Mining News

Market overview

2010-03-16T23:48:00.000-07:00

The bristling hostility between two Canada-based gold diggers, Barrick and Goldcorp, over El Morro, a deposit in Chile, raises a number of issues of more than passing interest. The unusual tactics applied by Goldcorp to ostensibly gain control of El Morro are one thing; another highlight is the characterisation of the asset, for both groups, which increasingly rely for a living on non-gold metal sales.

In the hands of London-listed Xstrata, El Morro was classified as a copper-gold deposit; in the disputed hands of the two gold groups, it was magically converted overnight into a gold-first deposit. On 12 October 2009, Barrick announced that it agreed with Xstrata to acquire Xstrata's 70% interest in the El Morro project for USD 465m in cash. The asset is close to Barrick's Pascua Lama, now in build, and 75%-held Cerro Casale, which is ready for build.

From stage left, on 7 January 2010, Canada-listed New Gold, holding 30% of El Morro, said that is had exercised a right of first refusal on El Morro, a right triggered by Barrick's original offer. On 7 January 2010, also, Goldcorp magically agreed to loan USD 463m to New Gold to fund the acquisition of Xstrata's 70% interest. Goldcorp also loaned USD 50m "to a New Gold subsidiary which was paid to a different New Gold subsidiary in consideration of the internal assignment of the acquisition agreement with Xstrata".

That apparently left Goldcorp with 70% of El Morro, and New Gold with the balance. Not so, says Barrick, which "disputes that Xstrata or New Gold could properly sell the interest to Goldcorp and has filed an action in Ontario involving New Gold, Goldcorp and Xstrata in order to protect its rights under an October 2009 sale agreement with Xstrata". Barrick intends to "vigorously pursue" its claims and expects that the Ontario courts "will ultimately respect Barrick's rights notwithstanding the disputed Xstrata-Goldcorp transaction".

While it can be argued that, at least in the interests of transparency, Goldcorp could have chosen to kick off a "hostile counterbid" for El Morro, Xstrata equally could have put the stake up for open tender after clarifying rights with New Gold, to promote a certain outcome. Xstrata probably would have seen the price bid higher, an outcome that would have done its own shareholders no harm.

The matter is now in the courts; whatever the outcome, the dual-metal status of El Morro would accelerate the growing multi-metal status of Barrick and Goldcorp, also seen at certain other gold majors, such as Newmont. For gold companies, this is less like kissing your sister, and more like having an ugly sister and having no choice but to do the honours.

Gold diggers have developed a habit of using "other metal" sales, such as for copper, as nothing more than convenient weapons to reduce reported per-ounce costs of producing gold. But why would two gold majors battle over what ranks primarily as a copper deposit?

BARRICK'S COPPER MOVES

Barrick anticipates own copper production for 2010 of 340-365m pounds, which would produce revenue of more than USD 1bn at prevailing copper prices. Forward production is likely to expand with the USD 3bn build of Pascua Lama, on the Chile-Argentina border. Given a mine life of 25 years, expected average annual production is about 750,000-800,000 ounces of gold and 35m ounces of silver in the first full five years; copper production would be relatively modest, at about 30m pounds a year.

At Cerro Casale, in Chile, where Kinross owns 25%, feasibility study optimization work is complete. Pre-production capital expenditure is huge, at around USD 4.2bn (100% basis). Barrick's 75% share of average annual production is anticipated to be about 750,000-825,000 ounces of gold and 170-190m pounds of copper in the first full five years.

According to El Morro itself, production at full capacity, on a 100% basis, is likely to be in the order of about 330m pounds of copper a year, plus some 300,000 ounces of gold. Capital expenditure to build the mine is put at about USD 2.5bn. Based on prevailing metal prices, El Morro would rank firmly as a copper-gold mine.

If Barrick succeeds in obtaining 70% of El Morro, and completes build of Pascua Lama, Cerro Casale, and El Morro, its annualised copper production would approach 800m pounds. Barrick's share of capital expenditure for the three mines would be about USD 8bn.

Barrick						Five prior	Total
USD m	2009	2008	2007	2006	2005	years
Operating cash flow	2,899	2,254	1,732	2,122	726	3,147	12,880
Capital expenditure	-2,351	-1,749	-1,046	-1,087	-1,104	-2,558	-9,895
Other	-64	-2,171	-1,122	-506	-76	-5	-3,944
Net	484	-1,666	-436	529	-454	584	-959

Free cash flow
Operating cash flow	2,899	2,254	1,732	2,122	726	3,147	12,880
Capital expenditure	-2,351	-1,749	-1,046	-1,087	-1,104	-2,558	-9,895
Free cash flow	548	505	686	1,035	-378	589	2,985


Debt raised	-1,748	-1,114	720	-608	-120	-781	-3,651

Equity raised	3,950	74	142	74	92	43	4,375

Cash on hand	2,564	1,437	2,207	3,043	1,037	NA	2,564
Debt	-6,335	-4,556	-3,148	-4,107	-1,801	NA	-6,335
Net debt	-3,771	-3,119	-941	-1,064	-764	NA	-3,771

Dividends	-369	-349	-261	-191	-118	-542	-1,830

GOLDCORP: HUNGRY TO SUPPORT EXTREME MARKET VALUATION

Goldcorp's big current build, costing billions of dollars, is at Peñasquito in Mexico; commercial production is anticipated around the third quarter of this year. At full production, and on life-of-mine data, the two polymetallic pits at Peñasquito will produce, as Goldcorp puts it, "both lead and zinc concentrates, with most of the gold and silver production coming from the lead concentrates.

Output is anticipated at annualised 400m pounds of zinc; lead numbers are hazy, but lead concentrates are expected to contain about 500,000 ounces of gold annually, and 31m ounces of silver.

Based on prevailing metal prices, zinc revenues would compute at about USD 400m, gold at USD 550m and silver at just less than gold. During 2009, other metal sales for Goldcorp accounted for USD 454m of total USD 2.7bn revenues, or about 17% of the total. Most of that came by way of Goldcorp's 37.5% stake in copper-gold miner Alumbrera, 50% owned by and operated by Xstrata. The remaining stake in Alumbrera is held by Yamana, which relies heavily on Alumbrera to put a shine on its active group activities, which are focused on gold.

Goldcorp has a lot to prove. It market value, at USD 29.4bn, is higher than Newmont's USD 24.7bn, and second, among classified gold miners, only to Barrick's USD 39.5bn. Goldcorp's 2009 revenues of USD 2.7bn, compared to Newmont's USD 7.7bn, or Barrick's USD 8.1bn, leave lots to prove on the valuation front.

Over the past 10 years, Goldcorp has produced precious little in the way of free cash flow, financing the payment of USD 739m in cash dividends by raising equity from investors in a total amount of USD 968m, and divesting various assets, including its stake in Silver Wheaton, which in 2008 raised cash of USD 1.5bn for Goldcorp, and in 2006, USD 189m. On 24 July 2007, Goldcorp agreed to sell Silver Wheaton 25% of Peñasquito's life of mine silver production, for upfront cash of USD 485m.

Goldcorp						Five prior
USD m	2009	2008	2007	2006	2005	years	Total
Operating cash flow	1,270.2	866.0	651.0	763.7	465.8	355.5	4,372.2
Capital expenditure	-1,356.4	-1,372.0	-871.0	-472.2	-277.5	-216.0	-4,565.1
Net investments	-102.3	930.3	13.4	-1,802.4	56.7	3.8	-900.5
Net	-188.5	424.3	-206.6	-1,510.9	244.9	143.3	-1,093.5

Free cash flow
Operating cash flow	1,270.2	866.0	651.0	763.7	465.8	355.5	4,372.2
Capital expenditure	-1,356.4	-1,372.0	-871.0	-472.2	-277.5	-216.0	-4,565.1
Free cash flow	-86.2	-506.0	-220.0	291.5	188.3	139.5	-193.0

Debt repaid/(raised*)	-872.0	639.0	-140.0	-845.0		4.8	-1,213.2

Equity raised	79.1	104.0	70.0	527.5	44.0	143.7	968.3

Cash on hand	874.6	262.0	511.0	526.3	562.2	NA	874.6
Debt*	-735.7	-5.3	-1,065.0	-925.0		NA	-735.7
Net cash/(debt)	138.9	256.7	-554.0	-398.7	562.2	NA	138.9

Dividends	-131.7	-129.0	-127.0	-79.1	-155.0	-117.5	-739.3
* Includes convertibles

OLD PALS NOW FOES?

Goldcorp and Barrick are hardly strangers; on 15 March 2006, Barrick acquired 100% of Placer Dome for some USD 10bn in shares and cash. Goldcorp had previously agreed to acquire for USD 1.6bn certain Placer Dome assets from Barrick, including the Campbell (100%), Porcupine (51%) and Musselwhite (68%) gold mines in Canada, the La Coipa (50%) silver-gold mine in Chile, and 40% of Pueblo Viejo in the Dominican Republic, plus Placer Dome's interests in its Canadian exploration properties, including the Mount Milligan copper/gold deposit in British Columbia.

Pueblo Viejo, where Barrick is 60% owner, and operator, is busy with a USD 2.7bn build. The mine is scheduled for initial production in the fourth quarter of 2011. On a balance of probabilities, it could make sense to argue that Goldcorp is hungrier than Barrick for El Morro. As has been shown over the past few years, copper can do absolute wonders for a gold miner's cash flow quantum, and quality.

One possible challenge for Goldcorp is that its status as a gold major could be "diluted" by increasing revenues from base metals. That is accelerating sharply as Peñasquito ramps up to full production, and would be sharply underlined if El Morro is retained and built.

Tier I gold (and some copper) diggers

	Stock	From	From	Value
	price	high*	low*	USD bn
Yamana	USD 10.18	-29.2%	38.3%	7.466
Goldcorp	USD 40.03	-13.4%	49.9%	29.364
Polyus	USD 48.75	-17.9%	47.7%	9.293
Harmony	ZAR 72.00	-38.7%	6.3%	4.157
Lihir	AUD 3.06	-18.8%	27.0%	6.626
AngloGold Ashanti	USD 38.28	-19.4%	30.4%	13.868
Zijin	CNY 8.18	-33.4%	117.6%	12.626
Barrick	USD 40.09	-16.5%	48.0%	39.462
Newcrest	AUD 33.52	-15.7%	21.3%	14.813
Gold Fields	ZAR 90.13	-27.9%	8.5%	8.613
Kinross	USD 18.15	-24.1%	33.3%	12.633
Newmont	USD 51.20	-9.3%	44.4%	24.731
Buenaventura	USD 32.91	-22.9%	86.6%	9.047
Freeport-McMoRan	USD 82.18	-9.2%	139.2%	35.384
[[SPDR Gold Shares ETF]]	USD 110.09	-7.9%	29.6%	40.315
Tier I averages/total		-21.2%	49.9%	228.083
Weighted averages		-18.1%	52.1%
* 12-month

source:mineweb

Gold progress

2010-03-16T19:46:00.000-07:00

Gold's rally to record highs in euro and sterling terms and the resilience of spot prices in the face of a rising dollar is sign-posting the metal's broadening insurance appeal, as sovereign debt fears shift to the fore.

Worries over Greece's fiscal outlook created a perfect storm for euro-priced gold this month, as some investors selling the single currency chose bullion as an alternative.

News that the next UK general election could result in a hung parliament, making it harder for an incoming government to tackle Britain's debt, sparked a similar rally in sterling gold, taking it to a record 759.86 pounds an ounce.

Investors' growing sensitivity towards sovereign risk is starting to suggest dollar-denominated gold can maintain strength even as the dollar rises -- usually a prime factor pushing the precious metal down.

"Gold is holding up very well given the foreign exchange market movements, and you have to ask why that is," said GFMS Chairman Philip Klapwijk. "Sovereign debt is very high up the agenda at the moment."

Spot gold held above $1,115 an ounce on Wednesday, off the record high of $1,226.10 it hit in December but still above the $1,096.25 at which it started the year.

The dollar has gained nearly 4 percent versus the euro in that time, largely on fears over fiscal issues in Portugal, Italy, Ireland, Greece and Spain.

GLOBAL RISK

But sovereign debt issues don't stop there. In January the World Economic Forum said the risk that deteriorating government finances could push economies into full debt crises was the main threat facing the world in 2010.

The U.S. fiscal deficit is projected to reach $1.56 trillion this year, Japanese debt is nearing 200 percent of GDP, while Fitch Ratings said earlier this week that Britain's sovereign credit profile has deteriorated.

"Until we start to see governments bringing down debt, the (sovereign) risk will stay with us," said Saxo Bank senior manager Ole Hansen.

A Reuters monthly poll of 65 forex strategists showed the Greek debt crisis could force euro volatility against the dollar higher still in March.

Usually the euro's decline versus the dollar would drag gold lower, but that relationship has weakened.

Using 1 as a perfect correlation and -1 as an inverse correlation, the traditionally strong link between gold and the euro-dollar exchange rate fell from 0.9 in early February to as low as -0.2 a month later, according to Reuters data.

UGLY CONTEST

With the world's leading currencies currently involved in what analysts refer to as an 'ugly competition', gold is gaining traction.

"People have real fears about what is going to happen in Greece and Spain and the effect it is going to have on the euro, and they are saying the only thing that is safe and secure is gold," said ANZ Bank's head of metals sales Peter Hillyard.

"Whether that is foolish or not, it is current thinking."

Major economies' adoption of low interest rates to stimulate economic growth have cut the earning power of cash on deposit -- also cutting the opportunity cost of holding non-interest bearing gold.

Governments are unlikely to address falling currency values at present, analysts say, as a weak currency can protect exports and boost recovery. Moves to raise cash via bond issuance to steer economies away from crisis are also unsettling investors.

"Long-term investors are beginning to realise that gold is the only thing that is going to protect you from governments who decide that the way out of this problem is to borrow more," said Bullman Investment Management Managing Director Nick Bullman.

From a chart perspective, gold has been building a solid base. It has risen steadily in euro and sterling terms since its late December correction, while dollar-priced gold has been on an upward trend since a dip to 2010 lows in February.

"Clearly gold has been based as something of an insurance policy," said Sean Corrigan, chief investment strategist at Switzerland's Diapason Commodities Management.

And buyers of physical gold, who typically lend strong support to the market, are more comfortable with prices above $1,000 an ounce, dealers say, putting a solid floor in prices.

Now gold has proved it can hold its own in a rising dollar environment, any change in that trend may prove explosive.

"If dollar gold prices manage to hold up under the prior circumstances, how are they going to perform when the U.S. dollar is back under pressure again?" said Klapwijk of GFMS.

source: mineweb

The survive with diamond

2010-03-16T17:41:00.000-07:00

In the mining of rough diamonds, what's meant by "long term?" In the case of De Beers, the world's leader for well more than a century, it's a long time. For Gem Diamonds, the world's leading listed name, after Harry Winston, which also runs downstream businesses, it could mean just a few years.

According to Gem Diamonds's own advertisements, it is "a global diamond mining company that has pursued a long term growth strategy through targeted acquisitions and the development of its existing assets".

Even for the biggest in the game, these have been some of the worst of times for decades. De Beers recently completed a USD 1bn rights issue, funded according to its shareholder structure, 45% from Anglo American, 40% from the Oppenheimer family, and 15% from the Botswana government. The rights issue was mostly an equity-for-debt swap; over the past two years, in particular, De Beers's shareholders have stumped up USD 817m in the form of shareholder advances, presumably because De Beers was unable to secure further bank debt.

Listed diamond stocks were trashed during the second half of 2008, to an extent unknown in other global mining subsectors. It seems that tough times bring out the best stones; according to today's results for Gem Diamonds for 2009, its Letšeng mine, in Lesotho, "produced over 700 rough gem diamonds of over 10.8 carats which equates to 78% of revenue". External research cited by Gem Diamonds has found that Letšeng produces 31% of all rough gem quality diamonds in excess of 25 carats.

What makes Gem Diamonds global is that after severe rationalisations, closures and shut downs, it also continues to maintain an operation at Ellendale in Australia, well known for its fancy yellows. Prices have been spluttering nicely upwards; "despite the downturn", Gem Diamonds notes, "the average price for Ellendale's production rose in 2009 to USD 232 per carat compared to USD 184 per carat for 2008".

Gem Diamond's global vision has changed; 2009 saw "a group-wide emphasis on cost cutting and cash preservation", when "the majority of the group's other assets were placed on care and maintenance, and its assets in the DRC subsequently sold".

