London markets performed over the past week

Commodities enjoyed a strong week as copper punched upwards towards US$10,000. The red metal closed the week four per cent higher at US$9,978 per tonne, or US$4.53 per pound, as data confirmed that London Metal Exchange inventories shrank by a quarter last year, the first annual decline in six years. Nickel recorded a 4.6 per cent gain, building on a 3.5 per cent rise last week, and closed at US$28,040. Zinc also closed higher, at US$2,492 per tonne.

Precious metals also trended higher. Gold closed up at US$1,349 per ounce although it remains well below recent highs. Silver was even stronger, rising four per cent to reach US$29.07 per ounce. Platinum gained 2.8 per cent to US$1,848, outperforming palladium, which edged higher to US$819 per ounce.

The majors all flourished on the stronger pricing, although Xstrata was the only company that released production figures. Its shares climbed 4.6 per cent to 1,417p as it announced record annual production of coking coal, semi-soft coking coal, mined nickel and refined nickel, as well as year-on-year increases in mined copper, lead-in-concentrate and ferrochrome production.

Of the majors, Anglo American returned the strongest share price rise, gaining 9.6 per cent to 3,322p. Rio Tinto climbed 5.4 per cent to 4,512p while BHP Billiton gained six per cent to 2,521p.

There was also plenty of good news elsewhere. Gold-focused Avocet Mining reported strongest production performance of the week. Its shares closed 2.6 per cent higher at 218p as it announced forecast-busting 2010 production of 236,396 ounces of gold at a cash cost of US$660 per ounce. That compared well with 109,548 ounces produced at US$639 per ounce in 2009. The strong performance was driven by the Inata mine in Burkina Faso, which exceeded guidance by producing 137,732 ounces.

Two other gold miners aim to join Avocet in the 200,000 ounce-plus club this year. One has been in the eyes of a regional storm recently - Centamin Egypt gained 9.9 per cent to 144p as it confirmed it hadn’t suffered any impact from the unrest in Egypt. The company achieved record quarterly production of 53,189 ounces as its Sukari mine continued to ramp up operations. Production averaged over 20,000 ounces per month in November and December, and Centamin now expects 2011 production to reach 250,000 to 290,000 ounces.

The other miner likely to move above the 200,000 ounce mark this year is Allied Gold. Shares in Allied closed 3.2 per cent higher at 36.9p as it announced quarterly production from Simberi in Papua New Guinea of 18,921 ounces at a cash cost of US$652 per ounce. Mill throughput is being expanded towards 3.5 million tonnes per annum as part of plans to lift Simberi production to 100,000 ounces. Meanwhile, first gold is due this quarter from Gold Ridge in the Solomon Islands, which could lift total output this year to over 200,000 ounces.

In contrast, Norseman Gold endured another tough quarter. But in clear sign that the appetite for gold miners remains strong, its shares climbed 3.7 per cent to 56p even after it failed to improve production in the December quarter. Output during the three months totalled 11,162 ounces at a high cash operating cost of A$1,342 per ounce of gold. However, Norseman expects production from new ore sources, including the North Royal open pit, its fourth mine, to improve performance in the current quarter.

Elsewhere, Peninsular Gold produced 4,524 ounces from tailings at its Raub mine in Malaysia during the December quarter. An expanded plant at Raub will begin operating by the end of this quarter and the company is also drilling around Raub and at exploration properties to the north of Raub. The shares climbed 3.3 per cent to 46.5p.

In exploration news, European Goldfields continued its impressive performance as it announced high-grade intercepts from initial exploration at the Piavitsa target in northern Greece. Core sampling has confirmed broader zones of mineralisation than had previously been identified and the shares gained 4.2 per cent to 1,025p.

Not everyone was a winner. Solomon Gold closed 1.4 per cent lower at 28.6p even after it announced encouraging mineralisation from the first drill hole at its Fauro Island project in the Solomon Islands and further encouraging drill assay results from its Rannes project in Queensland.

