity and currency markets. The yellow metal blasted through US$1,250/oz on Tuesday to set a new all time high, boosted by soaring safe haven demand after the US Labor Department reported a lesser than expected increase in non-farm payrolls, which added 431,000, mostly reflecting the 411,000 temporary workers hired by the government to conduct a census, while most surveys projected an increase of over 500,000. The unemployment rate declined from 9.9% in April to 9.7% in May, largely due to the census jobs. At the same time, worries over the European debt crisis strengthened after Hungary’s new government said the budget deficit was worse than expected and the country could soon find itself in the same situation as Greece, which has barely avoided bankruptcy after receiving heavy financial aid from the European Union and the International Monetary Fund (IMF).
Unlike Portugal and Spain, which also have massive sovereign debts and have recently been downgraded by high profile rating agencies, Hungary is not a member of the euro zone, however, it is a member of the EU and the euro’s exposure to the economic situation in this country is very high.
Gold then slid to below US$1,220/oz as investors were reaping profits following the yellow metal’s surge, while the markets recovered on a series of positive updates that came out in the US.
Early in the week, Fed Chairman Ben Bernanke said that the US economy was unlikely to slip back into recession. On Wednesday, the Fed released its Beige Book survey of regional economic conditions, reporting growth in all 12 Federal Reserve districts, which had not happened since December 2007.
The markets also got a boost from data released late in the week by the US Labor Department, which showed that continuing jobless claims hit 17 month lows after declining by 255,000 last week. Initial claims fell by 3,000, which was a lesser decline than expected.
However, negative news came from china and Hungary. China said that its industrial output slowed from 17.8% in April to 16.5% in May, while inflation rose to an annualised 3.1%, eclipsing the government’s target of 3%.
Finally, Hungary’s debt auction failed to worsen the outlook for its debt situation and weigh on the euro and the European stock markets.
Gold has traditionally been seen as an alternative investment to the US dollar and usually moves inversely to the greenback and in tandem with the euro. However, gold has increasingly been used as a hedge against risks associated with recent volatility in equity and currency markets.
The yellow metal last traded at US$1,227/oz. Platinum rose to US$1,539/oz, while silver inched lower to US$18.22/oz.
Gold and silver producers advanced over the past five trading days, while platinum miners fell. Randgold Resources (LON:RRS) climbed from 5,900 pence to 6,075 pence, silver mienr Fresnillo (LON:FRES) rose from 907 pence to 1,009 pence, while platinum miner Lonmin (LON:LMI) went against the tide, sliding from 1,594 pence to 1,578 pence.
Gold producer Petropavlovsk (LON:POG) improved from 1,224 pence to 1,268 pence, Hochschild Mining (LON:HOC) rose from 283 pence to 310 pence, while Aquarius Platinum (LON:AQP) inched lower from 358 pence to 355 pence.
Large and Mid Cap News
In a letter to its shareholders, BHP Billiton (LON:BLT, ASX:BHP) called for Australia’s proposed super-tax to be abandoned, due to the proposal’s "fundamental failings". According to BHP chairman Jac Nasser, the current proposal requires a substantive re-design and, like with Australia’s previous major tax reforms, the Australian government should consult the mining industry "to find a solution in Australia's best interests".
Small Cap News
Red Rock Resources (LON:RRR) 25.1% owned Jupiter Mines (ASX:JMS) has nearly completed its acquisition of a 49.9% stake in the world-class Tshipi Kalahari Manganese Project in South Africa from a group of investors including Pallinghurst Resources Limited and Investec, and will commence drilling at its Oakover Manganese project this month.
African Consolidated Resources (LON:AFCR) (ACR) said it signed a joint venture deal for its recently acquired Nkombwa Hill project with privately-held Rare Earth International (REI) and reported the start of an in-house work programme.
African Eagle Resources (LON:AFE) has completed 98 holes of infill and definition drilling at the main Wamangola Hill Deposit on the Dutwa Nickel Project in Tanzania. The result highlights included 54m at 1.5% nickel, including a 6m section grading 2.8% nickel. Resource modelling is now underway, which is intended to upgrade a ‘significant proportion’ of its JORC resource into the Indicated category.
Hargreaves Services (LON:HSP) has said it does not plan to pursue a merger with UK Coal (LON:UKC). On March 10, it had confirmed that, as part of its regular consideration of a range of strategic opportunities, it was in the early stages of reviewing a potential merger with UK Coal, but today announced that while recognising that UK Coal has many valuable assets, it does not intend to pursue this.
Avocet Mining (LON:AVM) was forced once again to clarify press speculation emanating from Indonesia related to the possible disposal of its North Lanut and Penjom Gold Mines.
Laterite nickel specialist European Nickel (LON: ENK) said H1 marked “progress on all fronts” after completing a merger with Rusina Mining (ASX:RML; LON:RMLA) to secure enough funds to complete project financing of the Caldag nickel project in Turkey and recommence work on the feasibility study at the Acoje nickel propject in the Philippines.
