London markets performed over the last week

Traders pay attention to China this week, although there are mixed signals out of the Middle Kingdom. First, the Chinese government announced that the Chinese economy had expanded by 9.7 per cent in the first three months of the year. This was below the 9.8 per cent expansion delivered in the last quarter of 2010, but still beat analyst expectations which had been for growth of around 9.4 per cent. However, Chinese inflation rose to 5.4 per cent in March, up from 4.9 per cent in February. And, with prices now rising at their fastest rate since 2008, the prospect of further rate hikes tempered sentiment and drove gold to a new high of US$1,487 per ounce. Silver followed that lead, putting in a rise to US$43 per ounce. Not all the precious metals were stronger, though. The threat of higher interest rates caused platinum to retreat to US$1,795 per ounce and palladium to drop to US$774 per ounce.

The spectre of higher interest rates hit other industrial metals too. Copper closed at US$9,432 per tonne, or US$4.28 per pound, while nickel closed lower at US$26,300 per tonne, and zinc retreated to US$2,408 per tonne.

In company news, there was huge market interest in Glencore’s impending super-sized float while the majors retreated on the mixed messages from China. Rio Tinto slipped 4.4 per cent to 4,325p as it announced that its first quarter coal, iron ore, uranium and alumina operations in Australia had been affected, as expected, by earlier extreme weather, although most are recovering output. BHP Billiton closed three per cent lower at 2,507p and Xstrata slipped 3.3 per cent to 1,464p. Anglo American shed 6.6 per cent to close at 3,123p.

Fresnillo was prominent in a busy week of news from precious metals miners. The Mexican miner achieved attributable silver production of 10.1 million ounces in the first quarter, 2.2 per cent lower than last year, although gold production hit a record 96,407 ounces, up 13.3 per cent from the prior year. The shares closed 4.3 per cent lower at 1,575p.

Gold miner Avocet Mining increased the mineral resource at its Inata project in Burkina Faso to 2.12 million ounces, which represents an increase of 20 per cent over the previously published resource. However, an outbreak of political violence in the country of its operations, Burkina Faso, took the shine off that news as far as investors were concerned. The shares closed 10.9 per cent lower at 222p.

The news was even less good for Australian miner Norseman Gold. Norseman slumped 54.6 per cent to 16p as it continued to struggle to lift production from its Bullen and Harlequin underground mines and to ramp up output from the OK Decline. However, the company’s fourth mine, the North Royal open pit, has continued to ramp up and is producing ore broadly in line with schedule. The company is now forecasting gold production for the year of between 55,000 and 60,000 ounces.

In South America, Minera IRL continues to return good gold grades from drilling at the Minapampa East zone of its Ollachea project in Peru. The company expects to publish an updated resource estimate by the end of May. The shares closed down 3.3 per cent at 88p. Meanwhile, Minera’s neighbour in Patagonia, Mariana Resources, slipped 14.9 per cent to 27p as it reported further positive intersections from its third drill campaign at its Las Calandrias gold-silver project in Santa Cruz, Argentina.

Over in Central Asia, Kryso Resources continues to make progress. Shares in the company gained 4.1 per cent to 15.9p after it updated the mineral resource at its Pakrut and Eastern Pakrut gold prospects in Tajikistan to 3.578 million ounces. The updated estimate incorporates 16 new diamond drill holes that confirm the grade and geological continuity in the main mineralised areas of Pakrut.

Also in Central Asia, Kyrgyzstan-focused Chaarat Gold reported further consistency and continuity from drilling at its Contact Project (Kiziltash), following on nicely from the previously announced JORC resource of 4.41 million ounces. Mineralisation has been demonstrated over a strike length of 1,160 metres and to a maximum depth of 900 metres from surface. It remains open both along strike and down dip. The shares edged lower to 52p.

Across the border in Kazakhstan, gold miner Hambledon Mining increased year-on-year quarterly gold production by 72.5 per cent as it completed phase 1 of the winterisation programme and equipment upgrade at its Sekisovskoye project. First gold production from underground mining remains on target to start before the end of the year. The shares climbed 9.1 per cent to 4.5p.

Meanwhile, Triple Plate Junction climbed 3.5 per cent to 7.5p as it started a 3,000-metre drilling programme at the Pu Sam Cap gold project in Vietnam after it received encouraging assay results from recent field work at the project.

Two platinum miners were in the news this week. Jubilee Platinum agreed a binding memorandum of understanding to acquire chromite miner Chemstof. Chemstof holds near-surface platinum-bearing chromitite reefs, an operating chrome ore beneficiation plant and an estimated 500,000 tonnes of platinum-rich surface stockpile. Jubilee closed 6.4 per cent higher at 28.2p.

And Aquarius Platinum is to secure new platinum mineral rights on the western limb of the Bushveld through the acquisition of a 74 per cent interest in private South African company Afarak Platinum. The US$109.7 million consideration will be settled by a cash payment of US$70.2 million and the issue of 6,804,162 Aquarius shares. The shares closed 4.5 per cent lower at 345p.

In bulk commodities, London Mining climbed 4.5 per cent to 405p after it released details of its pre-feasibility study for phase 2 of its Marampa project in Sierra Leone. Phase 1 is due to begin operations this year.

Meanwhile, Mozambique coal miner Beacon Hill Resources raised US$20.3 million through a placing to finance licence acquisitions and improve its logistics chain ahead of maiden coal exports from its Minas Moatize mine, which is expected by mid-year. The shares closed 9.6 per cent lower at 13p.

Nautilus Minerals was one of the week’s biggest winners. It climbed 21.2 per cent to 209p after it formed a strategic partnership with German shipping company Harren & Partner to own and operate a production vessel. This will serve as the operational base for Nautilus to produce high-grade copper and gold at its first sub-sea project, Solwara 1, in Papua New Guinea. Harren will design and construct the vessel at a cost of approximately US$167 million, with delivery scheduled for the first half of 2013.

Finally, cash shell Q Resources has entered into a memorandum of understanding to acquire the Montecristo copper mine and Santo Domingo processing plant located in the Antofagasta province of Chile. The company is planning a placing to raise the US$110 million consideration, but in anticipation of the deal the shares climbed 3.2 per cent to 16p.

Sources