Gem Diamonds, which listed in London in 2006, is skippered by Clifford Elphick, who previously worked for a good number of years at E. Oppenheimer & Son, and appears to have an interesting time ahead. From listing to date, Gem Diamonds has raised USD 811m in equity from investors, most of it in 2007.

The company spent USD 119m buying 70% of the Letšeng Mine, and a terrific USD 250m buying the Ellendale operations in Australia. Yet from its listing in 2006 through to the end of 2009, Gem Diamonds has produced negative free cash flow (operating cash flow less capital expenditure) of USD 144m.

In a statement out today on the outlook, Elphick noted that diamond prices continued to improve in early 2010; "evidence suggests that demand for diamond jewellery in India and China continues to grow strongly, although not making up for the slowdown in US consumption of diamond jewellery".

He adds that production cutbacks by the major producers in 2009, "allied to anecdotal evidence which suggests that capacity in India, the largest cutting centre, has not returned to pre crash levels, has meant that stocks of rough and polished have not grown substantially by the end of 2009. At the top end of the market, amongst larger, better quality goods, there appears to be a shortage of supply".

The Lesotho mine, which has a long history, is proving to be a freak, in the best possible sense. In 2009, a 35.1 carat diamond from Letšeng sold for USD 1.8m at an average of USD 51,253 per carat. The average price for the mine's sales in 2009 was USD 1,534 per carat.

Gem Diamonds
USD m	2009	2008	2007	2006*	Total
Operating cash flow	47.5	59.1	49.6	14.2	170.4
Capital expenditure	-58.9	-137.9	-109.6	-7.9	-314.3
Other	-2.1	-21.2	-402.9	-118.5	-544.8
Net	-13.5	-100.0	-463.0	-112.2	-688.7

Free cash flow
Operating cash flow	47.5	59.1	49.6	14.2	170.4
Capital expenditure	-58.9	-137.9	-109.6	-7.9	-314.3
Free cash flow	-11.4	-78.8	-60.0	6.3	-143.9

Debt repaid/(raised)	41.5	-12.9	8.1	-60.0	-23.2

Equity raised	98.8		606.9	103.2	811.4

Cash on hand	113.8	61.4	183.5	51.9	113.8
Debt	-0.2	-37.8	-32.2	-60.3	-0.2
Net debt	113.6	23.6	151.4	-8.4	113.6

Dividends
* Six months

*Selected diamond stocks*
	Stock	From	From	Value
	price	high*	low*	USD bn
Lucara	CAD 1.06	-11.7%	165.0%	0.218
Afri-Can Marine	CAD 0.23	-15.1%	181.3%	0.037
Karelian Diamond	GBP 0.02	-46.7%	6.7%	0.002
Sunrise Diamonds	GBP 0.01	-42.2%	44.4%	0.002
Namibian Resources	GBP 0.03	-51.1%	155.6%	0.002
Olivut	CAD 0.35	-36.4%	169.2%	0.011
New Nadina	CAD 0.08	-52.9%	77.8%	0.003
Kalahari Resources	CAD 0.07	-17.6%	366.7%	0.019
Lonrho Mining	AUD 0.02	-33.3%	77.8%	0.010
Sanatana Diamonds	CAD 0.12	-54.0%	109.1%	0.007
African Consolidated	GBP 0.10	-44.4%	79.5%	0.054
Gem Diamonds	GBP 2.38	-16.6%	104.4%	0.498
Shore Gold	CAD 0.92	-45.2%	253.8%	0.203
Petra Diamonds	GBP 0.65	-26.8%	182.6%	0.347
Mountain Province	CAD 2.05	-38.1%	180.8%	0.135
Firestone Diamonds	GBP 0.39	-21.2%	169.0%	0.058
African Diamonds	GBP 0.42	-25.9%	112.8%	0.048
Rockwell Diamonds	ZAR 0.50	-45.7%	133.8%	0.023
Trans Hex	ZAR 3.41	-35.7%	241.0%	0.049
Pangea Diamondfields	GBP 0.01	-61.2%	21.6%	0.030
Namakwa Diamonds	GBP 0.34	-34.3%	123.3%	0.061
Kopane Diamonds	GBP 0.12	-45.9%	666.7%	0.044
DiamondCorp	GBP 0.10	-68.9%	0.0%	0.007
Stornoway Diamonds	CAD 0.49	-33.8%	476.5%	0.138
Vaaldiam Resources	CAD 0.04	-73.1%	75.0%	0.010
Harry Winston	CAD 10.25	-22.8%	349.6%	0.773
BRC Diamondcore	CAD 0.13	-27.8%	550.0%	0.011
Tawana	ZAR 0.07	-63.1%	121.7%	0.004
Azure Resources	CAD 0.12	-22.6%	100.0%	0.006
Spider Resources	CAD 0.14	-10.0%	440.0%	0.062
Tsodilo Resources	CAD 2.25	-10.0%	733.3%	0.043
Peregrine Diamonds	CAD 1.85	-60.2%	262.7%	0.152
Diamonds North	CAD 0.26	-35.4%	131.8%	0.020
Cluff Resources Pacific	AUD 0.00	-55.6%	33.3%	0.008
Dios Exploration	CAD 0.37	-1.3%	362.5%	0.013
Arctic Star Diamonds	CAD 0.07	-27.8%	333.3%	0.016
Grizzly Diamonds	CAD 0.27	-51.8%	1.9%	0.007
North Australian	AUD 0.05	-31.9%	444.4%	0.102
Blina Diamonds	AUD 0.01	-72.5%	10.0%	0.004
Tawana Resources	AUD 0.03	-10.7%	525.0%	0.010
Averages/Total		-36.1%	209.1%	3.245
Weighted averages		-31.2%	203.1%

*Diversifieds with diamonds*
Anglo American**	GBP 26.79	-9.6%	148.5%	53.445
BHP Billiton	GBP 21.84	-2.9%	72.5%	204.291
Rio Tinto	GBP 36.89	-2.5%	144.7%	131.108
Alexis Minerals	CAD 0.38	-40.6%	2.7%	0.081
Flinders Mines	AUD 0.13	-36.5%	140.4%	0.208

*Market leader*
De Beers	Unlisted	NA	NA	NA

*Indicator stocks*
Tiffany & Co.	USD 46.36	-1.4%	146.6%	5.770
LVMH	EUR 86.15	-1.0%	92.1%	57.965
Blue Nile	USD 56.11	-16.5%	143.1%	0.813
Gemfields Resources	GBP 0.05	-44.9%	104.0%	0.025
* 12-month

** Holds 45% of unlisted De Beers

Source: market data; table compiled by Barry Sergeant and mineweb

First Quantum raise standards

2010-03-16T15:36:00.000-07:00

First Quantum, the African copper-gold miner, now expanding into nickel beyond the continent, reported a sharp turnaround in its fortunes for 2009, bar the debacle at Kolwezi tailings in the Democratic Republic of the Congo, which appears to have turned into a farce of international proportions.

Jungle tragedy and comedy aside, First Quantum produced 374,000 tonnes of copper in 2009, and is anticipating 385,000 tonnes this year. Gold production for 2009 was 193,000 ounces, with 240,000 ounces anticipated this year.

First Quantum's group copper production has grown from 29,500 tonnes in 2003, all from Bwana (Zambia) and Lonshi (just across the border in the DRC). Group gold production started out at a modest 14,300 ounces in 2005. The group owns and operates 80% of the Kansanshi copper-gold mine in Zambia ("a foundation asset"), 95% of Frontier in the DRC, and 80% of the Guelb Moghrein gold-copper mine in Mauritania.

First Quantum is expanding in Africa, and also moving offshore. On 23 November 2009, First Quantum announced it would acquire London-listed Kiwara for USD 260m, mainly for its controlling interest in mineral prospecting licence 267, covering 2,850 km² on the periphery of the Kabombo Dome in Zambia.

On 30 November, First Quantum announced the go ahead for its Kevitsa, Finland project, with a capital cost of USD 400m and first production anticipated for 2012. The mine will produce a cocktail of concentrates, with metals that include copper and gold, led by nickel.

On 8 December First Quantum announced the USD 340m acquisition of Ravensthorpe, Australia from BHP Billiton. Ravensthorpe, approved in March 2004, was built at a cost of USD 2.1bn but operations were suspended in January 2009, following the precipitous decline in nickel prices, long among the most volatile of any commodity. From highs close to USD 25.00/lb in 2007, nickel fell to nearly USD 4.00/lb, and has since recovered to close on USD 10.00/lb.

First Quantum has commenced work at Ravensthorpe, modifying the crushing, conveying, stockpile and reclaim areas, and will continue work for about the next 12 months, followed by about six months of commissioning and ramp-up.

First Quantum expects Ravensthorpe's average annual production of nickel metal at about 39,000 tonnes for the first five years, after recommencement of operations, and an average annual production of 28,000 tonnes of nickel metal over the expected life of mine of 32 years. The total modification cost is estimated at about USD 150m.

First Quantum is distinguished as one of just a few miners that have kicked off in Africa and expanded outside the continent. The group started mining at Lonshi, just over the DRC border, in August 2001; a 36km laterite road was built to haul ore from Lonshi to Bwana Mkubwa, near Ndola. The Lonshi orebody was mined out during 2008, by which time First Quantum had made it into the major league.

As for the drama in the DRC, the carrying value of the Kolwezi tailings development project, or KMT, is USD 787m, being an initial acquisition cost of USD 388m, and capital expenditures, so far, of USD 399m. In a September 2009 announcement, First Quantum confirmed suspension of work at the 75%-complete Kolwezi tailings project, after it was shuttered by government agents.

On February 1 2010 First Quantum announced commencement of international arbitration by First Quantum and its partners in KMT, under the facilities of the International Chamber of Commerce, International Court of Arbitration, in Paris.

First Quantum
USD m	2009	2008	2007	2006	2005
Operating cash flow	562.6	765.4	540.0	512.0	201.8
Capital expenditure	-361.8	-460.3	-319.6	-302.1	-186.7
Other (net)	-4.8	-304.7	-283.2	-61.6	21.9
Net	196.0	0.4	-62.8	148.3	37.0

Free cash flow
Operating cash flow	562.6	765.4	540.0	512.0	201.8
Capital expenditure	-361.8	-460.3	-319.6	-302.1	-186.7
Free cash flow	200.8	305.1	220.4	209.9	15.1


Debt (raised) repaid	-279.7	-18.2	-69.3	-55.5	-28.2

Equity raised	279.1	5.0	11.5	3.5	2.2

Cash on hand	919.2	176.2	200.0	249.5	82.9
Debt	-630.0	-385.7	-360.8	-294.9	-236.1
Net debt	289.2	-209.5	-160.8	-45.4	-153.2

Dividends	-5.8	-53.0	-51.7	-20.2	-4.0

*Selected copper stocks*
		Stock	From	From	Value
		price	high*	low*	USD bn
Freeport-McMoRan		USD 82.18	-9.2%	139.2%	35.384
Southern Copper		USD 31.51	-14.8%	110.1%	26.784
Antofagasta		GBP 10.20	-3.2%	126.3%	15.241
KGHM Polska Miedź		PLN 101.80	-8.6%	139.5%	7.201
Jiangxi Copper		CNY 34.04	-33.4%	111.3%	8.155
Sterlite		USD 18.14	-9.8%	234.7%	15.243
Yunnan Copper		CNY 24.86	-35.7%	87.9%	4.577
Tongling		CNY 18.01	-31.3%	89.6%	3.415
First Quantum		CAD 90.30	-10.0%	177.8%	7.156
Equinox		CAD 3.85	-17.9%	146.8%	2.682
Philex		PHP 13.25	-33.8%	212.5%	1.423
Nautilus Minerals		CAD 2.14	-22.5%	111.9%	0.328
Katanga Mining		CAD 0.75	-39.2%	236.8%	1.409
Quadra		CAD 17.49	-5.8%	315.4%	1.714
Pan Australian		AUD 0.52	-20.0%	197.1%	1.394
Metorex		ZAR 4.20	-24.3%	228.1%	0.428
Palamin		ZAR 109.90	-4.4%	138.9%	0.720
Mercator		CAD 2.81	-18.8%	510.9%	0.539
Anvil		CAD 4.04	-4.5%	386.7%	0.598
Northern Dynasty		CAD 9.50	-7.6%	59.1%	0.873
Taseko		CAD 5.19	-11.1%	359.3%	0.940
Aditya Birla		AUD 0.93	-43.6%	708.7%	0.266
Corriente		CAD 8.51	-0.6%	71.9%	0.631
Fronteer		CAD 5.13	-10.8%	108.5%	0.605
CuDeco		AUD 4.68	-29.0%	153.0%	0.587
Chariot		CAD 0.65	-1.5%	364.3%	0.234
Baja Mining		CAD 0.77	-20.6%	234.8%	0.109
Activex		AUD 0.08	-35.8%	67.4%	0.006
Terrane		CAD 1.11	-43.9%	516.7%	0.140
Hillgrove Resources		AUD 0.37	-28.8%	236.4%	0.163
Havilah Resources		AUD 0.42	-40.8%	35.5%	0.031
Globestar Mining		CAD 1.08	-10.0%	120.4%	0.112
Citadel Resource		AUD 0.36	-23.7%	222.7%	0.475
Amerigo		CAD 0.70	-17.6%	145.6%	0.102
New Gold		CAD 4.62	-11.0%	148.4%	1.769
Tiger Resources		AUD 0.25	-21.9%	177.8%	0.093
Candente		CAD 0.46	-20.2%	236.0%	0.036
African Copper		GBP 0.06	-61.3%	757.1%	0.075
Marengo Mining		AUD 0.11	-54.2%	120.0%	0.050
Inca Pacific		CAD 0.20	-54.0%	25.0%	0.011
Exco Resources		AUD 0.24	-31.4%	192.7%	0.111
Coro		CAD 0.53	-27.4%	360.9%	0.047
Discovery Metals		AUD 0.77	-9.5%	446.4%	0.162
Africo		CAD 0.98	-34.2%	84.9%	0.069
Prairie Downs		AUD 0.13	-50.0%	120.3%	0.009
Duluth Metals		CAD 2.31	-42.1%	1148.6%	0.219
Polymet Mining		CAD 2.51	-35.5%	248.6%	0.368
African Eagle		GBP 0.04	-71.0%	61.1%	0.016
El Nino Ventures		CAD 0.08	-54.3%	45.5%	0.005
Seabridge		CAD 22.73	-36.0%	8.7%	0.843
Augusta Resources		USD 2.69	-25.5%	249.4%	0.238
Rambler Metals		GBP 0.35	-8.6%	239.0%	0.031
Norsemont Mining		CAD 2.30	-12.5%	94.9%	0.181
Apoquindo Minerals		CAD 0.82	-25.5%	272.7%	0.041
Capstone Mining		CAD 3.07	-7.0%	119.3%	0.596
Imperial Metals		CAD 16.55	-2.2%	652.3%	0.560
Pacific Booker		CAD 6.75	-20.1%	35.0%	0.076
Nevada Copper		CAD 3.28	-8.1%	1582.1%	0.146
Avanco Resources		AUD 0.03	-43.2%	316.7%	0.012
Finders Resources		AUD 0.20	-20.4%	81.4%	0.034
Polar Star Mining		CAD 1.20	-24.5%	471.4%	0.083
Hana Mining		CAD 1.90	-12.8%	955.6%	0.111
Benguet		PHP 13.50	-26.0%	121.3%	0.028
Continental Minerals		CAD 2.19	-8.0%	461.5%	0.330
Bezant Resources		GBP 0.34	-16.5%	426.9%	0.024
Kobex		CAD 0.93	-20.5%	49.0%	0.048
Cornerstone Capital		CAD 0.13	-35.9%	212.5%	0.010
Thundermin		CAD 0.15	-39.6%	52.6%	0.010
Western Copper		CAD 1.74	-22.7%	443.8%	0.136
Averages/total			-16.2%	170.7%	146.244
Weighted averages			-15.1%	140.3%

*Diversifieds with copper*
	Stock		From	From	Value
	price		high*	low*	USD bn
BHP Billiton	GBP 21.84		-2.9%	72.5%	204.291
Vale	USD 30.42		-4.8%	135.6%	160.883
Rio Tinto	GBP 36.89		-2.5%	144.7%	131.108
Anglo American	GBP 26.79		-9.6%	148.5%	53.445
Xstrata	GBP 11.58		-11.1%	230.2%	51.561
Norilsk	USD 16.80		-2.4%	211.1%	32.025
Teck	USD 40.68		-2.9%	962.1%	23.585
Vedanta	GBP 27.17		-8.4%	387.8%	11.159
NFC	CNY 13.79		-38.5%	58.3%	1.291
Lundin	CAD 5.13		-2.5%	375.0%	2.928
Kazakhmys	GBP 14.90		-4.7%	403.4%	12.087
Ivanhoe	CAD 16.32		-11.7%	204.5%	6.845
Inmet	CAD 59.19		-24.1%	101.9%	3.270
Northgate	CAD 3.17		-14.3%	124.8%	0.907
Oz Minerals	AUD 1.14		-14.3%	152.2%	3.239
Hindalco	INR 169.55		-5.7%	310.0%	7.116
Mwana Africa	GBP 0.10		-42.3%	230.6%	0.062
EMED Mining	GBP 0.12		-27.0%	217.2%	0.059
Boliden	CAD 13.80		-11.7%	224.7%	3.717
Xinjiang Xinxin	CNY 4.18		-25.0%	120.0%	0.409
Ivanhoe Australia	AUD 3.36		-20.8%	646.7%	0.985
Minera Andes	CAD 0.96		-4.0%	68.4%	0.249
CGA Mining	AUD 2.10		-18.9%	54.4%	0.636
Asia Now	CAD 0.30		-22.4%	268.8%	0.019
Kefi Minerals	GBP 0.02		-42.9%	20.0%	0.006
Iberian Minerals	CAD 0.52		-16.1%	55.2%	0.173
Sandfire Resources	AUD 3.64		-17.1%	6286.0%	0.404
Orocobre	AUD 2.25		-8.2%	845.4%	0.166
Orvana Minerals	CAD 1.12		-8.2%	86.7%	0.127
Straits Resources	AUD 1.29		-40.2%	54.9%	0.301
Highlands Pacific	AUD 0.26		-37.0%	372.2%	0.154
Kagara	AUD 0.83		-37.1%	233.3%	0.512
Averages/total			-16.9%	431.5%	713.719
Weighted averages			-5.1%	133.2%
* 12-month

Source: market data; table compiled by Barry Sergeant and mineweb

Mining problems in chile

2010-03-16T10:15:00.000-07:00

After a power failure plunged 90% of Chile's population into darkness Sunday night, mining companies quickly informed the world that their mines were back on line and all is well.

