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Gold came roaring back this week, retracing about half of the losses it sustained on April 15.
Just as gold was being counted out as a safe investment, it has started showing resilience. The yellow metal tracked higher on Thursday after picking up some fresh safe haven demand due to the United States’ accusations that Syria used chemical weapons against its own people.
Spot gold on Thursday was last quoted up $13.60, at $1,445.50, while gold futures for June were up $39.70, at $1,463.10 an ounce. The gains came on the back of an equally bullish day for gold on Wednesday, when the precious metal gained $14.20 on the spot market and $18.50 on the futures exchange after it was revealed that Germany’s business index fell and the country could be teetering towards recession.
Kitco’s Jim Wyckoff said that gold prices remain in a 6.5-month downtrend, with technical resistance and support levels forming at $1,500 and $1,400.
Gold’s two-day run means that the metal has clawed back about 50 percent of its value since taking a precipitous plunge on April 15 to $1,326, a multi-year low. Its retracement over the last several days has largely been credited to a resurgence in physical gold demand, with buyers, particularly in Asia, lining up in droves to buy the metal at cheap prices. In the United States, physical demand has also been robust, with US Mint gold coin sales nearing a high of 231,000 ounces set in December 2009. On Thursday, Reuters reported that the Mint actually had to stop sales of its one-tenth-ounce gold coin to prevent from running out of stock.
In fact, shortages of gold at the moment could actually be a global phenomenon, according to Ross Norman, CEO of bullion dealer Sharps Pixley. He noted on Thursday that there have been reports of “Dubai running short of physical, US Mint selling out of smaller denomination bars, coins and bars flying off the shelves in India and China, and queues outside leading gold sellers such as Degussa in Germany. The effect has been a massive drawdown in physical metal which has, by and large, caught the gold refineries and some stockists by surprise.”
Company news
A raft of news about Barrick Gold (TSX:ABX,NYSE:ABX) kept headline writers busy this week. The Toronto-based company is facing the wrath of shareholders whose investments are down 40 percent this year, prompting the world’s biggest gold miner to look at cutting costs to reign in its $11.6 billion debt and boost its share price. Not helping matters is a decision to pay co-chairman John Thornton an $11.9 million signing bonus, which angered a group of institutional shareholders to such an extent that the bloc of large Canadian pension funds voted down a resolution on executive compensation. On Monday, Barrick said it would sell three gold mines in Australia to help alleviate its debt burden, and on Wednesday the company announced that it plans to cut at least $500 million this year from spending on major projects. A day later Barrick said it will look at deferring its Pascua Lama project straddling the border of Argentina and Chile. The decision comes after a Chilean court suspended construction on the Chilean side of the open-pit mine due to Pascua Lama not complying with environmental requirements.
Australia’s Newcrest Mining (TSX:NM,ASX:NCM) also said it will review its business activities especially those with high costs of gold production, the company said in its quarterly report. “Operating and capital costs overall continue to be high in the global gold mining industry. Also, the recent decline in commodity prices has not been accompanied by a reduction in the strength of the Australian Dollar and New Guinean Kina,” gold major Newcrest said in a statement.
Junior company news
Banro Resources (TSX:BAA) was up 1.5 percent Thursday to $1.31 after closing its previously announced $100 million financing to put towards its Namoya gold project in the DRC. Banro originally tried to raise $20 million to $30 million through issue of common shares and $50 million in preferred shares, with the remainder coming from BlackRock World Mining Trust, according to The Globe and Mail. The final deal, however, had Banro issuing $68 million in common shares and just $3 million in preferred shares, with BlackRock maintaining $30 million in preferred shares. The common shares were sold at $1.35 per share.
Alpha Minerals (TSXV:AMW) completed its previously announced private placement of 1.2 million flow-through shares at a price of $4.40 per share and 1.7 million units at $4 per unit for aggregate gross proceeds of $12.28 million. Proceeds will be used to advance the Patterson Lake South uranium property in Saskatchewan, which it owns with JV partner Fission Energy (TSXV:FIS). Alpha also owns gold properties in BC and Ontario.
Homestake Resource (TSXV:HSR) reported a 40 percent increase in indicated and inferred resources at its Homestake Ridge gold-silver project in northern BC. The maiden resource for the South Reef deposit, discovered in 2011, shows 124,000 ounces of gold and 939,000 ounces of silver in the indicated category. In the inferred category, the deposit shows 911,000 ounces of gold and 20.366 million ounces of silver.
White Tiger Gold, a tiny $14.5 million market cap company that trades on the TSX, said Thursday it is voluntarily delisting from the Toronto main board and moving its listing to the NEX. The NEX provides a trading forum for listed companies that have fallen below TSX Venture’s listing standards, according to the exchange’s website.
The announcement begs the question of whether other junior mining companies having difficulties in the current tough financing market could move their listings to the NEX to avoid delisting altogether.
Securities Disclosure: I, Andrew Topf, hold no investment interest in any of the companies mentioned.
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