February 14, 2009
That Was The Week That Was … In Australia
By Our Man in Oz >>
www.minesite.com
Minews. Good morning Australia. You seem to have had another positive week.
Oz. It was, and what’s more, this week’s upward momentum was a continuation of a trend that has been evident for the past few weeks now. In fact, if you trawl back through the data you find that the mining sector is trading at its highest level in three months. No-one is running about shouting that the boom has returned, but there is undoubtedly a more optimistic tone in the market.
Minews. Presumably it’s gold leading the way.
Oz. The straightforward response to that statement is: “yes”. But as you dig into the detail it does become apparent that there was a positive mood right across the sectors last week, and even some of our base metal stocks improved after a terrible run over the past six months or so. Overall the mining market, as measured by the XMM index, was up a respectable 3.7 per cent, just ahead of the all ordinaries, the measurement for the entire Australian market, which was up by 2.6 per cent. The gold sector was aided by the twin boost which came from a lower dollar exchange rate and higher US dollar price for gold. At the close on Friday night gold down this way was fetching A$1,450 an ounce, an all-time record. And, as one miner told your Man in Oz bluntly this week: “if you can’t make money at more than A$1,000 an ounce you ought to quit”.
Minews. Let’s start our weekly survey with a look at the gold space and then roam across the sectors.
Oz. Most gold stocks ended the week comfortably ahead, although there were a few exceptions. One of the best performances came from a stock we don’t hear much about, Argonaut Resources (ARE). It reported a suite of excellent assays from an exploration project in Laos. As a result its share price almost doubled in a day. The best intersection from the company’s Houai Khouay prospect was a 24 metre zone grading 25.5 grams of gold a tonne, with an eight metre section inside that intercept assaying 71.8 grams a tonne. Those results super-charged Argonaut which closed on Friday at A9 cents, a rise of just under 70 per cent
Minews. Good to see that exploration and discovery are back in favour with your investors.
Oz. It is. And Silver Lake (SLR) was another stock that attracted investor attention simply because it is getting on with the business of finding and producing gold. We took a look at the company mid-week, and that, it seems, was fairly timely, as the company’s shares had risen 18 per cent by the time the week was out, closing at A32.5 cents. That rise was thanks entirely to the company delivering on its promise to increase gold output. Troy Resources (TRY) also produced a more than useful price rise. It closed at A$1.35, up 17.4 per cent, after trading as high as A$1.44 at one stage on Friday. In late November, Troy dropped to a low of A67 cents, which, when you tot it up, means that Troy is getting awfully close to having pulled off a double-your money exercise in three months. To be fair, though, buyers were pretty thin on the ground back in those bleak November days so not many will have benefitted from that particular theoretical 100 per cent return.
Also on the way up this week was Kingsgate Consolidated (KCN) which has shaken off last year’s doubts over slow government decision making in Thailand. Kingsgate closed on Friday at A$3.99, up 11.1 per cent, although it did get as high as A$4.07 on Thursday. Meanwhile, Centamin (CNT) was the focus of much attention at Cape Town’s Indaba mining conference early in the week, as it announced the start of mining operations at its Sukari project in Egypt. In response shares in Centamin rose a relatively modest A4 cents to A$1.13, though that price needs to be measured against the low of A55 cents that the shares hit last October.
Minews. There is a pattern emerging in those prices, isn’t there? Quite a few gold stocks seem to have doubled, or come close to doubling, since we reached the depth of the sell-off.