Not so fast.

In Nevada when the power doesn't function properly, mining processes are hit harder than the actual business of earthmoving. When too many brownouts or blackouts occur, mining companies start building and operating their own power plants because everyone knows a dependable, cost-effective supply of electricity is critical to a mining operator's bottom line.

No thanks to one of the most powerful earthquakes and its mighty tough aftershocks, no one can deny that Chile's power supply has become unstable. Yet commodities investors are told over and over that most of Chile's major mines are located in northern Chile, which was pretty much unaffected by the earthquake and its aftershocks.

In reality, Reuters reported that three Codelco mines, three Anglo American operations, one Antofagasta Minerals mine, and Freeport-McMoRan's Candelaria mine were all affected by Sunday's blackout. That takes at least small bites out of 1.5 million tonnes of annual production at the mercy of a power system which has been rendered unstable by the massive earthquake and its powerful aftershocks.

Chile's power supply is expected to be fragile for at least six months, the Chilean Government admitted Monday. A short circuit in a 500-kilowatt transformer was blamed for Sunday's blackout.

Energy Minister Ricardo Raineri said the nation's power network suffered various damage, "be it in transformers, switches and others." He cautioned the blackouts could happen again in the future and asked the public to moderate their power consumption to avoid putting an even greater strain on the system.

Raineri warned that, "As long as we do not recover the security level, we are going to be in a critical situation."

Despite the assurances from Codelco, Freeport-McMoRan, Anglo and other major miners that all is well with the power supplies of their Chilean operations, if nationwide power outages become a fact of life in Chile, mega-power consuming domestic mining operations could find their own electricity supplies rationed.

As long-time Chilean mining observers may recall, over the years, Chilean mining operators often have had to be concerned about power supply.

In 2006 roughly 2.3 Mtpy of Chilean copper mine capacity (13% of global copper capacity) was run either on hydroelectric power or power produced by burning natural gas from Argentina. As Bloomsbury Minerals Economics wrote in 2008, "Power supply in Chile has now become another stumbling block for copper and will lead to delays in production expansion in the near future."

Chile's power system is split into two major networks: Sistema Interconectado Central (SIC), which covers nearly 70% of power generation in Chile, failed Sunday; and Interconectado Norte Grande (SING), which produces 30% of total Chilean power and provides for mines in northern Chile.

The majority of power in the Atacama Desert, in which many copper mines are located, is produced by burning Argentinean natural gas.

Chile imported 72% of its energy in 2006 through petroleum, gas and carbon in 2006. Chile's National Energy Commission cautioned in the past that the nation's dependency on imported energy "puts the country in a vulnerable position given the volatility of international prices and supply interruptions."

Mineweb readers might recall that in May 2007 Argentina cut gas exports due to cold weather in Argentina, which forced mines in the SING power district in Chile to prepare for the rationing of power. As a result, many mining companies in northern Chile installed their own power plants. However, these plants are not adequate enough to wean mining from its reliance upon the SING network and gas imports.

Some gas-burning plants have been converted to diesel and fuel oil, which is also expensive. Codelco now develops power plants to service its operations.

Chile's lack of rainfall can also wreak havoc with hydroelectric power supplies during years of extreme drought. The inadequate rainfall which often accompanies La Nina weather patterns can mean inadequate rainfall in reservoirs and a loss of operational hours in hydroelectric plants.

Meanwhile, efforts to develop new hydroelectric plant reservoirs and dams are facing opposition and delays from local residents and environmental groups fighting the industrialization of Chile, Bloomsbury Economics' Christopher Welch has noted.

Even now, shaky, blackout-prone energy supplies could impact many medium-sized mines in Chile and reinforce world market concerns about supply disruptions in a country that mines one-third of the world's copper.

source: mineweb

Forecast of gold production of 236 tonnes of different

2010-03-16T07:58:00.000-07:00

The latest Global Hedge Book survey from Société Générale, (compiled by GFMS Ltd, using the Brady Trinity^TM trading and risk management software) shows that at the end of 2009 the global delta-adjusted hedge book stood at just 236 tonnes, a far cry from the 2,064 tonnes when it was at its peak in 2000. De-hedging in the fourth quarter was 125 tonnes, making up more than half the year's total of 246 tonnes. This means that net mine supply in 2009 was reduced by 9% last year, to 2,317 tonnes against production of 2,553 tonnes (GMFS figures).

The biggest changes came from Barrick Gold as it closed out the remainder of its fixed-price forward sales (ahead of its September 2010 target) and this elimination was of course also a major contributor to the improvement in the marked-to-market liability of the book, which contracted to -$2.9 billion in the fourth quarter. Barrick was responsible for 90 tonnes of the quarter's dehedging and 165 tonnes of the full year's activity, meaning that the rest of the sector removed 35 tonnes in the quarter and 81 tonnes in the rest of the year. AngloGold Ashanti, which was the second largest de-hedger in the quarter (14t) is now the largest open book, at 108 tonnes - or 46% of the outstanding position, meaning that the rest of the hedged population account for 128 tonnes. Polymetal was the third largest de-hedger, at ten tonnes. The fall in the volume of outstanding options positions was largely due to contracts reaching maturity rather than any proactive unwinding.

The majority of the reductions to the book were through the forward sales component, so that at the end of December, forwards and loans accounted for just 44% of the book with the remainder in options. If the book is considered in nominal terms, then at the end of 2009 forward sales comprised only 23% of the total, while a year previously forward sales were 56% of total. This is a function of cuts in the forward book rather than a specific preference for option exposure.

The largest component of the options position is sold calls (65% of total - an implied 85 tonnes). The study looks in detail at different companies and their position changes and argues that when this composition is combined with the high implied delta on the aggregate call position, by contrast with the low implied delta on the aggregate put position, the inference should be that "the options portion of the book is currently functioning more as a cap to price upside!" rather than as downside protection. The study contains a matrix of the impact on the book of changes in price volatility and the underlying price itself. A $100 rise in the gold price, for example, would increase the side of the book by 90,000 ounces (almost three tonnes), while a fall would cut it by 100,000 ounces (3.1 tonnes). Obviously the evolution of the book is to large extent a function off AngloGold Ashanti's attitude

Net de-hedging is expected to continue this year despite the limited size of the existing book. The company's strategy currently outlines a continued reduction of the hedge book, and there are indications that this reduction will be accelerated from time to time when circumstances suggest it. The existing delivery schedule for the global book suggests that there are perhaps 25 tonnes of outstanding forwards due for delivery this year and just over 30 tonnes in 2011. Including options positions, the schedule for this year amounts to 59 tonnes coming to maturity this year and perhaps 65 tonnes in 2011. The analysts expect a continued acceleration of the programme this year and see the potential for around three million ounces of dehedging this year.

source:mineweb

New considerations, investing in gold majors

2010-03-15T21:45:00.000-07:00

Barry Sergeant has recently written a well-reasoned analysis suggesting that the days of the big gold mining company may be drawing to a close and suggesting that modern-day shareholder pressures may force the companies, which are pursuing very expensive growth and reserve preservation programmes, to start monetising their assets and generate shareholder revenues this way, rather than expend large capital sums on ever more expensive major gold projects.

On the face of things he has a point - the big gold companies have perhaps lagged their ferrous and base metals counterparts in building shareholder value and have also commanded investor premiums that do not necessarily justify their positions in the markets. Yet to an important extent this ignores the continuing lure of the yellow metal for investors and realistically such premiums are likely to continue.

Furthermore, in many people's minds, gold - and by association the big gold miners - is/are considered by many to be a safer short and long term investment than their industrial counterparts which are more subject to the vagaries of global growth patterns - as witness the collapse of metals prices and metals stock prices in the October 2008 meltdown. True gold and major gold stocks suffered too - but to nowhere near the extent of their industrial metals mining counterparts. Indeed gold remains one of the few commodities which is still trading at higher levels in dollar terms than it was pre-metals price meltdown.

The problem facing big gold is that it is becoming increasingly difficult to maintain resources and production without expending huge capital sums on new mine development, and putting them into what Barry Sergeant calls a net cash flow deficit (effectively operating profit less capital and other expenditures). The gold companies are themselves great believers in the future of gold and while few gold company chief executives may seriously consider some of the stratospheric price increases for bullion predicted by some of the more way out gold proponents, they do believe that there are good price increases ahead which will justify their capital spending and ultimately substantially increase shareholder value. They are in the gold business for the long term and, as with any investment, there are times when the long term viewpoint seems less inherently profitable than the shorter term view.

Today, too much investment pressure - often exerted by hedge funds and other financial institutions - is frequently short-termist to the extreme and to the detriment of whichever industry they may be pressuring. There have to be those prepared to take the long term view otherwise sectors of industry will wither and die because no-one is prepared to take the brave decisions, and make the necessary expenditures, to look further ahead than the short term gain-maximising policies of some of their detractors.

While one may be critical of some financial institutions and hedge funds, I am glad to say there are others out there who believe in the longer term picture - if only as an insurance against the short term vagaries of the market. Maybe big gold will no longer make you a fortune unless there is a huge rise in the gold price - at which point as we have said before the causes of such could decimate other sectors and lead to all kinds of unwelcome social consequences globally.

Mind you, if the big gold miners stop pouring investment into the sector then the days of peak gold will definitely be with us and the smaller producers will benefit - but the big ones will gradually decline which is not what their shareholders want. Many of those investment gurus who we quote in these pages recommend holdings in the strong gold majors like Barrick, Newmont, Goldcorp, AngloGold ashanti, Gold Fields, Kinross etc. and these people have good track records so are worth following too. Big gold thus does have a future, but perhaps more as a provider of regular dividend income and steady performance rather than explosive growth - and it is still likely the gold premium will continue to give these companies high investment ratings regardless as investors continue to be lured by the glamour, and safety of the yellow metal.

source: mineweb

$1,000 gold will be regarded as the future "bottom out" floor price in the immediate years ahead

2010-03-15T15:35:00.000-07:00

The once magical US$1,000 an ounce price for gold - once considered unachievable - will be increasingly regarded more as the future "bottom out" floor price in the immediate years ahead, according to a senior economist with the major Australian bank Westpac.

Senior economist Huw McKay told the Paydirt Australian Gold Conference in Perth today that the gold price had stepped up year on year by about US$100 an ounce above predictions, for at least the past five years.

"What we did not know was going to happen was that we were going to have such an enormous collapse in risk appetite that pushed gold beyond the US$1,000 magical barrier," McKay said.

"That has changed gold trends forever and what was once an invisible ceiling, is now more a level where we talk about the US$1,000/oz price as more of a floor price going forward.

"It is now being seen as the level at which any plunge in the gold price will start to pull out of such a dive."

McKay attributed the gold price pressures as due to the change in demand for jewellery - from two thirds of world gold consumption in 2007 to around 40% currently.

"In parallel with this, there has been an expansion in exchange traded products which have grown from accounting for 7% of total gold consumption in 2007 to 19% now.

"This is a dramatic trend movement move and it is here to stay," McKay said.

"World equity markets and financing has so much uncertainty to it that the allure of gold has never been stronger.

"Demands for gold has shifted to the investor, with very strong fundamental trends coming together to fuel investor appetite for things they can see, touch, hold and put in a warehouse. Gold certainty meets those criteria."

McKay said the turn towards gold had come out of all other asset classes as "investors try to get into something that holds value".

The Westpac executive predicted gold holding at around US$1,006/oz by the end of this year, moving only slightly higher to around US$1,030 by 2011.

source: mineweb

Market game between the expectations and demands

2010-03-15T05:18:00.000-07:00

The latest economic figures from China have put pressure on the dollar and boosted a number of high-yielding currencies, including the Australian dollar and the South African rand. Commodities have reacted accordingly. Export growth in February was much higher than the markets had been expecting, registering a year-on-year growth of a whopping 46% - while imports were up by 45%. The latter was underpinned by the government's growth stimulus, while the former has boosted hopes of another step in the right direction in terms of global recovery. The increase is even more impressive when we take into account the fact that the Chinese New Year, and its associated five-day holiday, fell in February this year as against January in 2009.

While these figures have obviously raised the temperature among some of China's trade partners who would like to see a revaluation - if only de facto - of the renminbi, the Governor of the central bank has subsequently iterated the government's cautious stance towards letting the renminbi float higher, as it has yet to be convinced (like most of the rest of us) of the strength of any economic recovery. It may be interesting to look at the Baltic Dry freight index here as it is a barometer for global trade levels. As the chart lustrates, conditions are improving after the precipitous falls of 2009 and the trend would seem to be reasonably well-entrenched, if somewhat volatile (the fall in early February can be ascribed to the fall-out over the Greek Sovereign debt near-panic).

Source: Thomson Reuters

The figures gave a boost to platinum, palladium and silver in the precious sector, although gold has remained under pressure; although dealers are reporting physical support appearing in the market below $1,100 the recent price action has reflected continued profit taking and some concern that rising inflation may intensify expectations of interest rate rises in China which could, in theory, choke off physical gold demand. Consumer prices rose by 2.7% year-on-year in February. The Governor of the People's Bank is aiming to hold inflation at 3% this year, but at least one local bank is forecasting rates closer to 3½%.

The counter-argument, of course, is that domestic concerns over inflationary forces will boost local investment demand for gold, which is already a powerful force in the market. Figures compiled by GFMS Ltd for the World Gold Council indentify China's jewellery demand at 347 tonnes in 2008 (which is equivalent to 14% of world fabrication plus bar hording demand), while identified bar hoarding was 81 tonnes. In both cases China was the largest in the world and the combined tonnage of 428 tonnes amounted to 17% of world fabrication plus bar hoarding. For that matter, China's usage in electronics, while a much more modest figure at almost 13 tonnes in 2008, rose by an average compound growth rate of 4% over the previous ten years although GFMS records that it fell in 2009 on the back of a sharp contraction in the first half of the year. Electronics is one of the sectors in which China relies heavily on exports, so it will be interesting to see what numbers GFMS produce for Chinese electronics fabrication in 2010. For the time being, at least, China is relatively small in terms of electronic fabrication, being dwarfed by Japan at 116 tonnes, the US at 52 tonnes and South Korea with 33 tonnes.