European Nickel PLC (LON:ENK) told investors that the Turkish parliament has now passed the new Mining Law, and consequently the process to re-issue the company’s forestry permit related to the Caldag nickel project can now commence. The company anticipates that the new Mining Law will come into effect in about a month.
Noventa (LON:NVTA) has outlined its strategic future development plan - now approved by the board - , which will include an increase in the capacity of the Marropino tantalum mine in Mozambique by over 70% and development of its other tantalum projects, while also releasing its full year results, which showed a 50% reduction in pre-tax losses.
Kryso Resources (LON:KYS) said that the bankable feasibility study (BFS) for its 2.8 million ounce (Moz) Pakrut gold project in Tajikistan, is progressing well. However in order to include recently announced encouraging drilling data into the resource model, the BFS has encountered a slight delay. Kryso emphasised that all other major elements of the study are largely complete.
Ncondezi Coal Co Ltd (LON:NCCL) has joined London’s AIM market this morning, following a £35.6m fundraising to fast-track a bankable feasibility study (BFS) at its flagship Ncondezi project in the Tete province of Mozambique. The company aims to complete the BFS in the second half of 2012.
Red Rock Resources (LON:RRR) has entered into a ‘Funding and Co-operation’ agreement with Mineras Four Points SA (MFP) and its general director, Juan Camilo Florez Ramirez (JCF). The agreement will allow MFP to invest in production and mining equipment at two gold mines in the province of Antioquia, Colombia.
African Diamonds (LON:AFD) said it is ready to begin an 800 hole reverse circulation (RC) drilling programme on the AK8, AK9 and BK5 kimberlite exploration projects which are located in Orapa, Botswana. Additionally, the company said it expects board approval for the final AK6 feasibility studies at the end of June.
Central China Goldfields (AIM: GGG) has appointed Michael Short, an Australian chartered engineer, to its board as a non-executive director. With his experience in both the region and in the mine engineering sector, Short is expected to have a considerable input as the company fast tracks the recently acquired BullaBulling JV to bankable feasibility within two years.
Turkey and Ethiopia operating gold miner Stratex International (AIM: STI) has called the newest results from detailed sampling of its Megenta hot spring gold prospect in Ethiopia positive, reporting grades of up to 16.75 g/t gold from a surface samples and an intersection of 2.46 metres grading 2.29 g/t (grammes per tonne) of gold.
Solomon Gold (AIM: SOLG) has completed a maiden resource estimate at the wholly-owned Crunchie gold-silver prospect, containing 201,648oz gold equivalent in the inferred category. The estimate was based on the results of early-stage drilling, and the company is keen to build the resource, with 20,000m of drilling set to begin immediately.
EMED Mining (LON:EMED) has taken another significant step towards the restart of the Proyecto Rio Tinto (PRT) in the Andalucía province of southern Spain. The company’s wholly-owned subsidiary EMED Tartessus SL has settled an outstanding issue with the Spanish Department of Social Security, relating to unpaid social security contributions incurred by the PRT’s previous owners - the now insolvent Minas de Rio Tinto (MRT).
Uzbekistan focused gold miner Oxus Gold (LON:OXS) reported on its progress at its 50% owned Amantaytau Goldfields project in Uzbekistan - the company’s sole activity after recent divestments - during a “turning point” 2009, which also marked its return to net profit and new equity funding to finance its operations.
Tantalum concentrate supplier Noventa (LON:NVTA) is raising £1.38 million through a completing placing of 6.8 million new shares and the conditional placing of 14.4 million new shares at 6.5p each. The newly raised capital is expected to be used for general working capital purposes.
Stratex International (LON:STI) has expanded its activities into the Republic of Djibouti, with the receipt of six new licences covering 535km2 in the highly prospective Afar Depression of the Main Ethiopian Rift. The company’s overall land package in the Afar Depression now straddles the Ethiopia-Djibouti border, and combined with its licenses in Ethiopia, the total exploration area now reaches 2,780km².
Oxus Gold (AIM: OXS) said the agreement with a Chinese consortium over financing of its 50% owned Amantaytau Goldfields project in Uzbekistan has been amended, removing the requirement to sign a FIA (foreign investment agreement) by the end of June and allowing it to secure the initial investment of US$85 million upon receipt of the relevant approvals from the Chinese government.
Connemara Mining (LON:CON) has appointed Graham Reid as a new non-executive director with immediate effect. The newly appointed director has worked with the company since 2004 in a consultancy role.
On London’s AIM market, AfNat Resources (LON:AFNR) shares soared 50% this morning on news it will create a joint venture with a wholly-owned unit of major international mining group Rio Tinto (LON:RIO, ASX:RIO) for the exploration of copper, cobalt, nickel, platinum and gold in the company’s licenses in the Manica Province of Mozambique.
Western Coal (LON:WTN) has announced the terms of its acquisition of the remaining shares in Energybuild Group it does nopt already own, agreeing to give 0.0833 shares for every one share in the company, valuing it at 24 pence per share, or a total £54.4 million.
In a note on Chromex Mining (LON:CHX), London-based small and mid-cap stockbroker Ocean Equities said that now that chrome prices have improved, the company is set to achieve a step change in profitability and cash flow over the next 6 months.