London markets performed over the past week

In a week that saw inflation re-emerge as a global challenge, the FTSE 100 index dropped back below 6,000 to close at 5,896. But despite these inflation concerns, gold, the traditional store of value during economic difficulties, also edged lower, to close the week at US$1,343 per ounce. Silver also suffered heavy falls on Thursday, and closed at US$27.46 per ounce. Base metals were also weaker. Copper closed lower, at US$9,455 per tonne, or US$4.29 per pound. Nickel fell to US$25,900 per tonne and zinc closed lower at US$2,354 per tonne. The one bright spark was in PGMs. Platinum and palladium both climbed, platinum to US$1,831 per ounce and palladium to US$814 per ounce.

The mining majors also closed lower. Rio Tinto slipped 3.7 per cent lower to 4,272p as it released a fourth quarter operations update in which chief executive Tom Albanese emphasised the importance of running operations at full capacity while commodity prices remained strong. The company’s iron ore operations set a new quarterly production record of 50 million tonnes attributable and new annual record of 185 million tonnes attributable. The company also stated that its Queensland coal mines are operational, although a force majeure declaration remains in place. Rio has not yet been able to estimate the full impact of the adverse weather in Australia. In the meantime, the company has just added to its coal capability away from Australia - late in the week, Australia’s Foreign Investment Review Board approved Rio’s acquisition of Riversdale Mining which has coal licences in Mozambique.

Meanwhile, BHP Billiton eased 2.74 per cent lower to 2,410p as it announced half-year production figures. The company achieved record iron ore production in both the quarter and the half year but, like Rio, its Queensland coal operations were significantly disrupted by the rains and flooding there. BHP commented that robust growth from developing economies continues to drive commodity demand, although industry-wide cost pressures are impacting a range of projects. Elsewhere, Anglo American slipped six per cent to 3,102p and Xstrata slipped 6.4 per cent to close at 1,400p.

Amongst precious metals miners, African Barrick Gold slipped 7.9 per cent to 529p as it reported fourth quarter production of 179,730 ounces. This represented an increase of nine per cent higher over the third quarter, meant that the full-year total came in at 700,934 ounces.

At the smaller end of the gold market, Tertiary Minerals leapt over 19 per cent to 13.4p on the back of positive analyst notes and the announcement that the company is a rig to start test drilling its gold project in Finland. That rise made for an interesting contrast with the fall that came from Philippines-focused gold producer Medusa Mining, which closed 3.6 per cent lower at 442p. Medusa had good news of its own, and announced that drilling continues to return encouraging intersections that indicate additional growth potential at and around the Co-O mine. The market was more concerned about the impact of gold price, though.

Also weaker was silver miner Hochschild Mining, which closed 9.4 per cent lower at 489p, even as it announced full-year production of 26.4 million attributable silver equivalent ounces, which was in line with expectations. The company stated that it’s looking for future growth from the Crespo, Azuca and Inmaculada properties.

Amongst junior iron ore miners, London Mining slipped 2.7 per cent to 365p, despite announcing a 70 per cent increase in the primary resource at its Marampa mine in Sierra Leone. Additional resources mean that the operation now looks capable of supporting production at a rate of 16 million tonnes per year.

Meanwhile, diversified junior African Aura Mining edged 0.6 per cent lower to 177p as it neared completion of a maiden resource estimate at its Nkout iron ore project in southern Cameroon. A 33-hole drilling programme has now been completed at Nkout. The maiden resource statement is expected early next month.

Also in iron ore, Beowulf Mining continued a strong recent run to close up 0.5p at 49.5p. The company recently added to its ground in Sweden when it acquired the Kallak South project for C$40,000 in Beowulf shares. That new ground now looks as though it might hold upwards of 400 million tonnes of iron ore, which, when added to the 175 million tonnes that Kallak North is expect to show, means that whole area has the makings of a tidy little project.

In zinc, Griffin Mining gained over seven per cent to close at 68p after it significantly increased its estimate of the resource within Zone III and doubled estimates of the contained tonnes of metal within Zone II at its Caijiaying zinc, gold, and lead mine in China.

It was a mixed picture amongst the nickel companies. European Nickel slipped 10.4 per cent lower to 21.5p as an operational update confirmed previously-announced plans to focus resources on its Acoje project in the Philippines. The Çaldağ mine in western Turkey is to be put on care and maintenance in light of the further delays encountered in the company’s quest for a forestry permit.

But Horizonte Minerals closed 30 per cent higher at 26p as it signed heads of terms to acquire 100 per cent interests in the Vila Oito and Floresta nickel projects in northern Brazil in return for the issue of 8.5 million new shares in the company.

And it was a good week, too, for Bezant Resources, which gained 11.8 per cent to close at 68.5p following the completion of a positive independent conceptual study for its Mankayan copper and gold project in the Philippines. The study confirms the technical and economic feasibility of the project and estimates a pre-tax net present value of US$459 million and lifetime pre-tax cash flow of some US$5 billion.

However, Stratex International eased 3.9 per cent lower to 9.38p as it announced positive initial copper, gold, molybdenum, and rhenium intersections from recent drilling at the Muratdere project in Turkey. The company also confirmed that further funding would be forthcoming from joint venture partners for the exploration programmes at the Öksüt and Hasançelebi prospects in Turkey.

Uranium juniors also had a busy week. Berkeley Resources edged 0.9 per cent lower to 113p as Severstal’s right to subscribe for shares and undertake an agreed bid for the company lapsed, although the two companies remain in discussions over other possible arrangements. Meanwhile, Berkeley raised A$55 million through a placing, and pressed the green light on its Salamanca uranium project. And Forte Energy closed 4.5 per cent higher at 9.38p as it raised A$15 million through a placing. The money will be used to accelerate exploration and feasibility work on its West African uranium portfolio.

Also offering uranium exposure, VANE Minerals gained 5.6 per cent to 3.7p, although this week it was gold and silver that drove the shares. The company has now concluded a joint venture to expand gold and silver production in Mexico.

Diamond miners enjoyed a good week too. Petra Diamonds closed 8.8 per cent higher at 180p as it announced the acquisition of South Africa’s second largest diamond mine by production, the Finsch mine, from De Beers. The acquisition will be funded by a 150p to raise £205 million.

Also better off was Stellar Diamonds, which closed 2.3 per cent higher at 11.5p after reporting further positive news from its Droujba kimberlite pipe in Guinea. Recent drilling has intersected a significant new zone adjacent to the known pipe. Results from the first two sample batches are expected shortly.

And sub-sea miner Nautilus Minerals soared over 27 per cent to 176p as the government of Papua New Guinea granted the company the world’s first deep sea mining licence in respect of its Solwara 1 project in the Bismarck Sea. The government has an option to take up to a 30 per cent stake in the project, exercisable within one month, and Nautilus is pressing ahead to conclude discussions over strategic partnering to develop the 2.2 million tonne seabed resource.

Finally, Kenmare Resources, which was recently forced to suspend production at its Moma mine in Mozambique after a tailings wall breach flooded a local village, confirmed higher second half production. The company also added that production expansion remains on schedule. The shares responded by rising 9.5 per cent to close at 33.12p. The company has also negotiated significant price increases with customers for 2011.

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