GFMS puts China's gross gold fabrication demand (note that this is fabrication, not necessarily the level of domestic consumption. Domestic jewellery fabrication is smaller than domestic jewellery consumption) amounted to 342 tonnes in 2008; subsequent jewellery figures would suggest (this is this website's inference not a GFMS postulation) that fabrication in 2009 will have been a good bit higher as jewellery demand plus bar hoarding, as reported for the World Gold Council were up by 35 tonnes over the previous year. Mine production in 2008 was 292 tonnes and is likely to have exceeded 320 tonnes in 2009, suggesting that domestic mine supply fell short of domestic fabrication demand by some 50 tonnes. Figures for domestic scrap supply are not yet in the public domain, but extrapolating from 2008 numbers and last year's price action suggests that it may well have been sufficient to fill the gap.

China' is obviously key to all commodity markets. Its demand for platinum accounts for more than 30% of global offtake and its palladium offtake accounts for over 20% of global offtake. The latest Chinese trade figures, with their boost for the rand, will give platinum a short term shot in the arm at least, as the market is increasingly concerned about the cost pressures on South African platinum mine producers. Meanwihle China's silver demand accounts for perhaps 10% of the world total, a long way behind the US, which typically absorbs more than 20% of world silver demand.

It will be interesting to see what happens next in the gold investment sector in particular in the near future, especially as domestic Chinese bonds are now expected to return to 6% this year as a result of China's tightened policy on lending. A leading local fund manager has said that bond funds are likely to be attractive this year and that the weight of money sitting in financial institutions points to rising bond returns - possibly as much as 6%. How these compete with gold (and other investment vehicles) for attention from private individuals is a function not only of investment polices but of demographics and this year could be particularly instructive.

source: mineweb

Behind the Fresnillo's billion dollar silver

2010-03-02T09:45:00.000-08:00

London-listed Mexican miner Fresnillo, the world's biggest primary silver miner, continues to command a significant market value, relative to its peers. Annual results for 2009, just published, show that Fresnillo produced operating cash flow of USD 391m in 2009, down a little on the number for 2008. The group recorded a 9% rise in attributable silver production to 38m ounces, and slightly higher gold output, at 277,000 ounces.

Fresnillo holds a current market value of USD 8.5bn, and can be compared to Hochschild Mining, also listed in London, which produced 28m attributable silver-equivalent ounces in 2009, but is valued at a rather more modest USD 1.3bn. US-listed Pan American Silver, which raised silver production 23% in 2009 to 23m ounces, and gold production to 101,000 ounces, is valued at USD 2.3bn.

Investors may be focused on Fresnillo's longer-term goals, "to maintain the group's position as the world's largest primary silver company, producing 65m ounces of silver and over 400,000 ounces of gold by 2018".

Fresnillo's books show that for 2009, the market price for gold averaged USD 972.98 an ounce, compared to USD 871.71 an ounce in 2008, while the average market silver price was USD 14.67 an ounce, compared to USD 14.99 an ounce in 2008. Both prices are comfortably higher today.

METAL PRICES

Precious, USD/oz	Current	From low*	From high*
Gold	1116.70	29.1%	-9.0%
Platinum	1549.35	50.7%	-6.5%
Palladium	435.88	130.0%	-8.3%
Silver	16.45	39.1%	-15.5%
Industrial, USD/lb
Copper	3.36	121.6%	-5.1%
Aluminium	0.97	65.8%	-10.5%
Lead	0.98	111.7%	-19.3%
Tin	7.73	73.5%	-7.8%
Nickel	9.73	127.6%	-1.7%
Zinc	1.01	103.7%	-18.9%
* 12-month

Fresnillo's group revenues for the year of USD 850m produced, as noted, operating cash flows of USD 319m, and free cash flow (after capital expenditure) of USD 140m. Revenues for 2008 were USD 721m, which produced operating cash flows of USD 415m, and free cash flow of USD 230m. ‘

Fresnillo raised USD 855m in its 2008 rights issue, of which USD was redirected as a capital redistribution. Fresnillo listed late in 2007, after implementing a structure to consolidate the precious metals interests of Mexico's Industrias Peñoles, which continues to hold 77% of Fresnillo.

Fresnillo's stock price has been volatile, in the great tradition of primary silver stocks. The price was savaged down to GBP 1.00 a share, but has subsequently traded over GBP 9.00 a share, arguably departing from many of its underlying metrics. Fresnillo is also evidently keen to participate in corporate activity, and runs a marvelously clean balance sheet should anything that needs muscle appear suddenly on the horizon.

Fresnillo and its joint venture partner for gold in Mexico, Newmont, the world's No 2 gold producer, exchanged multiple takeover offers with Goldcorp, another gold major, for Canplats Resources, owner of the Camino Rojo gold-silver-lead-zinc deposit. Goldcorp's CAD 309m bid for Canplats prevailed.

Like a good number of stocks marketed as primary gold or primary silver producers, Fresnillo can be lined up alongside likely diversified peers for "valuation checks".

KGHM Polska Miedź, which produces the same amount of silver as Fresnillo, but as byproduct, holds a market value of USD 6.7bn. The big metal here is copper, which produced some of the most impressive margins seen in mining during 2009, despite a very poor start to the year.

During 2009, the Polish miner produced just over 500,000 tonnes of copper, and is planning to grow that to 700,000. During 2009, the group's unit cost of copper production was PLN 11,170 a tonne; the average sale price was PLN 17,343.

In the result, operating cash flows for KGHM Polska Miedź chimed in for 2009 at PLN 2.5bn (about USD 750m), and free cash flow computed at around USD 460m. These kind of numbers leave Fresnillo deeply in the shade, and show up the advantages, for Fresnillo, of having a relatively captive market centered around a London listing, along with the premium ratings traditionally accorded primary silver, and also gold, producers.

Fresnillo
USD m	2009	2008	2007
Operating cash flow	391	415	79
Capital expenditure	-250	-185	-103
Other	45	54	-222
Net	186	284	-246

Free cash flow
Operating cash flow	391	415	79
Capital expenditure	-250	-185	-103
Free cash flow	140	230	-24


Debt repaid/(raised)		455	-356

Equity raised		855

Cash on hand	312	212	5
Debt			-456
Net debt	312	212	-451

Equity distribution		-407	-198

Dividends	94	42

*Selected silver stocks*
		Stock	From	From	Value
		price	high*	low*	USD bn
Fresnillo		GBP 7.92	-15.3%	154.9%	8.488
Silver Wheaton		USD 15.26	-14.3%	169.6%	5.222
Pan American Silver		USD 21.79	-20.2%	72.7%	2.290
Hochschild Mining		GBP 2.59	-30.2%	53.8%	1.308
Silver Standard		USD 17.32	-32.3%	48.7%	1.246
Coeur d'Alene		USD 14.72	-40.8%	167.6%	1.150
Hecla Mining		USD 5.33	-28.6%	355.6%	1.290
Volcan		EUR 9.28	-11.6%	445.4%	1.051
Silvercorp		CAD 6.83	-19.1%	172.1%	1.071
ECU Silver		CAD 0.61	-34.4%	41.9%	0.181
Henan Yuguang		CNY 18.92	-26.7%	85.1%	0.633
First Majestic		CAD 3.36	-25.7%	103.6%	0.300
Sabina Silver		CAD 1.12	-25.3%	107.4%	0.123
S. Métallurgique d'Imiter		MAD 982.00	-10.7%	71.1%	1.947
Endeavour Silver		CAD 3.45	-24.5%	151.8%	0.203
Excellon		CAD 0.73	-18.9%	265.0%	0.170
Fortuna Silver		CAD 2.29	-23.9%	197.4%	0.210
Great Panther		CAD 0.87	-30.4%	176.2%	0.095
Genco Resources		CAD 0.36	-56.6%	63.6%	0.027
Impact Silver		CAD 1.06	-28.9%	152.4%	0.049
Revett Minerals		CAD 0.33	-37.7%	407.7%	0.040
US Silver Corp		CAD 0.17	-31.3%	57.1%	0.040
Silvermex		CAD 0.45	-26.2%	221.4%	0.035
Abcourt Mines		CAD 0.15	-34.1%	70.6%	0.010
Apogee Minerals		CAD 0.11	-35.3%	175.0%	0.012
Scorpio Mining		CAD 0.67	-11.8%	179.2%	0.072
Arian Silver		CAD 0.09	-32.0%	88.9%	0.019
Aura Silver		CAD 0.16	-73.3%	166.7%	0.008
Avino Silver		CAD 0.74	-25.3%	94.7%	0.015
Bear Creek Mining		CAD 3.95	-25.3%	223.8%	0.267
Esperanza Silver		CAD 1.24	-20.0%	113.8%	0.062
Klondike Silver		CAD 0.06	-40.0%	20.0%	0.011
MAG Silver		CAD 6.87	-10.8%	41.6%	0.330
Cobar		AUD 0.19	-55.3%	280.0%	0.020
Minco Silver		CAD 1.62	-33.9%	63.6%	0.062
Mines Management		USD 2.61	-24.8%	137.3%	0.060
Oremex Silver		CAD 0.16	-35.4%	138.5%	0.011
Orko Silver		CAD 1.24	-15.6%	117.5%	0.137
Oro Silver		CAD 0.15	-49.1%	314.3%	0.009
San Anton Resources		CAD 0.23	-38.7%	155.6%	0.023
Silvercrest		CAD 0.88	-14.6%	112.0%	0.039
Alexco Resources		CAD 3.41	-23.4%	143.6%	0.175
S American Silver		CAD 0.36	-35.5%	22.4%	0.020
Southern Silver		CAD 0.16	-20.5%	181.8%	0.009
Averages/total			-28.8%	149.6%	28.504
Weighted averages			-20.3%	130.5%

WORLD'S TOP SILVER PRODUCERS
BHP Billiton	GBP 20.75		-4.5%	102.4%	192.549
KGHM Polska Miedź	PLN 98.20		-11.8%	191.0%	6.737
Fresnillo	GBP 7.92		-15.3%	154.9%	8.488
Volcan	EUR 9.28		-11.6%	445.4%	1.051
Kazakhmys	GBP 14.12		-9.4%	502.8%	11.294
Pan American Silver	USD 21.79		-20.2%	72.7%	2.290
Goldcorp	USD 38.42		-16.9%	46.9%	28.183
Buenaventura	USD 33.98		-20.4%	99.9%	9.341
JSC Polymetal	USD 9.60		-5.3%	68.4%	3.834
Southern Copper	USD 30.08		-18.7%	137.8%	25.568
Hochschild Mining	GBP 2.59		-30.2%	53.8%	1.308
Rio Tinto	GBP 34.65		-8.4%	162.1%	122.664
Teck	USD 38.32		-7.6%	1368.2%	22.217
Coeur d'Alene	USD 14.72		-40.8%	167.6%	1.150
Xstrata	GBP 10.66		-18.2%	269.2%	46.821

Spot silver/oz	USD 16.45		-15.5%	39.1%
Gold:silver ratio (times)	67.89
* 12 month

Source:
market data; table compiled by Barry Sergeant
miningweb.com

Iron ore and coal as Megatrends

2010-03-02T03:36:00.000-08:00

For some months now, the most noticeable positive net portfolio flows among global resources have been directed to the broad classification of iron ore stocks, followed closely by nickel miners, and certain classifications of coal miners. By now, there should be no surprise as to the heat that continues to gather around these stocks. In Chinese waters, spot prices for iron ore have moved up to around the USD 140/tonne level, compared to contract prices trading roughly 50% lower.

There are increasingly numbers of estimates and forecasts that contract iron ore prices will be raised by up to 50% this year. Coking coal, a natural bedfellow to iron ore, and a highly specialised but bulk market, is also running up the price curve. China remains the world's No 1 miner of iron ore and coal, but has become a net importer of both, with coal going into that mode just last year.

Nickel, a bedfellow downstream for processing into stainless steel, is back on the radar screen after radical, fundamental, changes in the market that saw prices completely collapse in the second half of 2007. Nickel pig iron is back, a product of Chinese smelters that use tropical laterite ores, typified by that available at Acoje in the Philippines. The ore is gifted limonite (usually grading 47% to 59% iron, 0.8 to 1.5% nickel, along with trace cobalt).

Outside China, significant nickel production capacity has been curtailed or shut down in the past two years, allowing for development of a new equilibrium in supply-demand. Nickel prices continue to rise; the best of breed are already back in the money. Australia's Western Areas, which owns two of the world's highest grade nickel deposits in Flying Fox and Spotted Quoll, recently reported a 209% increase in interim revenues for the six months to 31 December 2009. Operating cash flow increased massively to AUD 50.4m from AUD 3.8m in the comparable 2008 period.

But nickel remains a relatively small base metal. The big money is in seaborne iron ore, which has established itself over the past seven or so years as the world's most profitable mining franchise. Brazilian supergroup Vale increased iron ore sales, including pellets, from USD 3.5bn in 2000 to USD 22.2bn in 2008. Sales fell after demand dropped in the first half of last year, and after contract prices fell sharply in the second half, to USD 14.2bn as a whole for 2009.

Vale put it so earlier this year: "Chinese iron ore imports in 2009 reached an all-time high figure of 627.8 million metric tons, up 41.6% on a year-on-year basis, driven by steel production growth and the increasing reliance on imported iron ore".

Contract iron ore prices

USD per dry metric ton unit


Rio Tinto	2007	2008	Change	2009	Change
Yandicoogina Fines	0.8042	1.4466	79.9%	0.9700	-32.9%
Pilbara Blend Fines	0.8042	1.4466	79.9%	0.9700	-32.9%
Pilbara Blend Lump	1.0264	2.0169	96.5%	1.1200	-44.5%

Vale's volume of iron ore and pellets sold in 2009 reached 247mt, against 296mt in 2008, a decrease explained by the significant fall in iron ore demand during the first half of 2009. These numbers can be compared with iron ore sales, including pellets, of some 145mt in 2000.

The megatrend is summated by Vale: "In light of the increasing deterioration in quality of [Chinese] internally produced iron ore and the modernization of the Chinese steel industry, requiring higher quality raw materials, the share of imported iron ore in apparent domestic consumption rose from 15% in 1985 to 25% in 1995, and to 50% in 2005, reaching 72% in 2009".

As for coal, China became the world's largest importer of coal in 2009. On Vale's market intelligence, China in 2009 imported 104mt of coal, against net exports of 4.6mt in 2008. Given the increasing demand from China and India for thermal coal, the Pacific market has been increasingly tight, Vale remarked earlier this year, against a still weak Atlantic market.

The market scenario for Chinese coking coal is similar to iron ore. Vale puts it so: "There is robust demand growth derived from a continued steel production increase. On the supply side, coal fields are moving inland while steel mills are increasingly concentrated in coastal areas and requiring high quality coking coal in the face of a decline in the quality of limited coal reserves. As other countries are running steel mills at increasing rates of utilization, the market for coking coal is expected to become tighter in 2010".

Immaculate timing for new entries to seaborne iron ore would have been around seven years ago. In 2003, Australia's Metal Group acquired Allied Mining & Processing. Going beyond substantial tenements at Mt Nicholas, the new owners promptly acquired Iron Ore Australia, along with its Mt Lewin tenements. The acquiring group bought with it a new CEO, Andrew "Twiggy" Forrest, and a change in name to Fortescue Metals. Today, with a market value of USD 13.1bn, Fortescue is one of the world's bigger mining stocks, and Forrest features regularly in rankings as Australia's richest fellow.

At this point, Rio Tinto and BHP Billiton, which, together with Vale, hold about 75% of the global seaborne iron ore market, rank as two of the world's most heavily demanded resources stocks. Vale is close behind. After voracious bouts of profit taking across the second half of 2008, it seems that iron ore's megatrend is back in place, accompanied, this time, by the rise of coking coal.

