London markets performed on the past week

The contrast between activity during the first full trading week of 2011 and the corresponding week in 2010 couldn’t be more marked. Back in January 2010, Minesite was struggling to find news stories of any kind, as chief executives were still hunkered down, waiting for the dying embers of the credit crunch finally to disperse, and still wary of anything the future held. Gold was not much north of US$1,100, copper was slightly shy of US$7,500, and finance was scarce. Fast forward exactly a year, and the news stories are coming in thick and fast, gold is at US$1,360, and copper is at US$9,591, close to its all-time high. There’s money around too, though the banks haven’t recovered their poise completely.

But China’s still motoring along, and whisper it softly, there are even hints that the US economy may be on the road to recovery too. However, inflation remains stubbornly high, not helped by sky-high oil prices and increased food costs around the world. So the case for gold remains as strong as ever, particularly in the US, where quantitative easing is still the order of the day, and in the UK, where all the latest data shows inflation as increasingly rampant.

All in all then, not a bad time to be a small cap miner, and already several companies are making the most of the attractive 2011 trading environment. In the gold space, shares in Archipelago closed up a penny at 64p after the company announced that it had secured a US$55 million loan from an Indonesian bank to help it get construction of its Toka Tindung gold project over the line. A further US$55 million will be made available in nine months’ time, if required. Under the terms of the loan, Archipelago must make provision for what it calls “revenue protection”, through put options over 100,000 ounces of production, priced at US$900 per ounce. The company will remain exposed to all upside in the gold price.

Sticking to the gold theme, GGG Resources continued its recent stellar run with a further 2p rise to 25.75p. The company is now well and truly clear of the ranks of the penny dreadfuls, amongst whom it had been firmly ensconced, until GGG managing director Jeff Malaihollo secured ownership of a stake in the Bullabulling gold project in Western Australia for the company. Resources at this project rapidly went past the talismanic million ounce mark, and the latest news from the company is that 58 of the most recently drilled 59 holes have intersected mineralisation, in a pattern consistent with the existing resource model.

Other gold companies in the news included the South American-focused producer Orosur, which released a good-looking set of financial results, and which initially rose from 87p up to 91.5p as a result. However, the market then elected to take profits, and the shares closed out the week down 2.5p at 84.5p. Elsewhere, an update from perennial struggler Hambledon Mining failed to set pulses racing, as it revealed that it had produced just under 6,500 ounces in the most recent quarter, and the shares eased by a few fractions of a penny to 7.5p. Vatukoula’s news, by contrast, that in the year to August 2010 it had produced nearly 60,000 ounces from its mine in Fiji met with a much more favourable reception. Vatukoula’s shares closed up just over 8p at 180p.

Away from gold, a clear sign for London market watchers that the future for nickel looks bright came in the form of the completion of a previously agreed royalty deal etween those canny accountants at Anglo Pacific and the owners of the Lontra nickel deposit in Brazil, Horizonte Minerals. Under the terms of this deal, Anglo Pacific has paid Horizonte US$500,000 for a six year option over a 1.5 per cent net smelter royalty on 30,000 tonnes of yearly production. To exercise the option, Anglo Pacific will need to find a further US$12.5 million. But given how its shares have raced away lately, up from around 245p this time last year, when Minesite picked out the company as a tip of the year, to recent trades of over 350p, that shouldn’t be too much of an issue. On the week Anglo Pacific was up by just over 7p to 449p, while Horizonte rose 3p to 20p.

Sticking with nickel, African Eagle’s Dutwa laterite project in Tanzania continues to show promise, as the company upgraded indicated resources at the Wamangola Hill portion of Dutwa to 430,000 tonnes. The shares closed up by more than 3p at 15.5p.

In the diamond space, Petra Diamonds released a trading update revealing that the company generated US$90 million in revenue during the six months to December, from the production of just over 584,000 carats, up two per cent on the corresponding period the previous year. In his commentary, chief executive John Dipenaar spoke of continued strong demand from emerging markets such as China and India, and of a steady recovery in the US. The market liked the news, and the outlook, and the company’s shares closed up by more than 20p, at 165.5p.

Source