But there was further demand in the market for African Aura shares. These raced up 35.6 per cent to 229.5p after the company announced encouraging early stage drilling and trenching results from the Ndablama gold prospect, not far from its 1.51 million ounce New Liberty gold project in Liberia. Earlier in the week the company had also impressed investors with a maiden resource of 1.04 billion tonnes at its Nkout iron ore project in Cameroon. That estimate is based on a three kilometre section out of a total strike length that could extend for 20 kilometres. The company’s target is for a total resource of four billion tonnes.

Two of London’s primary silver producers also announced positive exploration news. Arian Silver received encouraging results from the first batch of assay samples from its recently-started 10,000 metre drilling programme at its San José property in Mexico. Results from the first eight holes confirm that mineralisation remains open along the vein. The company is currently drilling six kilometres away from the mine to examine how far the mineralisation extends. The shares closed 4.7 per cent lower at 43.4p.

And Hochschild Mining climbed ten per cent to 526p after it reported positive drilling results from Pariguanas, the joint venture property that lies close to the company’s Ares operation in Peru. Partner Buenaventura holds 60 per cent of the joint venture and has an obligation to achieve production by 2018.

In diamond news, Stellar Diamonds eased 3.7 per cent to 11.08p as it reported encouraging initial diamond recoveries from the Droujba kimberlite pipe in southeast Guinea. The sample of 538 diamonds recovered included five commercial-sized diamonds larger than 0.85 milimetres.

In the wake of the recent sale of African Diamonds and its flagship AK6 kimberlite in Botswana to Lucara Diamond Corp, resources entrepreneur John Teeling floated his new vehicle, Botswana Diamonds, on the Alternative Investment Market. The company will explore three smaller kimberlites close to AK6 and has other exploration opportunities in Zimbabwe and Cameroon. The shares closed at 6p.

Gemstones company TanzaniteOne closed 4.9 per cent lower at 14.5p after it announced total 2010 production of 2.2 million carats, up from 1.9 million carats produced in 2009. Average grade in 2010 was also higher, at 59 carats per tonne, as against 51 carats per tonne in the prior year.

Away from precious metals and stones, Coal of Africa slipped 8.5 per cent to 97.5p as released its latest quarterly production numbers. This showed production of 954,915 tonnes of run of mine and 686,403 tonnes of export quality coal from the Woestalleen and Mooiplaats thermal collieries.

Meanwhile, Sweden-focused Beowulf Mining closed 4.3 per cent lower at 45p after drilling operations at its Kallak South iron ore deposit were interrupted by the harsh winter. Conditions have now improved and the company expects to receive initial assay results by the end of February. Beowulf has also assumed operatorship at its Ballek copper-gold joint venture project.

London Mining led the week’s financing activity as it announced plans to issue senior, unsecured convertible bonds due 2016, in order to raise US$110 million. The proceeds will be used primarily to fund phase 1 capital expenditure for the company’s Marampa iron ore project in Sierra Leone. London’s shares closed 12.4 per cent higher at 410p.

Elsewhere in the capital markets, European Nickel raised £6 million through a placing and subscription at 20p, a premium of 2.6 per cent to the previous closing price. Its shares closed 11.9 per cent lower at 18.5p. And Horizonte Minerals raised £8.25 million through a placing at 25p to fast-track development at its Araguaia nickel project in northern Brazil. Its shares closed 11.6 per cent lower at 26.75p.

Oxus Gold closed 3.6 per cent lower at 4.57p after it announced it has agreed in principle to sell its 50 per cent interest in the Amantaytau Goldfields joint venture to Uzbek shareholders. Talk in the market is that the company will now focus on investment opportunities in Africa, so it will be interesting to see if any deals get done at the major African conference, Indaba, which gets underway this week.

Finally, Toledo Mining slipped 5.2 per cent to 24.4p after revealing that the previously-announced approach from a third party has been withdrawn.

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