Selected iron ore names

THE THREE KINGS		Stock	From	From	Value
		price	high*	low*	USD bn
Vale		USD 28.46	-11.0%	140.8%	150.517
Rio Tinto		GBP 34.65	-8.4%	162.1%	122.664
BHP Billiton		GBP 20.75	-4.5%	102.4%	192.549
Big three averages/total			-7.9%	135.1%	465.730
Weighted average			-7.7%	127.8%

TIER II, PURE/DIVERSIFIED
Evraz	USD 33.40		-8.5%	307.8%	13.860
Minmetals	CNY 17.23		-37.5%	7.7%	2.705
Hunan Valin	CNY 6.40		-38.8%	32.2%	2.567
Severstal	USD 11.79		-7.9%	262.9%	11.885
Citic Pacific	HKD 17.90		-26.2%	149.3%	8.412
Vedanta	GBP 25.69		-13.4%	421.4%	10.404
Gerdau	BRL 20.49		-13.0%	134.2%	5.660
Steel Aut. India	INR 224.65		-15.9%	223.2%	20.152
Beijing Shougang	CNY 5.35		-28.3%	55.1%	2.325
Orissa Sponge	INR 346.90		-26.7%	28.0%	0.151
NMDC	INR 434.80		-24.0%	210.3%	37.439
CAP	CLP 16,095.00		-7.0%	112.0%	4.584
Fortescue	AUD 4.70		-15.6%	115.6%	13.123
Anglo American	GBP 24.51		-17.3%	170.5%	48.212
ENRC	GBP 10.63		-2.0%	251.7%	20.457
CSN	USD 33.49		-12.2%	182.6%	25.291
Mechel	USD 23.70		-11.0%	679.6%	9.866
Kumba Iron Ore	ZAR 366.00		-4.1%	161.4%	15.441
MMX Mineracao	BRL 13.16		-8.2%	521.3%	2.234
ARM	ZAR 191.17		-1.3%	78.7%	5.324
Cliffs Natural	USD 59.08		-0.4%	400.7%	7.989
Usiminas	BRL 52.47		-7.5%	151.2%	7.373
Sesa Goa	INR 419.40		-4.6%	490.3%	7.492
Assore	ZAR 725.00		-3.3%	113.2%	2.656
Labrador Iron	CAD 47.86		-5.6%	99.3%	1.476
Magnitogorsk	USD 1.00		-8.5%	347.1%	11.141
Tier II averages/total			-13.4%	219.5%	298.216
Weighted average			-14.0%	196.9%

TIER III, DEVELOPERS & OTHERS
Golden West Resources		AUD 0.70	-34.0%	164.2%	0.090
Ferrexpo		GBP 2.90	-1.8%	548.0%	2.551
Aquila		AUD 9.82	-13.7%	468.6%	2.847
Mount Gibson Iron		AUD 1.62	-13.6%	284.5%	1.565
AusQuest		AUD 0.12	-41.0%	43.8%	0.024
Murchison		AUD 2.49	-15.3%	378.8%	0.975
Cons.Thompson		CAD 8.85	-1.3%	527.7%	1.964
Atlas Iron		AUD 2.03	-14.0%	82.1%	0.816
Gindalbie		AUD 1.02	-21.5%	102.0%	0.649
Australasian Resources		AUD 0.44	-37.1%	51.7%	0.175
Northern Iron		AUD 1.34	-33.0%	64.8%	0.352
African Minerals		GBP 3.72	-18.2%	1573.0%	1.300
London Mining		NOK 20.30	-20.7%	126.8%	0.372
Baffinland		CAD 0.52	-30.7%	188.9%	0.171
Sundance Resources		AUD 0.14	-37.2%	92.9%	0.329
Cardero Resources		CAD 1.33	-32.5%	51.1%	0.075
Northland Resources		CAD 2.02	-2.4%	431.6%	0.215
Sphere Investments		AUD 1.25	-14.7%	492.9%	0.169
Admiralty Resources		AUD 0.01	-67.6%	9.1%	0.023
Giralia		AUD 1.68	-7.9%	435.1%	0.269
Sarda Energy		INR 199.90	-19.6%	299.8%	0.148
Red Hill Iron		AUD 3.35	-18.7%	235.0%	0.132
CBH Resources		AUD 0.12	-37.8%	271.0%	0.113
Strike		AUD 0.69	-44.6%	137.9%	0.081
Brockman		AUD 3.39	-1.2%	318.5%	0.423
Golden West Resources		AUD 0.70	-34.0%	164.2%	0.090
Centaurus Resources		AUD 0.06	-21.1%	122.2%	0.032
Ferraus		AUD 0.93	-3.6%	516.7%	0.148
New Millennium		CAD 1.15	-1.7%	325.9%	0.147
Petropavlovsk		GBP 9.72	-27.7%	138.8%	2.644
Indo Mines		AUD 0.30	-45.5%	93.5%	0.025
Cape Lambert		AUD 0.44	-30.7%	109.5%	0.224
Great Northern		USD 96.01	-1.1%	59.0%	0.144
Beowulf Mining		GBP 0.04	-21.6%	190.0%	0.003
Centrex		AUD 0.53	-34.4%	218.2%	0.146
Grange		AUD 0.39	-39.6%	102.1%	0.040
Sandur		INR 518.25	-33.8%	197.8%	0.098
Nalwa		INR 1,046.90	-30.4%	132.6%	0.117
BC Iron		AUD 1.15	-22.1%	244.3%	0.087
Western Plains		AUD 0.59	-13.9%	318.4%	0.056
IMX Resources		AUD 0.45	-10.1%	169.7%	0.080
Flinders		AUD 0.12	-39.1%	135.3%	0.196
Iron Ore Holdings		AUD 2.28	-8.8%	1472.4%	0.264
Mindax		AUD 0.49	-10.9%	50.8%	0.058
Aurox Resources		AUD 0.29	-41.8%	216.7%	0.050
Polaris Metals		AUD 0.71	-18.4%	610.0%	0.128
Haoma Mining		AUD 0.11	-46.3%	100.0%	0.018
Cullen Resources		AUD 0.05	-45.3%	88.0%	0.024
Adriana Resources		CAD 0.43	-40.3%	152.9%	0.033
Jupiter Mines		AUD 0.26	0.0%	200.0%	0.085
Macarthur Minerals		AUD 1.60	-8.6%	146.2%	0.037
Talisman Mining		AUD 0.96	-33.7%	377.5%	0.090
Anglesey Mining		GBP 0.32	-1.6%	740.0%	0.072
Ironclad		AUD 1.32	-16.5%	704.9%	0.052
Helix		AUD 0.08	-39.5%	82.9%	0.009
Maximus		AUD 0.02	-46.3%	4.8%	0.005
Venture Minerals		AUD 0.33	-35.0%	296.3%	0.044
Apollo Minerals		AUD 0.18	-56.3%	29.6%	0.019
Monax Mining		AUD 0.09	-22.5%	342.9%	0.012
Iron Mountain		AUD 0.07	-54.5%	32.0%	0.007
Cazaly		AUD 0.35	-33.0%	163.4%	0.031
Red Rock		GBP 0.02	-18.8%	129.4%	0.017
Renison Consolidated		AUD 0.01	-50.0%	500.0%	0.010
Baobab Resources		GBP 0.07	-62.5%	440.0%	0.016
Centrex Metals		AUD 0.53	-34.4%	218.2%	0.146
Averages/total			-25.9%	269.2%	21.329
Weighted averages/total			-17.7%	260.9%

Overall averages/totals			-22.2%	253.5%	785.276
Overall weighted averages			-10.5%	152.7%
* 12 month

Source:
market data; tables compiled by Barry Sergeant
miningweb.com

Big Gold, Big Gain

2010-03-01T12:52:00.000-08:00

The majority of major gold producers finished 2009 on a high note, generating record levels of operating cash flows, in line with the rise in the dollar gold price which notched up its eighth year of successive increases, rising from around USD 250 an ounce in 2001 to above USD 1,200 an ounce in December 2009. The fourth quarter was especially strong, underpinned as well by copper prices that moved above USD 3.00/lb, compared to the multi year low of USD 1.28/lb seen in December 2008.

Such copper prices, twinned with gold bullion notching up a record in nominal terms, saw overall aggregated operating cash flow for eight gold majors come in at USD 10.4bn for 2009, compared to USD 7bn in 2008, and USD 3.9bn in 2007. Copper price-assisted gold miners Barrick and Newmont , the world's two biggest gold miners, contributed USD 5.9bn of the total USD 10.4bn operating cash flow noted during 2009, following trends set in previous years.

Of the other gold majors that have so far reported for 2009 - AngloGold Ashanti, Newcrest, Gold Fields, Kinross, Harmony, and Lihir - AngloGold Ashanti and Gold Fields each reported more than USD 1bn in operating cash flow for 2009. Aggregate capital expenditure for the gold miners rose marginally in 2009 to USD 8bn, leaving free cash flow of USD 2.5bn, compared to negative free cash flow of USD 773m in 2008 and a significantly negative USD 2.6bn in 2007.

Cash dividend payouts increased from USD 792m in 2007 to USD 941m in 2009. The eight gold majors raised a notable total of USD 13.4bn from investors in rights issues across the three years. Much of this cash was earmarked for taking out hedge books, headed by Barrick, which in 2009 raised USD 4bn from shareholders, and ploughed USD 5.2bn towards eradicating its hedge book. Similar, but smaller, moves were made in 2009 and previously by AngloGold, Lihir and Newcrest.

Rights issues and improved free cash flows saw net debt for the eight gold majors falling from USD 9.1bn at the end of 2008 to USD 7.2bn a year later.

In general reflection of the relative scarcity of cash among gold majors, stock buybacks have been all but absent for some years, in sharp contrast to a number of major diversified resources stocks. BHP Billiton, the biggest, alone pushed USD 11.2bn cash into stock buybacks in 2006 and 2007, and mailed close to USD 5bn in cash dividends over the two years.

For years, gold companies of all sizes have promised, and promised, as gold bullion prices rose and rose. No matter its size, an expectation gap remains, and may be whittled down somewhat during 2010. The eight gold stocks mentioned carry an aggregate market value of USD 117bn, and returned a relatively modest USD 2.5bn in free cash flow for 2009. Combined cash dividends were USD 941m, as noted, giving a dividend yield well below 1%.

Could this be a year when gold majors focus on genuine returns to shareholders, rather than drawing attention to a good number of areas that sit on the periphery of underlying investor interest?

REPORT CARD FOR EIGHT GOLD MAJORS*

USD m	2009	2008	2007	Total
Operating cash flow	10,412.6	6,949.8	3,856.2	21,218.5
Capital expenditure	-7,961.3	-7,722.7	-6,452.6	-22,136.6
Free cash flow	2,451.3	-772.9	-2,596.4	-918.1

Equity raised	7,022.4	3,581.5	2,838.4	13,442.3

Cash on hand	8,572.9	3,438.8	5,222.6	8,572.9
Debt	-15,016.9	-12,368.6	-9,951.8	-15,016.9
Net debt	-7,156.5	-9,110.2	-5,171.6	-7,156.5

Dividends	-941.2	-808.2	-792.3	-2,541.7
* Barrick, Newmont, AngloGold Ashanti,
Gold Fields, Harmony, Kinross, Lihir & Newcrest

Given the persistent increase in dollar gold bullion prices, gold majors have fewer options available than mining rivals that produce little, or any, gold. A sampling of ten of the world's major mining companies shows a significant compression in aggregate cash flows during 2009 to USD 47.8bn, from USD 82.9bn recorded in 2008. The slowdown broadly reflected lower average commodity and metal prices during 2009.

However, the scope for recovery in commodity and metal prices beyond gold (and to some extent silver) has been, and remains, considerable. Dollar gold bullion prices fell about 30% in 2008, where metals such as copper fell by some 70%. Forecasting prices is a mug's game, but without persistently rising gold bullion prices, the priorities of listed gold stocks could become interesting.

source: miningweb.com

Consolidation of the gold price still continues as the strengthening dollar

2010-02-10T09:07:00.000-08:00

Continued strength in the dollar, at least in the short term, is likely to put further pressure on US dollar gold prices but, support from physical markets should help put a base under the fall and help prices consolidate around current levels.

This is the view of VM Group CEO, Jessica Cross who was speaking on the Mineweb Gold Weekly Podcast.

Cross says, the important thing to focus on now, with gold prices where they are is how the various sectors begin to respond to the change

"As we went up and we did so very steeply, the physical markets really did battle; certainly markets like Dubai, which is a conduit for a lot of the Middle Eastern countries and then into the Indian sub continent, went very quiet. There was some scrap generation but very little in the way of new buyers.

"Hopefully this kind of respite in the price will allow those markets to recuperate a little bit. Because at the end of the day we have to have physical coming off the market and those physical areas really do support the supply demand balance in the long run.

She says, physical buying has picked up somewhat and gold coins doing particularly well as well, adding, "if indeed the US is out of recession as people have been talking about then maybe you are going to have a resurgence of jewelry buying, luxury spending coming into 2010 that would be a very nice feature to see - renewed consumer confidence coming in and buying jewelry which was badly hit as the price went up."

Another interesting element within the supply demand balance is the role of ETFs which, Cross says, have been remarkable products that came to market at exactly the right time. She says, while the buying of ETFs has slowed in recent months, as gold prices have risen, you have yet to see lots of people divesting of their holdings.

"That means the sort of investor who is going into the ETFs is a long term holder and thus I wouldn't expect large shorting of ETF holdings. That says very encouragingly that that metal is off the market. So you have these long holdings of ETFs which I believe are very stable holdings and that ergo is supportive of the price "

Source:mineweb

BHP Billiton stepped quietly

2010-02-10T06:39:00.000-08:00

First blush headlines on half year results to 31 December 2009 for BHP Billiton appeared to have focused on profit after tax, which increased to USD 6.2bn from USD 3bn in the comparable 2008 period. A more useful reflection of the business experience of the world's biggest diversified resources stock came by way of net operating cash flows, recorded as USD 5.7bn for the latest six months, compared to USD 13.1bn for the comparable period in 2008.

One of the main reasons for the significant contraction in cash flows came by way of a fall in trade and other receivables; the group commented that "current period cash flow was negatively impacted by increased working capital on the back of a recovery in demand and prices".

Seen at the underlying earnings before interest and tax (EBIT) level, the latest six months' number was at USD 8.5bn, compared to USD 11.9bn for the same period in 2008. While investors may take some time to digest the results of this vast group, it is instructive to note that BHP Billiton has declared a dividend of 42 US cents for the six months to 31 December 2009, an increase of a cent a share on the comparable 2008 period.

The 2009 period was, of course, noted for how even some of the world's biggest mining names suspended dividends, most famously, perhaps, Anglo American, but also Rio Tinto, and Xstrata, the other three "London diversifieds". BHP Billiton paid cash dividends of USD 4.6bn during 2009.

Given that BHP Billiton's visions and plans are more accustomed to dealing with decades, never mind years or even months, the latest results, while pleasing at the headline level, point to a period of consolidation that commenced at some point during 2009. Seen on a calendar year basis (the group's fiscal year ends on 30 June), BHP Billiton's operating cash flow for 2009 was put back to levels seen in 2005 and earlier.

The so-called commodities supercycle, which was triggered in early 2002, peaked out during a year or so between mid-2007 and mid-2008, so far as commonly seen spot prices, such as for copper, are concerned. BHP Billiton's overall cycle continued for some time, given that a substantial amount of its business is performed in terms of 12-month contracts. These started biting into cash flows during 2009, as agreed price cuts, not least for iron ore, started to gain traction. But where most spot prices for commodities that don't trade in contract markets crashed during the second half of 2008, so it was that these recovered, sometimes substantially, during 2009.

In the latest half year, BHP Billiton's underlying EBIT from its iron ore division was beaten down to USD 2.1bn, compared to USD 4.1bn for the six months to 31 December 2008. For coking coal, the number fell hugely to USD 772m, from USD 3.1bn. Manganese numbers dropped to USD 190m, from USD 1.3bn.

The most significant reversal in the other direction came from base metals (mainly copper; aluminum and nickel are separately reported), which chimed in with underlying EBIT of USD 2.5bn, compared to a loss of USD 111m for the six months to 31 December 2008.

BHP Billiton, financial year to 30 June

Underlying earnings before interest & tax

	Half year	Half year	Annual	Annual	Annual
USD m	2010	2009	2009	2008	2007
Oil & gas	2,326	2,675	4,085	5,485	3,014
Aluminium	154	289	192	1,465	1,856
Base metals	2,462	-111	1,292	7,989	6,875
Diamonds/other	170	79	145	189	197
Nickel	200	-752	-854	1,275	3,675
Iron ore	2,091	4,143	6,229	4,631	2,728
Manganese	190	1,245	1,349	1,644	253
Coking coal	772	3,123	4,711	937	1,247
Steam coal	332	1,072	1,460	1,057	481
Other	-195	136	-395	-390	-259
Total	8,502	11,899	18,214	24,282	20,067

Among the smaller divisions, there were also improved numbers from diamonds, and nickel, where the turnaround was massive. Profits from steam coal and also aluminum dropped. The overall contraction in cash flows and maintenance of a progressive dividend policy, along with significant capital expenditure programmes, saw net debt (including cash) increase from USD 4.2bn on 31 December 2008 to USD 7.9bn a year later.

