Precious Metals

Gold companies enjoyed a lift from gold price gains on Wednesday, although some of that was given up Thursday with the release of positive US employment data.

Gold traded in a tight range this week around the $1,470 per ounce mark, with the exception of Wednesday, which turned out to be a good day for the yellow metal and also gold mining stocks. 

The action on Wednesday started when China reported an $18-billion trade surplus, nearly $3 billion better than the $15.6 billion expected. The news buoyed Asian stock markets, with the Nikkei average hitting its highest close in nearly five years, and China’s benchmark Shanghai composite index up 0.48 percent from Tuesday’s session. Better-than-expected industrial production data from Germany also put some wind in the sails of the gold price.

Spot gold rocketed $24 at its best point of the day, and the last quote was in at $1,474.50 for a daily gain of $21.50. Gold futures were also up $24.20, at $1,473 an ounce.

The gold majors Wednesday were up across the board as investors moved to purchase stock at bargain prices after gold’s mid-April crash. The biggest one-day gain belonged to Barrick Gold (NYSE:ABX,TSX:ABX), which surged 8.6 percent. Harmony Gold (NYSE:HMY) rose 7.6 percent, Newmont Mining (NYSE:NEM,TSX:NMC) added 4.5 percent, the world’s number-three gold producer, AngloGold Ashanti (NYSE:AU), traded up 4.7 percent and Goldcorp (NYSE:GG,TSX:G), the largest gold miner by market cap, rocketed 6.3 percent, according to a market round-up by Mining.com.

On Thursday, however, some of those gains were erased after a US jobs report showed the number of Americans looking for work fell to 323,000 in the week ending May 4 — meaning US employment has fallen to its lowest level since January 2008. The report hiked the US dollar and gold subsequently fell.

At the close, spot gold was down $4.30 to $1,470.50 an ounce, while COMEX gold for June delivery slipped $4.80 to $1,468.90.

Company news

Rio Tinto (LSE:RIO,ASX:RIO,NYSE:RIO) expects to start shipping metal from its giant Oyu Tolgoi copper-gold mine in Mongolia by the end of June, CEO Sam Walsh said at the diversified miner’s annual general meeting on Thursday. Rio Tinto, through a partnership with Turquoise Hill Resources (NYSE:TRQ,TSX:TRQ), is two-thirds owner of the mine, with the government of Mongolia controlling the other 34 percent. The corporate entities have agreed to keep funding the $6.2-billion first phase of mine construction, even though Mongolia has not, but Walsh said the government’s concerns have been addressed, Fox Business News reported. “I think we have moved well down the path in terms of resolving issues the government had tabled with us, enabling us really to move forward with the project,” he said.

Another huge gold mining project, Pueblo Viejo in the Dominican Republic, is back on even keel after the government and joint venture partners Goldcorp and Barrick agreed Wednesday to new terms for operating the $4-billion mine. The new contract eliminates a previous sticking point that the owners would not have to pay a tax on profits until they make a 10-percent return on the cost of their initial investment, The Washington Post reported. The new contract will provide an additional $1.5 billion in revenues to the Dominican over the 25-year life of the mine and will help pay down its budget deficit.

On the writeoff side of the ledger, Barrick and joint venture partner Antofagasta-Tethyan Copper Company announced Wednesday that they will give up on mining the Reko Diq copper-gold deposit in Pakistan and push for compensation instead. The companies will head to international arbitration to try and recover damages after the provincial government of Baluchistan refused to issue a mining license in 2011, according to Reuters. Barrick and Antofagasta sunk $220 million into the $3.3-billion project, of which Baluchistan owned 25 percent, Reuters said.

Junior company news

A prefeasibility study on Belo Sun Mining’s (TSX:BSX) Volta Grande project in Brazil went over like a lead balloon with investors this week. The stock dropped 37 percent Tuesday on triple normal trading volumes after the economics of the project looked less than robust. Newsletter writer and prominent junior mining analyst Lawrence Roulston said he was dropping his coverage of the Toronto-based explorer, the main reason being the number of recoverable ounces outlined in the prefeas. “The most significant factor is that the PFS mine plan mines only 2.8 million ounces out of a total project resource of 4.7 million ounces measured and indicated and a further 2.2 million inferred ounces,” he said.

Unigold (TSXV:UGD) announced drill results that expand the Neita concession in the Dominican Republic. The current drill program continues to trace the northwestern edge of the Candelones extension zone to determine the full extent of the gold mineralization.

Prosperity Goldfields (TSXV:PPG) reported final assay results for its 20-hole, 4,427-meter winter drill program at its Kiyuk Lake gold project in Nunavut, Canada. Results from the Rusty zone include 24 meters at 2.52 g/t gold from 184 meters, 24 meters at 1.47 g/t gold from 10 meters and 28 meters of 1.05 g/t gold from 38 meters in three separate drill holes.

 

Securities Disclosure: I, Andrew Topf, own stock in Goldcorp. 

Related reading: 

Belo Sun Flops on Prefeas

Goldcorp Can Weather Price Drop, CEO Says

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