Oz. That does seem to be the picture we’re seeing today. Last year was very much about forced selling to meet margin calls, not to mention a general stampede for the exit because someone claimed that the sky was falling in. Today, we’re seeing a far more rational market, and the reappearance of bargain-basement buyers. So let’s now move quickly through the gold stocks and then flick across to the rest of the market to see if we can discern any patterns elsewhere. Other gold risers included Resolute (RSG), up 13.4 per cent to A63.5 cents, Adamus (ADU) up A2 cents to A24 cents, Avoca (AVO) was up A13 cents to A$1.88, and Dragon Mountain (DMG), up 15 per cent to A11.5 cents. The only fall of significance came from Perseus (PRU) which dropped 13.7 per cent to A70 cents. However this was largely because the company has risen so far, so quickly - profit takers just had to clip the stock back a bit. A few months ago, Perseus was trading at just A20 cents.
Minews. Iron ore now, please.
Oz. This was another sector which was largely dominated by good news, perhaps thanks to interest in the value that Rio Tinto’s iron ore division is afforded through its controversial deal with China Inc. Fortescue Metals (FMG), which could be a major beneficiary of a revival in iron ore interest, hit a three-month high of A$2.81, up 21.1 per cent for the week. Atlas (AGO) also continued a recovery that comes in the wake of a few difficult months, rising another A8 cents to A$1.26. Meanwhile, Northern Iron (NFE) announced a major upgrade of resources at its Norwegian magnetite project, and rose A4 cents to A$1.22. Also on the up was BC Iron (BCI), which rose by 15 per cent to A42 cents, and Territory Iron (TTY), up half a cent to A15 cents. Saving the best for last, a relative unknown called Warwick Resources (WRK) delivered the best rise of the week as it announced excellent assay results at its Woggaginna discovery. Shares in Warwick rose by 80 per cent to A18 cents.
Minews. Base metals and uranium to finish, please.
Oz. The overall trend in base metals trend remained mixed, but it was just about possible to discern an upward drift. Among the nickel stocks Albidon (ALB) added 12.8 per cent back on to its value to close at A8.6 cents. This after it attracted a bit of interest at Indaba. Independence (IGO), perhaps more because of its gold assets, rose 11.3 per cent to A$2.86, while Fox Resources (FXI) reported fresh assays from its Radio Hill mine, and rose A2.5 cents to A54.5 cents. On the way down, Mincor (MCR) slipped A3 cents lower to A68.5 cents, and Western Areas (WSA) fell A13 cents to A$3.88.
Copper stocks put in a similarly mixed performance, although one rather interesting upward move stood out from the crowd. Bougainville Copper (BOC), a real blast from the past, leapt back into the headlines after a 20 year absence. The Papua New Guinea-focused Rio Tinto subsidiary, which you would have to think is for sale, reported a fresh resource calculation of more than one billion tonnes of ore containing three million tonnes of copper and nine million ounces of gold. There are the usual impediments to re-development, such as ongoing tribal warfare in the neighbourhood, but the upgraded resource announcement re-kindled interest and Bougainville rose by 19 per cent to A80 cents. Other copper movers included Marengo (MGO), which was up by 14.5 per cent at A5.5 cents, and Equinox (EQN), which slipped back by A10 cents to A$2.00.
Zinc stocks were generally flat, though Bass Metals (BSM) reported encouraging assays from its Tasmanian project, and rose 12.2 per cent to A11 cents as a result, and Kagara (KZL), which is spending less time on zinc these days and more on nickel, rose an eye-catching 27.8 per cent to A46 cents.
The uranium sector also showed a pleasing upward trend, and there was one stand-out worth noting. Extract Resources (EXT) rose 19.7 per cent to A$1.82, as interest builds in its large Namibian resource and the corporate games that swirl around the company. What made last week’s share price rise from Extract especially interesting was that it is one of the first companies in months to post a price which represents a 12-month high. That has to be a red-letter event, after such an awful period of reporting 12-month share price lows. Other uranium movers included Mantra (MRA), which rose a very respectable 22.2 per cent to A$1.10 after it upgraded its Tanzanian projects and engaged in a bit of marketing at Indaba, and Bannerman (BMN), which rode the revived interest in Namibian uranium with a rise of 17.6 per cent to A73.5 cents.
Minews. Thanks Oz.