While this represents a significant rise in debt in percentage terms, the numbers are relatively small for a group of BHP Billiton's size, providing loads of room for further debt raising, should that become necessary in the face of big new projects. Since 31 December 2009, BHP Billiton has approved USD 2.2bn pre-commitment capital expenditure for projects in iron ore, metallurgical coal and potash, and the approval of the Antamina expansion in Peru. Projects under development, where a total of USD 11.7bn of capital expenditure is already involved, are scheduled to start initial production within the next three years.

Over the past five calendar years, BHP Billiton has paid a total of USD 15bn in cash dividends, and returned USD 11.7bn in cash to shareholders by way of stock buybacks.

BHP Billiton
Calendar year, USD m	2009	2008	2007	2006	2005
Operating cash flow	11485	23383	16439	13186	9485
Capital expenditure	-8753	-9150	-7791	-6014	-4409
Other	-1534	-1978	-1944	-877	-7411
Net	1198	12255	6704	6295	-2335

Free cash flow
Operating cash flow	11485	23383	16439	13186	9485
Capital expenditure	-8753	-9150	-7791	-6014	-4409
Free cash flow	2732	14233	8648	7172	5076

Stock buybacks	-246	-204	-7617	-3534	-130

Cash on hand	8382	7195	2294	1423	809
Debt	-16297	-11363	-14298	-8629	-9533
Net debt	-7915	-4168	-12004	-7206	-8724

Dividends	-4564	-3893	-2694	-2159	-1684

source:mineweb.com

Anglo America on the beat

2010-02-08T17:55:00.000-08:00

On Monday, Anglo Platinum, the world's No 1 name in platinum group metals (PGMs), held 80% by Anglo American, announced a R12.5bn (about USD 1.6bn) rights issue that, naturally, will be underwritten by Anglo American.

The issue has a twist, to the extent that Anglo Platinum's debt owed to Anglo American will simply be swapped for equity issued by Anglo Platinum, so that only around ZAR 2.5bn (about USD 325m) in cash will be raised, from minority shareholders. Anglo Platinum paid no cash dividends to speak of in 2009, but across 2006, 2007 and 2008, cash dividends to the sum of USD 4.1bn were paid, mainly to Anglo American. At Anglo Platinum net cash of USD 698m at the end of 2006 turned into a horribly negative net debt of USD 2.6bn at the end of 2009.

In the background, free cash flows at Anglo Platinum fell from a positive USD 1.6bn in 2006 to a negative 785m for 2009. Under pressure from Anglo American, Anglo Platinum has spent years paying out huge dividends that were nowhere nearly covered by free cash flows. Anglo Platinum's "rights issue" will alleviate pressure on its balance sheet for now. Minority shareholders have been offered a deeply discounted rights issue price, limiting the chances of a hullabaloo being raised around the strange structure of the rights issue.

As chief plumber, carpenter and bricklayer, Anglo American is now on repair duty. There is no rights issue cash flow, as such, between Anglo American and Anglo Platinum. Anglo American's latest detailed financial results, for the six months to 30 June 2009, indicated net group debt of USD 11.3bn, ranking the group as one of the world's most indebted mining companies, along with Rio Tinto and Xstrata (which made a play, that could have been serious, for Anglo American, during 2009). Anglo American's net debt had been a relatively modest USD 3.2bn at the end of 2006.

Anglo Platinum
USD m	2009	2008	2007	2006
Operating cash flow	558.0	2087.0	1964.0	2512.0
Capital expenditure	-1343.0	-1740.0	-1511.0	-963.0
Other	122.0	-12.0	89.0	107.0
Net	-663.0	335.0	542.0	1656.0

Free cash flow
Operating cash flow	558.0	2087.0	1964.0	2512.0
Capital expenditure	-1343.0	-1740.0	-1511.0	-963.0
Free cash flow	-785.0	347.0	453.0	1549.0


Debt repaid/(raised)	-829.0	-1270.0	-1074.0	547.0

Equity raised	3.0	10.0	14.0	25.0

Cash on hand	479.0	309.0	597.0	712.0
Debt	-3088.0	-1701.0	-1123.0	-14.0
Net debt	-2609.0	-1392.0	-526.0	698.0

Dividends	-1.0	-1671.0	-1741.0	-717.0

Anglo American has also apparently pressed heavily for dividends from even 45%-held De Beers, which paid out total cash dividends of USD 730m across 2006 to 30 June 2009, a period when it generated negative free cash flow of USD 864m. Beyond that, capital expenditure for De Beers was extraordinarily heavy during 2006 and 2007.

Increasingly strapped, De Beers apparently reached a point during 2008 when it could raise no more debt, and had to rely instead on advances from its shareholders, which include the Oppenheimer family and the Botswana government. For some months now, De Beers has been working on finalizing a USD 1bn rights issue, aimed at fixing its badly damaged balance sheet.

De Beers
USD m	6m09	2008	2007	2006
Operating cash flow	-31	700	844	809
Capital expenditure	-86	-403	-1503	-1194
Acquisitions & sales	-9	-39	-109	442
Net	-126	258	-768	57

Free cash flow
Operating cash flow	-31	700	844	809
Capital expenditure	-86	-403	-1503	-1194
Free cash flow	-117	297	-659	-385


Debt raised			-804	-402

Shareholder advances	500	248

Net debt	-3329	-3552	-4057	-2994

Dividends	-74	-358	-125	-173

Anglo American's eccentric approach to mining finance was fully on show during 2009. The group raised USD 434m and USD 1.3bn selling the final two legacy tranches of stock it held in AngloGold Ashanti. Anglo American stated that it had secured a USD 1bn loan from the Brazilian development bank, BNDES, for the Minas-Rio iron ore project.

In August 2009, Anglo American launched a USD 1.5bn convertible, a hybrid debt-equity instrument. In a speech at Anglo American's AGM held in London, CEO Cynthia Carroll said: "In terms of liquidity, you will also have seen that just two weeks ago we launched a highly successful USD 2bn bond, for which there was extremely strong demand from investors in both North America and Europe".

While a number of media reports had the two issues as one, the USD 2bn corporate bond and USD 1.5bn convertible are two completely separate instruments. Given certain conditions, the convertibles may at a future date see creditors convert asset debt into equity - ordinary shares - in Anglo American. In the meantime, the convertibles carry interest, like a straight bond. Anglo American pays a far larger coupon, or interest rate, on its bonds, than BHP Billiton, reflecting investor perception of risk.

2009 CORPORATE BONDS

		Million	Coupon	Due
BHP Billiton	Bonds	USD 1,500	5.500%	2014
Rio Tinto	Bonds	USD 2,000	8.950%	2014
Anglo American	Bonds	USD 1,250	9.375%	2014

BHP Billiton	Bonds	USD 1,750	6.500%	2019
Rio Tinto	Bonds	USD 1,500	9.000%	2019
Anglo American	Bonds	USD 750	9.375%	2019

BHP Billiton	Bonds	EUR 1,250	4.750%	2012
BHP Billiton	Bonds	EUR 1,000	6.375%	2016

Anglo American, however, resisted a rights issue during 2009, unlike Rio Tinto, which raised USD 15.2bn by issuing fresh shares, and Xstrata, which raised USD 6.4bn. Rights issues, indeed, were the order of the day across the global resources sector, along with bond, and convertible, issues. Even Freeport-McMoRan, one of the world's most cash generative mining entities, raised fresh equity.

Unlike Vale, BHP Billiton and Rio Tinto, which together own about 75% of the market in seaborne iron ore, the world's most lucrative mining franchise, Anglo American is only a minor (but growing) player in the market. As such, Anglo American's half year 2009 financial results took a particular beating.

Anglo American
Underlying earnings, USD m	1H08	1H09
Base metals	1494	454
Ferrous metals/industries	705	336
Coal	543	505
Platinum	850	30
Diamonds	166	-67
Industrial minerals	139	18
Exploration	-93	-67
Corporate & other	-321	-113
	3483	1096
Source: Anglo American

Anglo American also has a large capital expenditure programme, relative to its size, not least on growth and assets. During 2007 and 2008, Anglo American paid a total of USD 6.7bn in cash to buy 100% of Minas Rio in Brazil, and also 49% of LLX Minas Rio (port of Açu). Anglo American may have already spent billions acquiring Minas Rio, but has budgeted a further USD 3.6bn for capital expenditure to fully develop the phase 1 (only) system, due to reach full production only towards the end of 2013, at the rate of 27m tons a year, wet basis.

(c)mineweb

Australian market conditions at the beginning of this week

2010-02-08T13:55:00.000-08:00

The rout in commodity prices continues, driven by a strong dollar and a general move away from assets deemed too risky. A relatively modest rise of one per cent in the dollar last week was outweighed by a 6.5 per cent fall in the price of copper to US$6,570 a tonne.

So, even though the Aussie dollar fell by 2.5 per cent, producers in that country still saw a real fall in their domestic price. Other metals experienced similar declines. Aluminium dropped 3.5 per cent to US$2,051 a tonne, lead by 4.3 pre cent to US$2,000 a tonne, zinc by 3.4 per cent to US$2,082. Only nickel that managed a gain, and even that was modest, a mere 0.7 per cent increase to US$18,250 a tonne.

These falls gave back a lot of the ground that commodities have gained in recent months. Not only is copper now down 14 per cent on the year, but it is actually back to the level it was at in mid-October. The same argument goes for other asset classes that share the pro-growth attributes that metals do. The most notable downward moves have been visible on the stock markets on the southern fringe of the euro zone. The Athens market was marked down by 8.3 per cent, Spain’s fell by 7.7 per cent, and Portugal’s by 7.2 per cent.

This sudden about turn in the mood of capital markets has had one high profile casualty, so far. Man Group grew out of the ED&F Man sugar trading business to become one of the most powerful hedge funds in the business, with a flagship worth over US$20 billion.

The exact nature of Man’s investment process is a closely guarded secret, but it is known that the strategy is based around the futures markets with a significant exposure to commodities. In essence it seems that the complex algorithms are very good at following and extrapolating trends.

Or at least were. The last financial year, and especially the last few months, have not been kind to Man, which has suffered the double whammy of an underperforming fund and redemptions. Funds under management have now fallen from US$47 billion to US$42 billion, and this poor performance means that the fund cannot charge its lucrative performance fees.

As a consequence its market value has fallen from £5 billion to £3.7 billion, and its current yield is over 12 per cent. For anybody seeking a cheap and highly geared way to play the commodity markets Man Group must be an interesting opportunity. Provided of course it can get its computers to work out which trend it should be following.

That of course is the nub of the problem for everyone following the commodity markets. The trend is your friend until the bend at the end.

Last year was an exceptional period for commodities, and China seemed to be the only game in town. While that story has not gone away, it is being pushed into second place by the other cross currents in world capital markets.

Now, there is real concern over the eurozone, and the dollar, despite all its problems, is deemed to be a much safer place to be. Perhaps the oddest development last week was the weakness in the gold price. Gold’s fall of 2.3 per cent was due to more than the rise in the dollar. If traders buy gold when they are worried about the dollar why do they buy dollars when they are concerned about the euro? Perhaps someone at Man Group is working on that.

Source:minesite

London mining markets report last week

2010-02-08T11:39:00.000-08:00

The gains made in the first half were wiped out on Thursday and Friday as the market continued to fret about the financial health of some European countries, in particular Greece and Portugal. These concerns fed a more general malaise and commodities were sold off sharply, with gold suffering its largest one day fall for more than a year. The FTSE 100 miners fell by an average of 3.0 per cent, while the mid and small cap stocks lost 3.3 per cent.

Antofagasta (LSE: ANTO) was among the worst performers of the FTSE 100 miners, suffering a 6.1 per cent fall to 826.25p, presumably because the market was disappointed with its fourth quarter production report. Copper cash costs at the Los Pelambres mine in particular rose sharply year-on-year, principally because of the reduced contribution from the by-product molybdenum. Interestingly, the story of a few weeks ago that the company had lost its rights to the Reko Diq project in Pakistan was not confirmed. What the company did say was that whilst the technical aspects of the feasibility study into Reko Diq have been completed, discussions for agreements with the relevant authorities are in progress (whatever that might mean).

The actual worst performer was Xstrata (LSE: XTA), which fell by 7.9 per cent to 950.05p. This followed the release of a production report which showed that the company's operations are only slowly recovering from the chaos of late 2008 and early 2009. The best performer of the week among the majors was Fresnillo (LSE: FRES), which fell by only 0.4 per cent, on no news.

First Quantum (LSE: FQM) was one of the week's weakest performers, falling 11.8 per cent to 4,160.5p after it commenced international arbitration in Paris against Gécamines and the Democratic Republic of Congo over the confiscation of its partly constructed Kolwezi tailings retreatment project. This appears to be a move of last resort as First Quantum has established a solid track record as a high quality operator both in DRC and over the border in Zambia, and it is surely in the interests of everyone for a compromise to be negotiated. First Quantum also operates the Frontier mine in DRC and has other operations elsewhere.

In corporate news, European Nickel (AIM: ENK) and Rusina (AIM: RMLA) announced that they intend to merge. The deal is intended to create a mid-tier nickel producer with a pipeline of projects in geographically diverse locations, and to bring together two capable operating teams. European Nickel's Çaldağ project in Turkey will still be the first priority, though this will be closely followed by Acoje project in the Philippines. At the same time, European Nickel has just completed a £12.1 million placing, in part to repay the bridging loan it received from Endeavour Financial Corporation, but also to provide funds to advance the projects. European Nickel is still waiting for Jiangxi Rare Earth and Rare Metals and China Tianchen Engineering to complete the approvals for the project funding for Çaldağ. This process has been dragging on for almost a year now. The Rusina deal effectively gives European Nickel a “Plan B” in case Çaldağ is delayed, and is helped along by the fact that it already has a 20 per cent interest in Acoje and a small direct holding in Rusina. European Nickel ended the week down by 4.3 per cent at 6.7p, while Rusina added a modest 2.3 per cent to finish at 5.5p.

Minco (AIM: MIO) announced that it and joint venture partner Xstrata are to spend around US$10 million this year on continuing exploration at the Pallas Green zinc-lead project in Ireland. The exploration work will involve the use of 16 drilling rigs and will include around 70,000 metres of drilling in around 150 holes. This will be the largest single exploration campaign in terms of annual metres ever undertaken, in Ireland and represents a substantial vote of confidence from Xstrata as it will be funding the majority of the work. Xstrata clearly thinks that there is the potential for the size of the project to be substantially increased over the present JORC compliant resource of around 11.3 million tonnes grading 12% zinc+lead hosted within the Tobermalug deposit. The same geology continues for a strike length of 25 kilometres and about 60 per cent of the trend remains unexplored. This is excellent news for Ireland's zinc mining industry, which has been going through some difficult times recently following the 2009 closure of Galmoy mine, cutbacks at Lisheen, and concerns that the Irish zinc flagship, Tara, is nearing the end of its life. Oddly, given the very positive tone of the announcement, Minco ended the week down by 7.4 per cent at 3.125p, though with a closing spread on Aim of 24 per cent, the move is probably not significant.

The week's best performer was coal-focussed GCM Resources (AIM: GCM) which rose by 13.9 per cent to 107.875p on no real news, though it appears that one of its major shareholders has slightly reduced its position.

Next up was another coal stock, Coal of Africa (AIM: CZA), which added 10.9 per cent to end the week at 132.5p after it announced that it had been granted the New Order Mining Rights for its flagship Vele coking coal project in the far north of South Africa. Rights were also conditionally granted for the company’s smaller Holfontein project. Coal of Africa expects to execute both sets of mining rights fully before the end of February. It will then move rapidly towards the development of Vele. The permitting logjam within the South African Department of Mineral Resources has been a severe obstacle to doing business there and so this has to be excellent news for the region's aspiring miners.

