Gold declined sharply at the end of the week after US CPI (consumer price index) was reported to have fallen by 0.1% in June, hitting the yellow metal’s appeal as an inflation hedge. The prices have risen by 1.1% in the year to date, however, it has been in decline for three months now. The Fed released the minutes from its latest interest rate meeting on Wednesday, revealing its intention to keep the economic stimulus measures in place, which would mean keeping the rates unchanged for the foreseeable future, raising inflation expectations and prompting investors to pour more money into precious metals.
Another factor negatively impacting the gold prices was the surging euro, which was gaining on optimism about Europe’s debt woes with the EUR/USD rate hitting 1.30 for the first time since May.
Moody’s delivered a blow to Europe single currency at the start of the week when it downgraded Portugal’s debt by two notches. However, another troubled euro zone state Spain was able to raise €3 billion in a debt auction to calm worries over its debt situation. Investors focused their attention on the US, whose economic recovery has been showing signs of a slowdown. The growth in the manufacturing sector has slowed down as the Empire State and Philly Fed indexes declined, while the University of Michigan consumer sentiment index declined to 66.5 from 76, causing a decline in the US dollar.
Corporate results further disappointed investors with Bank of America (NYSE:BAC) and Citigroup (NYSE:C) reporting weaker than expected performance in Q2.
Gold has been on the rise over the past few months as investors were pouring money into safe haven assets, primarily precious metals, to avert risks associated with Europe’s debt situation.
Gold fell to US$1,193/oz, while silver and platinum declined to US$17.86/oz and US$1,507/oz respectively. Gold stood at US$1,210/oz at the start of the week.
Major mining stocks were in decline this week. Gold miner Randgold Resources (LON:RRS) declined from 6,225 pence to 5,970 pence. Silver miner Fresnillo (LON:FRES) fell from 1,089 pence to 1,060 pence, while platinum miner Lonmin (LON:LMI) moved down from 1,484 pence to 1,417 pence.
Midcaps followed. Gold producer Petropavlovsk (LON:POG) slipped from 1,240 pence to 1,174 pence, while silver producer Hochschild Mining (LON:HOC) slid from 306 pence to 291 pence and Aquarius Platinum (LON:AQP) plummeted from 307 pence to 256 pence.
Small Cap News
European Nickel’s (LON: ENK) landmark tie-up with a leading mining investment house signals the "end of the pain" for the company and its investors, deputy chairman Simon Purkiss told Proactiveinvestors. ENK this morning revealed Canada’s Hunter Dickinson (HDI) will invest US$60 million in the company in return for a 27% stake.
Firestone Diamonds (LON:FDI) has now begun commercial production at the BK11 kimberlite in Botswana, following the granting of a 12-year mining licence to the company’s 90%-owned subsidiary Monak Venture Pty Ltd.
Ariana Resources (LON:AAU) has finalised its joint venture agreement over the Red Rabbit project with Proccea Construction Co. The 50-50% JV has now been established with Proccea committing US$8m to develop the project, which will ultimately lead to Ariana becoming the next gold producer in Turkey.
Latin American precious metal miner Minera IRL (LON, BVL: MIRL, TSX: IRL) has said that its pre-feasibility study (PFS) on the Ollachea gold project in Peru remained on track after “excellent progress” was made with data gathering.
Central China Goldfields (LON: GGG) has commenced an engineering scoping study at the Bullabulling gold project in the Coolgardie Goldfield, Western Australia, it is developing with 50:50 JV (joint venture) partner Auzex Resources Ltd (ASX:AZX).
Solomon Gold (LON:SOLG) has raised £1.6 million to fund additional near-term drilling and a significant resource upgrade at the Rannes and Mt Perry Projects in Queensland, Australia. The company has placed 33.1 million shares at 0.05 each, to institutional and private investors.
In a report on Red Rock Resources (LON:RRR), Edison Investment Research said that the significant investment in a Colombian gold mining company, Mineras Four Points (MFP), has the potential to add up to 50% on top of Edison’s current sum-of-the-parts valuation for RRR.
Minera IRL (TSX:IRL, LON:MIRL, BVL:MIRL) is set to expand its exploration footprint in Peru, announcing an option agreement to buy the 3,317ha Killincho gold project from Ingerieria y Tecnologia Minero-Metalurgica SA (ITMM).
