By Kishori Krishnan
Its a clear sign. Money is coming back into the resource sector as investors around the world are beginning to recognise the exceptional values in the context of a longer term outlook. And companies that are generating shareholder value by advancing their projects will continue to be rewarded. At the moment, the most favoured area for investors remains precious metals, especially gold.
Gold steadied above US$ 950 per ounce on Thursday as the US dollar stayed near a seven-week low against a basket of currencies marked the previous day, maintaining bullion’s allure as an alternative asset. Earlier this month, economic worries encouraged investors to buy the US dollar and US Treasuries instead of gold, dragging the precious metal’s prices down towards US$ 900.
Spot gold was at US$ 952.50 an ounce in Asian trade, up 0.2 per cent from the notional New York close of US$ 950.40 on Wednesday. On that day, gold rose for the third time in four sessions as the dollar weakened, boosting the appeal of precious metals as a store of value. Silver gained while platinum fell.
“Investors have a feeling that equity markets are on course for a recovery from recent lows… They are less risk-averse than before,” said Dick Poon, manager of precious metals at Heraeus in Hong Kong. “Now that they are buying stocks again, their focus is back on commodities markets as well,” he added.
The dollar slipped as much as 0.5 per cent against a basket of six major currencies as Federal Reserve Chairman Ben S. Bernanke reasserted a plan to keep benchmark U.S. lending rates at historic lows for an “extended period.” Last week, gold prices jumped 2.7 per cent as the dollar slumped.
“If the dollar starts to weaken significantly again, it will send gold off to the races,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago.
The safe-haven gold that is being offered back to the market is finding ready buyers in investors who look beyond the early stages of recovery. People now recognize inflation as the inevitable consequence of trillions of dollars of stimulus spending.
Gold is gaining recognition as a hedge against the declining value of currencies, which is the flip side of inflation. Some commentators feel that the gains in the broad markets and in resources have gotten too far ahead of economic fundamentals. However, in looking at the resource markets, it is important to consider the global picture.
On Monday, bullion hit a five-week high of US$ 954.90 as a declining greenback and better US corporate earnings boosted bullion’s appeal as an inflation hedge. But Federal Reserve Chairman Ben Bernanke’s remarks vowing to fight inflation kept investors from becoming overly bullish on gold.
Juniors are still holding forth. Analysts have given Gabriel Resources Ltd (TSE:GBU) a 3.7 rating, while High River Gold Mine Ltd (TSE:HRG) has got a 3.5 rating, as has Novagold Resources Inc (AMEX:NG).
Jinshan Gold Mines Inc (JIN) has got a 3 rating, according to an analysis by Thomson One Analytics, as has Banro Corp (TSX:BAA) and International Minerals Corp (IMC). Next on the list is Greystar Resources Ltd (TSX:GSL), which has a 2.8 rating, Capital Gold Corp (CGLD), CGA Mining Ltd (CGX) and Dundee Precious Metals (DPM), all three sharing a 2 rating.
Lower down the rating line is Anatolia Minerals (ANO) with a 1.9 rating, as does Detour Gold Corp (DGC) with a similar rating by analysts. International Tower Hill (THM) comes close with a 1.7 rating, as does Rainy River Resources Ltd (RR). However, Canplats Resources Corp (CPQ) has bagged a 1.5 rating as has Ventana Gold Corp (VEN) and Virginia Mines Inc (VGQ).
Ormonde Mining (ORQ) has signed up a new partner for the La Zarza Copper-Gold project and is to now focus on tungsten for early cash flow. “The biggest risk on small companies”, says Fraser Gardiner, “is probably financial risk”. As a director at Ormonde Mining, a company which has run into trouble in the past over the tricky geology at its La Zarza copper-gold project in Spain, Fraser should know.
La Zarza was only ever meant to be a small project, one undertaken with a view to getting Ormonde up and running and into the game. Instead, with matters complicated by a zinc www.zincinvestingnews.com credit that goes in and out of profitability depending on metals prices, La Zarza has turned into a sizeable and complex undertaking, with development costs now likely to come in at a back-of-the-envelope â‚¬100 million. Just to put that into perspective, on the current 4.88p share price, Ormonde has a market capitalisation of just Â£11.2 million.
Beowulf, (BEM:LN) the mining group with several exploration projects in Northern Sweden, has commissioned initial metallurgical tests on ore grade material from its 100 per cent-owned JORC-compliant Lulepotten copper-gold deposit in the Arjeplog County region of Northern Sweden.
Lulepotten currently forms the largest copper deposit within Beowulf’s Ballek project area covering close to 11,000 hectares. The deposit has an estimated JORC-compliant inferred mineral resource of 5.4 million tonnes grading 0.8 per cent Cu and 0.3g/t Au. That represents a total of 43,000 tonnes of contained copper metal and 52,000 ounces of contained gold using a cut-off value of 0.3 per cent for copper. Further drilling is expected to significantly increase the resource.