Third up was one of the sector's sleepers, Alexander Mining (AIM: AXM). Alexander ended the week up by 10.5 per cent at 11.875p, though before it was hit by profit taking at one stage it was up by more than 20 per cent. The company announced that a long-rumoured series of discussions with various multinational mining companies had resulted in the receipt of a preliminary, non-binding proposal for the outright purchase of the rights to its proprietary Ammleach ammonia leaching process. Alexander is now moving forward with the appointment of independent experts to establish the commercial value of the technology.

On the downside, the selling was for the most part driven by general market nervousness and there was little of substance to report. For now, the markets are in the grip of macro events and until this works through there is little that the miners can do to change sentiment. At least this is a state that they are now familiar with managing.

source:minesite

Australian market's report last week

2010-02-08T07:29:00.000-08:00

Still here actually. Just finishing up before heading home, so last week’s market report is a long distance look, and might have to be a bit shorter than usual.

Before getting to the market, then, perhaps a final word on Indaba, and how you read the mood of the mining industry.

Healthy is the one-word answer, but not yet robust. It seemed that the conference itself was dominated by suppliers and service providers trying to sell their assorted wares. Genuine miners and bankers were perhaps a little thin on the ground, which was to be expected after such a tricky time over the past 18 months. Australian miners were well represented, and the London banking crowd was here at about 75 per cent strength. There were plenty of bow ties and pinstripe suits on display, a look which is so totally out of place on the Cape Town waterfront, but at least Jeremy Dowler from Baobab Resources had the good sense to look much more relaxed, complete with a long fruity drink, when he hosted a very pleasant farewell lunch at Camps Bay on Friday.

And with your binoculars on at Camps Bay how did the Australian stock market perform last week.

If you ignore Friday’s sell off, not badly. The last day of the week was the bad one, with the all ordinaries index on the ASX diving by 2.4 per cent and the metals and mining index plunging by 3.9 per cent after the sharp fall on Wall Street. But, if you take a longer view, the picture wasn’t quite so bad. There were two up days last week and three down. That averaged out as a pretty modest decline in the metals index of just 0.7 per cent. The gold index was down two per cent, and the all ordinaries 1.4 per cent. BHP Billiton, the local market leader, actually ended the week up A15 cents, a good sign that even in a sell-off there are buyers hunting out quality stocks.

Time for prices, and since you’re in South Africa let’s start with gold.

Falls across the sector, as expected, but most by modest amounts. If you look really hard you can even find a couple of stocks which rose. Ramelius (RMS), which released a statement outlining the likelihood of good profits on Friday, added A2.5 cents to A56 cents. And Emmerson Resources (ERM), one of the Tennant Creek crowd, crept half a cent higher to A20 cents. After that it’s all down. The biggest fall was a drop of A22 cents to A77.5 cents suffered by Carrick Gold (CRK). Other movers included Kingsgate (KCN), down A67 cents to A$8.51, Resolute (RSG), down A4 cents to A94.5 cents, Gryphon (GRY), down A3.5 cents to A40 cents, Chalice (CHN), down A7.5 cents to A35.5 cents, and Troy (TRY), down A6 cents and A$2.10.

We get the picture, let’s move through the sectors with iron ore next, please.

Same story, one up and lots down. The odd man out was FerrAus (FRS), one of the emerging small players in the Pilbara region, which will probably do a deal with a major, eventually. It added A3 cents to A76 cents over the week. Now comes the list of the fallen. Firstly, Fortescue Metals (FMG) dropped just A2 cents to A$4.51, despite the corporate cops announcing that they would appeal the verdict in the case they lost against FMG’s chief executive, Andrew Forrest. Other movers included Atlas (AGO), down A9 cents to A$1.85, Gindalbie (GBG), down A4.5 cents to A90.5 cents, Giralia (GIR), down A2 cents to A$1.52, Brockman (BRM), down A4 cents to A$2.71, and Iron Ore Holdings (IOH), down A5 cents to A$2.13, though that fall needs to be seen in the context of a A16 cents drop on Friday alone.

In other words, Iron Ore Holdings was well ahead before Friday’s shake out?

Precisely. It makes the point that it was more a case of one bad day wiping out a reasonably positive trend.

Let’s move along to the fuel twins, uranium and coal, please.

All down among the uranium stocks, but it was a surprisingly strong week for coal. Extract (EXT) led the way down among the uranium stocks, despite plenty of Indaba-linked publicity and a good story to tell about the Rossing South project. It fell A60 cents to A$7.30. Manhattan (MHC) lost A16 cents to A$1.37. Mantra (MRU) fell A43 cents to A$5.30. Forte (FTE) lost A1.5 cents to A17.5 cents, and Paladin (PDN), which had been the darling of the Australian uranium pack, fell another A12 cents to A$3.52, a price which is exactly A$2.00 off the peak of A$5.52 reached last June.

Coal was the sector which performed best over the week despite losing ground on Friday. Coal of Africa (CZA) was the star attraction, adding A19 cents to A$2.34, in spite of some heavy selling on Friday. Macarthur Coal (MCC) added A8 cents to A$9.53, an even more impressive result because it dropped A56 cents on Friday. Whitehaven (WHC) rose by A15 cents to A$4.58, while Riversdale (RIV) had a tougher week than most, losing A49 cents over the week to close at A$6.96, with A43 cents of the fall coming on Friday.

Base metals now, please.

Not much joy here. The most notable performance came from Sabre Resources (SBR), which appears to have been the only base metal play to gain ground, perhaps courtesy of our mid-week report on its exploration activities near the historic Tsumeb copper mine in Namibia. Sabre added A3 cents to A40 cents. The only other stock to avoid the sector-wide sell-off was zinc hopeful Mt Burgess Mining (MTB), which managed to stand still at A1.4 cents, not a bad effort in a sea of red ink. Other zinc movers included Terramin (TZN), down A6 cents to A70 cents, Perilya (PEM), down A7 cents to A54 cents, and CBH (CBH), down A1.5 cents to A12.5 cents.

Other copper movers included OZ Minerals (OZL), down A9.5 cents to A97.5 cents, Sandfire (SFR) down A28 cents to A$3.42, Equinox (EQN), down A13 cents to A3.60, and Marengo (MGO), down A1 cent to A12.5 cents.

Nickel stocks were led by Mincor (MCR), which slipped A4 cents to A$1.42, and which like so many others, had its worst day of the week on Friday. Other nickel movers included Independence (IGO), down A39 cents to A$3.75, and Panoramic (PAN), down A12 cents to A$1.72.

source:minesite

Canadian mining market behavior

2010-02-08T03:56:00.000-08:00

It was another ugly week for the bulls as increased concerns that some nations will default on their debt had investors heading straight towards the perceived safety of the US dollar. That in turn put pressure on commodity prices, which were weaker across the board. Interestingly, the broad basket of gold producers actually gained ground even as bullion prices touched three month lows. Perhaps this is setting the stage for an imminent rally for the gold guys. Once all the trading was done the TSX Ventures Exchange, home to more junior exploration companies than anywhere else in the world, had dropped another 2.41 per cent, while the TSX Gold Index went the other way, having posted a 4.96 per cent gain.

First Uranium was dealt a blow by the South African government's unexpected decision to revoke the environmental permits needed for its Mine Waste Solutions tailings recovery project. Without the permits the company has been forced to discontinue development and now is going into cash preservation mode.

Gold Wheaton has also been impacted by this news.

Yep, the gold royalty upstart paid US$125 million in exchange for the gold purchasing rights from First Uranium’s mines. First Uranium’s inability to deliver the gold could trigger a US$42 million payment to Gold Wheaton, but the question is: will First Uranium have the money to pay?

Meanwhile I see Gold Wheaton consolidated its shares on a 10-old-for-one-new basis and has moved over the TSX from the TSXV.

The idea behind Gold Wheaton was to emulate the very successful strategy of Silver Wheaton. So far the idea has not really delivered on its promise, but a big board listing doesn’t hurt. In the meantime, First Uranium is seeking strategic alternatives and will restructure its operations. Gold Wheaton ended the week down C$0.67 on a share split adjusted basis at C$2.35, while First Uranium fell C$0.48 to close at C$1.44.

Elsewhere, the long running take over saga of Khan Resources may finally be coming to a conclusion. After a number of false starts and stops, Chinese run CNNC Overseas Uranium Holding has tabled a C$0.96 per share cash offer for Khan. That tops the C$0.65 per share offer currently on the table from state-owned Russian rival JSC Atomredmetzoloto. And investors obviously smell a potential bidding war because Khan ended the week up C$0.14 at C$1.00.

In exploration news, Apoquindo Minerals tagged 167 metres grading 0.89% copper and 0.18 grams per tonne gold at its Zafranal property in southern Peru. The junior is earning a 51 per cent interest in the ground from Teck Resources. Apoquindo ended the week down C$0.03 at C$0.82, while Teck closed at C$34.20 for a C$0.81 loss.

Also in Peru, International Minerals boosted the resource at its 51 per cent-held Inmaculada gold-silver project. The indicated resources now tallies 1.2 million tonnes grading 3.9 grams gold per tonne and 122 grams silver per tonne, while the inferred resource adds 4.7 million tonnes averaging 3.4 grams gold and 147 grams silver. London-listed Hochschild Mining holds the other 49 per cent stake in Inmaculada. The news was not good enough to keep the company in the black because International Minerals ended the week down C$0.10 at C$4.25.

Also doing well with the drill bit, Treasury Metals added C$0.08 to close at C$0.55 after reporting a drill intercept of 19.34 grams gold per tonne over 1.5 metres at its Goliath gold project in northwestern Ontario.

And Rubicon Minerals continues to hit the goodies at its Phoenix project in Red Lake, Ontario. The latest results included 14.3 metres of 20.7 grams gold per tonne. Rubicon ended the week up C$0.50 at C$4.76.

Meanwhile, American Bonanza Gold tabled a feasibility study for its small Copperstone gold mine in Arizona. The study showed that some 45,891 ounces of gold could be produced over the first three years at cash production costs of US$415 per ounce. Capital costs ring in at US$17.74 million and the after tax net present value amounts to just over US$51 million. American Bonanza ended the week up C$0.005 at C$0.18.

On the legal front, various legal claims involving Coalcorp were settled this week, and Coalcorp ended the week up C$0.04 at C$0.20.

In fundraising news, Nevsun Resources is looking to pocket some C$117 million after announcing a non-brokered private placement financing involving the issue of 52 million shares priced at C$2.25 per share. The funds are earmarked for the development of the company’s Bisha gold-rich massive sulphide deposit in Eritrea. Nevsun ended the week up C$0.25 at C$2.30.

And sticking to the financing theme, Gleichen Resources is looking to raise a cool C$50 million for its Morelos gold deposit in Mexico. The price per share is set at C$1.00. Gleichen ended the week down C$0.13 at C$0.96.

Finally, over to the copper side of things where Equinox Minerals announced that it had secured bank financing to the tune of C$400 million. The money will be used to repay some of the company’s existing debts, incurred to fund the development of its Lumwana mine in Zambia. Equinox ended the week down C$0.08 at C$3.39.

Canadian stocks continued to fall as investors unloaded a portion of their metals and mining exposure in the wake of falling commodity prices. Bullion had its worst week since 2008 but the gold bugs remained firm in the view that the US dollar will eventually crumble. For the junior bourse, the first trading week of February resulted in the fourth consecutive weekly loss. So far in 2010, we have only had one winning week. On the bright side, buyers did enter the market late during Friday’s session so perhaps the selling tide is started to reverse. We will see what next week’s trading has in store.

source: minesite

Gold distressed by the strengthening dollar

2010-02-01T21:27:00.000-08:00

During January gold traded sideways to lower mainly due to the stronger US dollar. The Euro was also hit hard on concern about Greece's fiscal health. The Euro fell to its lowest level against the greenback in more than six months and helped lift the dollar to a five-month high against a basket of key currencies on Friday.

The January FOMC statement indicated that the Fed funds rate will be kept at 0-0.25%. The U.S. economy recovered at a quicker pace than most economists expected in the last quarter of 2009. The U.S. gross domestic product surged 5.7% for Q4 of 2009, well above market consensus of 4.5%-4.8% and it is the largest quarterly growth since the third quarter of 2003 at 6.9%.

Since early December 2009 the greenback has rebounded 8% as measured by the Dollar Index which has risen from a low of 74 to touch 80. The strength in the US dollar has put some pressure on the price of gold. However the lower price in gold seems to be attracting physical buyers from Asia, particularly China. In Asia, premiums for gold bars jumped to their strongest since December 2008 as weaker bullion prices ignited buying from investors and Chinese consumers ahead of the Lunar New Year. Demand for gold should be supported by buyers in China ahead of China's Lunar New Year this month and seasonal demand from India tends to increase in February and March.

Sarkozy, the French President, is quoted as saying that there should be a return to the Bretton Woods standard and the France would pursue the establishment for a new global monetary order at the center of its agenda in its chairmanship of the Group of Eight next year. While I don't see that this is will happen, it does show that the role of gold is becoming more important.

The sell-off in gold seems to have broken through some short-term technical indicators which may prompt further selling. However, the long-term trend remains very much intact and if gold falls further, it may create a wonderful buying opportunity ahead of the next leg-up.

While there are several ways in which investors can participate in this market, it is advisable to first accumulate a holding of the physical metal. And, traditionally the best way to do this is to acquire gold bullion. Investors should view gold to be part of their savings and allocate a portion of their funds to developing a precious metals portfolio that includes a holding of gold. Other ways to buy gold include gold bullion coins such as the Krugerrand, the American eagle, and the Canadian Maple Leaf etc. They can also invest in a gold exchange traded fund (ETF) and gold shares. While there are several ways in which investors can participate in this market, it is advisable to first accumulate a holding of the physical metal. And, traditionally the best way to do this is to acquire gold bullion. Begin to accumulate gold on a regular basis. You can do this, month-in and month-out, or bi-monthly or every quarter depending on which of these alternatives better suits your budget. View gold to be part of your savings.

Technicals

While the long-term trend in gold still remains very much intact, since the December highs of $1225, gold has retraced 16%. It is now trading close to a support level (S1) at $1075. As the US dollar may continue its run, gold could experience further downside. However if it falls to $1025 which almost coincides with the 200 day moving average at (S2), I believe that this will offer buyers a wonderful opportunity to enter the market.

For more information go to: www.lakeshoretrading.co.za

Correction occurs in metals prices

2010-02-01T18:39:00.000-08:00

Someone once said that there is always a bull market going on somewhere. Well, last week it certainly wasn’t in the metals markets. Bizarrely, the cause of the weakness in metals was the markets finally giving up hope on Greece. That put pressure on the euro, which fell by 1.6 per cent against the dollar. A strong dollar usually means weaker metals prices. At least in dollar terms, as the greenback rises values in other currencies will remain at similar levels.

Metal prices have been heading for a correction for some time. Even the fan club at RBS, under the guidance of Nick Moore, expect prices to consolidate this year, so the near nine per cent drop over the week in copper, to US$6,840 a tonne, should not have been wholly unexpected. Even so, it wasn’t very nice and it did no favours to the miners, until they put on a late rally on Friday.

In percentage terms the drop suffered by lead was similar to that suffered by copper. Lead was off by 9.6 per cent to US$2,055. Zinc did even worse, and dropped by dropped 12.1 per cent to US$2,150 a tonne. Aluminium and nickel escaped relatively lightly, however. Aluminium dropped by 5.9 per cent to US$2,097 per tonne, while nickely fell by 3.5 per cent to US$2,097 a tonne.

What makes these downward moves somewhat odd is that they happened in a week when the US recorded exceptionally strong economic growth. The latest data shows that the US economy grew at a rate of 5.7 per cent over the fourth quarter of 2009. As ever, the trick to understanding the data is to know what the market was expecting in the first place, and what it was not. The US growth figures were expected. What upset the market was that China denied it was going to refinance Greek debt after the Greeks dropped strong hints it was. As a consequence spreads on Greek bonds shot out to 400 basis points and the euro took a hit.

No one expects the euro to collapse because the Greeks have been economical with the actualité – no one’s surprised about that fast and loose approach in any case. But this situation does remind investors that the euro is actually a political fudge masquerading as an economic solution. Europe is saying let’s pretend Greece has a similar democratic and economic system as the rest of developed Europe, and let’s let Greece pretend to agree.

The more that compromise is probed and stretched the more strain it will put on the euro. That can only depress it relative to the dollar, which is anyway looking a lot better than the yen as the credit rating agencies are now starting to put Japan on negative watch.

