London market review over last week

In several parts of the world the political and military situation remains on a knife-edge, but this week at least the global situation stabilised sufficiently to allow commodities traders to recover their poise. Gold rose to US$1,436 per ounce while silver climbed 5.8 per cent to close at US$37.31 per ounce. Platinum climbed to US$1,748.8 per ounce and palladium gained five per cent to US$751.85 per ounce. It was a similar story in base metals where copper rallied to US$9,730.5 per tonne, or US$4.41 per pound. Nickel closed higher at US$27,095 per tonne while zinc climbed to US$2,384 per tonne.

The mining sector took advantage of slightly more benign conditions to trend higher too. Amongst the majors BHP Billiton provided most of the news. The company approved US$6.6 billion worth of capital investment to continue expanding production from its Western Australia iron ore operations. It also approved development at three metallurgical coal projects in the Bowen Basin in central Queensland and a US$400 million expansion to expand Hunter Valley Energy Coal in New South Wales. The shares gained 1.9 per cent to 2,349p.

Rio Tinto and Anglo American both closed the week higher. Rio closed 5.2 per cent up at 4,224p, while Anglo also rose 5.2 per cent higher at 3,193p. Xstrata climbed 3.9 per cent to close at 1,436p.

Elsewhere, Kazakh miner ENRC reported record production volumes across all divisions last year. The miner has substantially increased its capital budget to US$11.1 billion this year, money which will primarily go towards developing iron ore assets in Brazil and Kazakhstan and to adding new power generating capacity. The shares gained 3.5 per cent to 935p.

Gem Diamonds firmed 7.8 per cent to 291p after it confirmed that it is in preliminary discussions with Lucara Diamond Corp regarding a possible merger that might constitute a reverse takeover under UK listing rules. Gem expects to publish an updated reserves and resources statement at around the time of its April trading update. Meanwhile, Botswana Diamonds, the business that remained after Lucara bought African Diamonds, and so acquired the prospective AK-6 kimberlite in Botswana, has been awarded a diamond exploration licence in Cameroon. Its shares climbed 9.7 per cent to 4.25p.

Gold miner Petropavlovsk published a reserves and resources statement updated to 1st January 2011 that showed proven and probable reserves up by 36 per cent to 9.1 million ounces. The increase was attributable to successful exploration predominantly at Malomir and Pioneer. Total mineral resources have increased by 96 per cent to 23.1m ounces of gold. The shares climbed seven per cent to 1,070p.

Other gold miners have also been making good progress with exploration. African Barrick Gold continues to make progress at the Tusker resource area of the Nyanzaga project. African Barrick believes these higher grade zones can add considerable value to its bulk mining project. In response, the shares climbed 2.7 per cent to 539p.

Elsewhere, Avocet Mining gained 6.5 per cent to 241p after it announced positive results from ongoing drilling at its Inata gold mine in northern Burkina Faso. The latest drilling results are from the Minfo deposit, the southernmost of the five open pits in the current mine plan, which results indicate remains open along strike and at depth.

And Tajikistan-focused Kryso Resources climbed 5.9 per cent to 15.35p after it reported encouraging assay results from recent drilling at its Pakrut gold deposit. Drill holes confirmed the existence of high grade zones and that surface mineralisation continues at depth. The company expects to release an updated resource estimate by the summer.

After receiving the necessary environmental and mining permits, South America-focused Orosur Mining moved further forward with plans to develop its Arenal Deeps project in Uruguay. The shares climbed 22.2 per cent to 77.9p.

The news was less good from Vatukoula Gold Mines, which has been targeting annualised output of 100,000 ounces from its gold mine in Fiji. Production in the last quarter was 11,405 ounces compared to 16,565 ounces in the quarter before. The company has consequently downgraded its estimate to 75,000 ounces for the year to August and its shares closed 12.3 per cent lower at 136p.

In platinum mining, Pan African Resources climbed 9.9 per cent to 10.75p after it announced it had begun bulk earthworks at its Phoenix project in South Africa. First production is planned for October and the chrome tailings retreatment plant there is expected to reach full capacity in the first quarter of 2012.

Meanwhile, South African iron ore miner Ferrum Crescent announced the completion of a 1,500-metre drilling programme at its Moonlight project. The company found iron ore mineralisation in all 12 holes drilled, with intersections considerably thicker than previously predicted. The shares rose 18.8 per cent to close at 19p.

Still in South Africa, Coal of Africa announced that it had secured a revolving thermal coal export finance facility for up to US$50 million with Deutsche Bank. The facility will be used to finance capital expenditure and for general working capital, and to repay the company’s existing US$20 million unsecured revolving loan facility. The shares edged higher to 73.5p.

Away from Africa, Beowulf Mining announced that initial results from the first 10 drillholes from its Kallak South deposit in northern Sweden confirm the presence of high grade iron ore similar in type and quality to that found at Kallak North. Preparation of a JORC-compliant resource estimate for the Kallak North deposit is ongoing and expected to be completed by the summer. The shares climbed 15.3 per cent to 64.25p.

In other commodities, Spain-focused uranium miner Berkeley Resources has begun a substantial drilling programme to test new exploration targets close to existing resources. The shares climbed 19.1 per cent to 68.5p.

Finally, Rambler Metals and Mining is raising approximately £10 million through a placing at 36p. The money will be used as working capital requirement as the company completes construction of the Ming copper-gold project in Newfoundland. The shares closed 3.7 per cent lower at 38.77p.

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