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Gold prices were steady this week, but may be affected by news from the Eurozone and the release of the latest US jobs report.
Gold prices remained relatively flat following the latest headlines regarding the European Union sovereign debt crisis. European Central Bank president Mario Draghi has strongly indicated that he wants a comprehensive banking union in EU.
A major data point of the week for investors might be the United States jobs report, which is expected on Friday morning; trading volumes in many markets may be relatively small prior to the release, with increased activity following the report. The key non-farm payrolls figure in the jobs report is expected to have increased by approximately 140,000 jobs last month. Spot market gold prices are trading in the range of $1,561.90 per troy ounce.
Operation Twist coming to an end
John Goldsmith, vice president of Canadian Equities for Montrusco Bolton Investments, indicated his strategy for the gold sector, commenting, “in June we are going to have Operation Twist coming to an end. If the long-term yields in the US start to increase substantially, as the yield curve is pretty flat right now, you are probably going to have the US Fed or the US treasury step back in and buy back some of those bonds, keeping yield curves flat. That will only signify one thing and that is QE3. QE adds fuel to the fire for the gold bugs into the gold price. Over the next four weeks, you could have a very strong movement to the upside in the case of gold, at which point in time pretty much everything on the gold map will go up.” Gold prices climbed approximately 15 percent earlier in the year following the Federal Reserve’s announcement that interest rate levels will be maintained near zero until late 2014. Traders and speculators broadly interpreted this as a signal of the intention to introduce a new round of economic stimulus or an asset purchase program often referred to as quantitative easing (QE).
Company news
Kinross Gold Corp. (TSX:K,NYSE:KGC) reached a deal to sell its 50 percent interest in its Brazil-based Crixas mine to AngloGold Ashanti Ltd. (NYSE:AU,ASX:AGG) for $220 million. The sale will leave AngloGold Ashanti with exclusive ownership of the project and will permit Kinross to focus on its core projects. Kinross’ biggest priority remains the development of its giant Tasiast project in Mauritania.
As a relatively minor source of total gold mine production for Kinross, Crixas was expected to realize approximately 70,000 gold equivalent ounces this year. The project was ultimately expected to represent 375,000 ounces of reserves for the company.
Earlier this month, Kinross reported a 58 percent decline in quarterly earnings to $105.7 million, the result of an exceptional $110.3 million re-measurement of deferred tax liabilities due to a rise in Ghana’s corporate income tax rate from 25 to 35 percent.
This news is of interest for investors as it demonstrates that Kinross is struggling with cost inflation for its development projects. The company has delayed project development and is looking at ways to optimize solutions. These issues may prove to be problematic for other gold producers as well, and provide context for the challenges of the current operating environment.
Eldorado Gold Corp. (TSX:ELD,ASX:EAU,NYSE:EGO) expects to delist from the Australian Securities Exchange at the end of August. The gold producer was originally listed on the Australian Securities Exchange at the end of 2009 after a successful takeover of Sino Gold Mining. The decision to delist came because “Eldorado has concluded that the financial, administrative, and compliance obligations of maintaining the listing are no longer justified.”
Last month, Eldorado reported a 29 percent yearly increase in its first quarter profit as a result of increased gold sales. The company produced approximately 155,000 troy ounces of gold during the first quarter of the year. Eldorado has a portfolio of gold assets in China, Brazil, Turkey, Romania, and Greece.
Eldorado’s delisting from the ASX is not expected to have a material impact on the company’s financial position or operating results; however, it may be an indication of gold companies’ level of confidence in the market and of the attention they are paying to costs.
Junior company news
Angkor Gold Corp. (TSXV:ANK) reported that five new prospects have been identified in the Dokyong prospect, Oyadao South Tenement, Ratanakiri province, Cambodia.
Grande Portage Resources Ltd. (TSXV:GPG), with joint venture partner Quaterra Resources Inc. (TSXV:QTA), filed a NI 43-101 compliant technical report with SEDAR on the Herbert Glacier gold project located near Juneau, Alaska.
Helio Resource Corp. (TSXV:HRC) intersected massive sulphide zones: up to 7 meters grading 9.0 g/t gold, 4.4 percent copper, and 75 g/t silver at the Gold Kop target, as well as other results from a second-phase geochemical soil sampling survey.
Securities Disclosure: I, Dave Brown, hold no direct investment interest in any company mentioned in this article.