The weak reaction of gold to all this tension is at first glance a little odd. Is the dollar a much better bet simply because everything else looks a bit worse? Not really. Nothing has actually happened to boost the greenback. It just looks safer in relative terms. Gold, even at US$1,076 an ounce, is the one part of the equation that cannot be tampered with.

So, over the next few months, and more, it would not be a surprise to see some of the recent confidence surrounding the global economic recovery drop away a little. That could put more downward pressure on base metals, due the metals’ economic sensitivity, and because their prices have already discounted a rosy scenario.

It might well be that higher levels of uncertainty could well translate into higher precious metal prices, as some supposed certainties start to unravel. For example, emphatic statements of support for Greece by senior politicians in the Eurozone might be viewed by some as a buy signal for gold.

source:minesite

London market reviews in the last weeks

2010-02-01T11:18:00.000-08:00

London's miners fell for the third week in succession, marking the most substantial market correction for the sector since the middle of last year. Continuing doubts about economic growth spurred the selling, with renewed concerns about the possibility that Greece and various others may have to default on debt. The FTSE 100 miners fell by an average of 5.3 per cent, while the mid and small cap stocks lost 5.6 per cent.

The FTSE 100 miners had a quiet week, apart from BHP Billiton (LSE: BLT), which announced that it had approved the investment of a further US$1.73 billion into the expansion of its iron ore business in Western Australia. The money will be spent on long lead-time items ahead of formal approval for the company’s RGP6 project, and will involve the expansion of the inner harbour at Port Hedland, the duplication of parts of the rail system and the expansion of the Jimblebar mine. The company also announced that it was making progress with its plans to acquire Athabasca Potash, though this deal was first revealed back in July last year. BHP Billiton fell by 3.5 per cent to 1,866.25p, making it one of the better performing FTSE 100 miners.

The worst performer of the FTSE 100 miners was Xstrata (LSE: XTA) which fell by 8.3 per cent to 1,031.25p, while the best was its former takeover target, Lonmin (LSE: LMI) which fell by only 1.8 per cent to 1,808.0p after it released a reasonably good set of operating results for the last quarter of 2009.

First Quantum (LSE: FQM) is in the final stages of acquiring Kiwara (AIM: KIW). The stock is now suspended pending cancellation of its quote on Aim on Monday morning. First Quantum was actually one of the weaker companies in the sector, ending some 13.1 per cent lower, at 4,719p though apart from the completion of the Kiwara deal there was nothing of significance to report.

Meanwhile, West African Diamonds (AIM: WAD) was restored to trading after it released the details of its takeover by Stellar Diamonds, a subsidiary of African Aura (AIM: AAAM). The deal is expected to complete towards the end of February, assuming shareholders give it the nod. West African gained 9.7 per cent to end at 4.25p, and African Aura added 4.1 per cent to end at 75.5p.

Brinkley Mining (AIM: BRM) also returned, following a period of suspension but in rather less impressive style. It has increased its holding in Dragon Mining from 8.1 per cent to 12.7 per cent, which is apparently enough to change its status from a cash shell to a mining investment company and hence retain its Aim quote. Dragon operates gold mines in Sweden and Finland. Brinkley fell by an apparent 9.1 per cent but given that the stock has a 40 per cent spread the move is probably not significant.

The week also saw the release of the formal proposal of the first addition to the Aim's mining sector since 2008. Scotgold Resources is already quoted on the ASX, but since its principal asset is the Cononish gold project in Scotland it makes good sense for it to join Aim. Those with long memories will remember that Cononish was originally discovered by Ennex back in the 1980s, but was never taken into production, although there was some underground development. It will be interesting to see if this one catches the imagination of the UK's more speculative investors.

Once again, most stocks lost ground though there were a few winners. The week's best performer was China Goldmines (AIM: CGM) which gained 30.5 per cent to end the week at 19.25p, after it announced that it has now received nearly all the money from the sale of its mining assets in China. As a result, the company now has US$23 million in cash, with a few million more due in once the remaining liabilities have been cleared up. Given that the company has a market capitalisation of only £9.3 million, equivalent to around US$14.9 million, there is still a considerable gap to account for. China Goldmines is now a cash shell and so will have to find a suitable asset in the near future or face losing its Aim quote.

Most companies that have tried to operate in China have found the going very tough indeed. However, a few have managed to keep going, including Griffin Mining (AIM: GFM), which has just announced that it has received a long-overdue licence which will allow it to mine below the 1300 level at its Caijiaying zinc-gold mine. The mining licence runs for a period of 16 years until January 2026, which will take the mine to the end of its planned reserves. The stock rose on the announcement but drifted back and ended the week only 1.2 per cent up at 43.5p.

Meanwhile, the bust-up at Niger Uranium (AIM: URU) continues. Two representatives of 35 per cent shareholder NWT Uranium have now been voted off the board. NWT Uranium had previously called for an EGM which would have sought the removal of Niger's chairman in favour of NWT’s own man. NWT was also trying to get Niger to call for an EGM for Kalahari Minerals (AIM: KAH) with a view to getting Kalahari to distribute its holding in Extract Resources to its shareholders. Extract holds the rights to the Rossing South uranium discovery. As a result of the board changes at Niger Uranium, it was able to declare that its board is now unanimous in its support of Kalahari and is confident that Kalahari is best placed to further develop the value of its interest in Extract. So, it would seem that it will come down to votes at the EGM, if indeed this ever happens.

Concerns continue that all is not right at Medusa Mining (AIM: MML), and, following press speculation, the company has had to issue a denial that it had any corporate association, affiliation or involvement with any other gold miners. The market would now seem to have woken up to the possible problems though, as the stock fell by 11.3 per cent to end at 165p. So far, the company has effectively said nothing about what may be going on.

Staying with the Philippines, Metals Exploration (AIM: MTL) issued an update regarding the economics of its Runruno gold project. There had been concerns about its viability following the recent reserve downgrade but it now appears that these concerns were misplaced, as the reduced reserve is effectively offset by reduced capital and operating costs. As a result, it’s expected that the project NPV won’t be significantly different from that calculated in the scoping study released in November 2008. The stock fell by two per cent to finish at 12.125p.

Next week should be very quiet with most players in London's mining sector (and their many hangers-on) already enjoying the sun in Cape Town. The mood should be good, in spite of the recent selloff, and no doubt business will be brisk.

Source: minesite

Australian market reviews during the last week

2010-02-01T07:12:00.000-08:00

Finding a winner in last week’s sea of red ink was a major challenge. All sectors were down, even gold, which was a bit odd because the price of the metal actually rose about A$10 an ounce, thanks to a combination of a slightly stronger U.S. dollar gold price and a fall in the Australian dollar exchange rate. As it turned out Australian gold stocks lost quite a bit of ground taking the gold index on the ASX as a guide. This dropped by 6.7 per cent. However, it is worth noting that most of that big drop in the index was caused by weakness in the top two goldminers, Lihir (LGL) and Newcrest (NCM). Lihir plunged by A29 cents to A$2.77, as speculation continued over the sudden departure of its chief executive two weeks ago. Newcrest lost A$1.78, as it tumbled to A$31.53. Elsewhere among the gold stocks the damage was not quite as bad.

Let’s start with gold, and we’ll keep this week’s report quite quick because you’re probably in a hurry to catch a flight to Cape Town for the annual Indaba gabfest.

Off soon, and a short report might actually be a blessing, unless you like reading long lists of losing stocks. Gold’s a good place to start, because the moves there looked a bit odd. The 6.7 per cent fall in the gold index was greater than the 6.5 per cent decline in the overall metals and mining index, and roughly double the 3.8 per cent fall that afflicted the all ordinaries. And that in an environment in which the gold price was stronger! Taken together it seems that investors simply decided that after the strength gold companies have enjoyed in the past few weeks it was time for a correction, as we all wait to see clear signs of what lies ahead in 2010.

A big question. Let’s stick to some simpler. Gold prices, please.

As hinted earlier, smaller gold stocks seemed to do better than the big boys. Troy (TRY) for example, which we will probably take a look at soon, actually added A3 cents to A$2.16 over the week, and while it is down from a mid-January price of A$2.50, a small uptick on Thursday indicates that interest is returning to a company which is once again getting on with business. Another modest rise was posted by Ramelius (RMS), which announced an expanded exploration effort, and rose A1 cent to A53.5 cents. After that it was flat or down. Stocks that held their ground included Centamin (CNT) at A$2.02, Focus (FML) at A6.7 cents, Allied (ALD) at A30.5 cents, and Resolute (RSG) at A98.5 cents. Weaker companies included Silver Lake (SLR), whic lost A9.5 cents to A92.5 cents, Adamus (ADU), which was down A2 cents to A42.5 cents, Perseus, (PRU) which was down a sharp A22 cents to A$1.57, and Kingsgate (KCN), which fell A14 cents to A$9.26.

We get the picture. Lots of relatively small falls, no disasters. Let’s scurry along, iron ore next, please.

A similar picture, two rises and the rest down. Brockman (BRM) was the only well-known stock to swim against the tide, as it posted an increase of A15 cents to A$2.75 after releasing an optimistic quarterly report. Venus Resources(VNS), which comes from the same stable as one of last year’s success stories, United Minerals, added A3.5 cents to A63.5 cents, after filing a positive exploration report. After that the list looks like this: Fortescue (FMG), down A28 cents to A$4.53, Atlas (AGO), down A20 cents to A$1.94, Mt Gibson (MGX), down A18 cents to A$1.40, Grange (GRR), down A3 cents to A33.5 cents, and Gindalbie (GBG), down A12 cents to A95 cents. Territory (TTY) was also weaker, down A2.5 cents to A18.5 cents, despite reporting a return to profitability.

Base metals next, please.

Only one up, as far as can be seen. Blackthorn (BTR), which successfully introduced Glencore to the Perkoa zinc project two weeks ago, has now announced that BHP Billiton has opted to extend and expand the joint venture at its Mumbwa copper project in Zambia. That helped Blackthorn rise by A9.5 cents to A90 cents. After that the red ink prevailed. Among the copper stocks, Citadel (CGG) was down A3.5 cents to A36 cents, Sandfire (SFR) was down A5 cents to A$3.70, Equinox (EQN) was down A21 cents to A$3.73, OZ Minerals (OZL) was down A13 cents to A$1.06, and on the list goes. All nickel stocks lost ground. Mincor (MCR) fell A23 cents to A$1.64, Independence (IGO) fell A38 cents to A$4.16, and Mirabela (MBN) fell A27 cents to A$2.04. Zinc stocks, apart from Blackthorn, were all lower. Terramin (TZN) lost A5.5 cents to A76.5 cents. Perilya (PEM) fell A8.5 cents to A61.5 cents, and Ironbark (IBC), which reported encouraging results from its Citronen project in Greenland, slipped A2 cents lower to A44 cents.

Uranium, coal and any specials to finish.

We’ve saved the best for last. Three uranium stocks did rise, though two not by much. Mantra (MRU) reported excellent results from its Nyota project in Tanzania, and rose A81 cents to A$5.73, a closing price which was a shade below a 12 month high of A$5.81 reached during earlier Friday trade. The other uranium companies on the rise were Uranex (UNX), up A2.5 cents to A30.5 cents, and Manhattan (MHC), which added a lowly half a cent to A$1.53. Paladin (PDN) lost A29 cents to A$3.64, after reporting more problems at its African mines. Forte (FTE) slipped A1 cent lower to A18.5 cents, and Toro (TOE) lost A1 cent to A13.5 cents. Not much to report from coal sector, with all stocks down a few cents, and no specials of note.

Have fun at Indaba, and keep us posted, it’s the first big mining conference since the financial crisis officially ended, so a measure of the mood of the miners and bankers could be quite interesting.

Source: minesite

Review of canadian market performed over the past week

2010-02-01T04:50:00.000-08:00

Despite a strong initial start to trading in 2010, Canada’s junior board has ended the first month of the year in the red to the tune of 1.9 per cent. News that economic growth in the USA surged 5.7 per cent in the fourth quarter failed to rally resource stocks during the week, as the price of bullion continues to correct from its recent record highs. Once all the trading was done, the TSX Ventures Exchange, home to more junior exploration companies than anywhere else in the world, had dropped by 3.74 per cent, while the TSX Gold Index had plunged 5.96 per cent.

Taking center stage this past week was potash, as Potash Corp. of Saskatchewan released a fourth quarter earnings report. The major fertilizer producer delivered profits of US$243.6 million or US$0.80 per share in the fourth quarter of 2009, compared with US$788 million or US$2.56 per share in the same period of 2008.

Its’ 2010 outlook was also not too rosy.

Well, analysts had been hoping for more, but Potash Corp. did say that the fourth quarter represented the beginning of the recovery in fertilizers. Investors, however, voted with their wallets, and Potash ended the week down C$9.38 at C$105.92.

Elsewhere in Potash, BHP Billiton went shopping and elected to buy junior explorer Athabasca Potash for C$341 million in cash, or C$8.35 per share. Athabasca's Burr project is right next to BHP's Jansen project, which is a proposed underground mine in Saskatchewan.

BHP acquired that asset back in 2008 from Anglo Potash, and, with Vale having just announced that it will pay US$3.8 billion to buy fertilizer assets in Brazil owned by Bunge, it looks like some more consolidation is underway in the potash space.

Not much slips past you. The potash price hit more than US$1,000 per tonne a couple of years back, and potash now fetches between US$350 and US$400 a tonne. But many pundits are predicting that demand will pick up and that the price will once again soar. In the meantime, Athabasca closed at C$8.30, for an impressive C$1.90 gain.

Crew Gold got a share price boost after announcing a cash infusion from Endeavour Financial Luxembourg SARL, a wholly-owned subsidiary of Endeavour Financial. The company purchased 37.9 per cent of Crew's issued and outstanding shares in a market transaction. Crew added C$0.045 to C$0.16, while Endeavour added C$0.09 to C$1.76.

However, it was a bad news week for Caledonia Mining. The company has suspended the expansion of its Blanket gold mine after the Reserve Bank of Zimbabwe failed to redeem special bonds issued as payment for previous gold purchases from Caledonia. Caledonia is owed some US$3.2 million in principle and interest. The powers that be rolled over payment for six months. Caledonia ended the week unchanged at C$0.065.

Over to the drill bit where Volta Resources reported a 15 metres drill intercept running 4.45 grams gold per tonne at its Nassara prospect on the Danyoro permit in Burkina Faso, West Africa. That wasn’t good enough to fight the negative market sentiment as shares in Volta closed at C$0.75 for a C$0.02 loss.

And also worse off on positive news, Capella Resources tagged 0.68 gram gold per tonne over 318 metres at its Lajitas project in Chile. Capella ended the week down C$0.03 at C$0.40.

Meanwhile, huge trading volumes were maintained all week in First Gold Exploration. The gold explorer turned rare earth market darling tabled 2,922 grams rubidium over 6.7 metres on its Pivert/Rose property in Quebec. Over 40 million shares changes hands, and the price fluctuated from C$1.03 to C$0.45 before settling in at C$0.55, down C$0.13 for the week.

First Nation issues in Ontario are once again impacting exploration projects. This time the target area is the red hot James Bay Lowlands where First Nations groups blockaded two more ice airstrips. This comes on the heels of recent protests that blocked the Kopper Lake air strip near Noront Resources' project, and the McFaults Lake air strip near Freewest Resources' project. The Matawa First Nation and the Marten Falls First Nation are concerned that they are not being consulted about potential development plans for the area.

We reported a while back that the government of Ontario paid Platinex C$5 million, plus undisclosed expenses, to drop its lawsuit after it was unable to access its Big Trout Lake property thanks to First Nation disputes.

Yes, it is rapidly becoming a major problem in Ontario and one that needs to be given careful consideration by exploration companies. So far, though, investors are shrugging off the problem because Noront ended the week up C$0.01 at C$1.68.

Finally, it seems that the Ross Beatty-led Lumina Capital Limited Partnership continues to believe in the commodity story. Lumina agreed to take down C$500,000 of a C$2 million financing in Kivalliq Energy at a price of C$0.20 per unit. The funds will be used to explore and develop Kivalliq's Lac Cinquante uranium deposit in Nunavut. Kivalliq ended the week up C$0.13 at C$0.30.

The broader markets are continuing to show considerable weakness in the face of a stronger US dollar. Is the economic growth in the United States merely a head fake driven by government stimulus or is it the real deal? We will see what next week’s trading has in store.

Source : minesite