African Eagle Resources (LON:AFE) said managing director Mark Parker has purchased 263,443 shares at 3.75 pence each to increase his stake in the company to 1.45%.
Edison Investment Research has issued a note on Ariana Resources (AIM: AAU), a day after the Turkey focused gold miner reported the finalisation of its 50/50 JV (joint venture) Zenit with Proccea Construction Co over the Red Rabbit gold project in Turkey.
African Minerals (LON:AMI), the exploration and development company run by mining entrepreneur Frank Timis, has announced it is receiving US$1.5bn investment from the Chinese.
Emerging Latin America focused gold miner Minera IRL (LON:MIRL, BVL:MIRL, TSX:IRL) told investors that the Corihuarmi mine in Peru continues to perform ‘beyond expectations’. In the second quarter of 2010, the mine produced 8,098oz of gold, 10% ahead of the company’s budget.
Kazakhstan operating gold producer and copper developer Frontier Mining (LON:FML) announced it has commenced gold production at its Koskuduk deposit. Shares in the company rallied 7.5% on the news in early trade.
EMED Mining (LON:EMED) has begun the 2010 exploration drilling programme in Slovakia on the Banska Stiavnica and Hodrusa exploration licences. The programme will focus on three prospects - Bursa, Quartzlager and Mohr Shaft - located near the small-scale Rozalia Mine.
Chaarat Gold (LON:CGH) will now acquire the remaining equity in Guernsey-incorporated Kyrex Ltd - which holds four large license areas in the north west of the Kyrgyz Republic - as ‘drag-along’ provisions in Kyrex’s articles of association are activated, after shareholders with more than 75% of Kyrex shares accepted Chaarat’s offer. The 22-day offer period closed yesterday.
Nyota Minerals’ (LON:NYO, ASX:NYO) flagship Tulu Kapi gold project in Ethiopia is moving into its next phase of development, as the company hires SRK Consulting and assembles key personnel to take the project forward. With exploration work to date providing Nyota with sufficient confidence in Tulu Kapi, SKR has been hired to complete a Preliminary Economic Assessment (PEA) Feasibility Study.
Stellar Diamonds (LON:STEL) told investors that it has now increased its production capacity at the Mandala and Bomboko properties in Guinea. Earth moving equipment has been introduced at both sites over the last three-months - including 4 30-ton dump trucks, 2 excavators and 2 front end loaders – to enable increased production at both mines in the second half of the year.
Mozambique focused iron ore, base and precious metals explorer Baobab Resources (LON:BAO) said the first round of scout drilling at the Chimbala prospect at the Tete project in Mozambique intersected significant widths of magnetite-ilmenite mineralisation with the grades reaching 63.1% Fe (iron) and 0.72% vanadium.
Shares in AIM’s only pure-play chrome mining company, Chromex Mining (LON:CHX) surged this morning, rising over 38%, after the company confirmed press speculation that it has received a preliminary approach, which may or may not lead to an offer for the company, at 35p per share. Details of the potential acquirer were not disclosed.
Caledon Resources's (LON:CDN, ASX:CCD) shares jumped over 20% after the company announced it has received a number of “unsolicited and indicative enquiries”, including an offer to buy the company, since it terminated its merger talks with Polo Resources (LON:POL) on 24 June 2010.
KEFI Minerals (LON:KEFI) told investors that its partner for the Artvin joint venture, Centerra Gold (TSX:CG) has decided to withdraw from the project. On the London Stock Exchange, investors do not appear to be particularly perturbed by the news, as shares in KEFI were up 4.5% in afternoon deals.
Horizonte Minerals (LON:HZM) revealed that it is in advanced discussions in relation to an acquisition that would qualify as a reverse takeover. The company’s shares are suspended on the London Stock Exchange pending the publication of an admission document.
African Minerals Ltd (LON:AMI) has appointed, senior economist and vice president of China Railway Materials Commercial Corporation (CRM), Liu Guoping, as a non-executive director.
Large and Mid Cap News
Mining major Rio Tinto (LON:RIO, ASX:RIO) has announced US$200 million funding to prepare for the expansion of its Pilbara iron ore operations in Australia, aiming to boost the capacity of Pilbara to 330 Mtpa (million tonnes per annum) by 2016.
The world's largest primary silver miner, Mexico's Fresnillo (LON:FRES) Wednesday announced record silver and gold production during the second quarter of this year.