By Kishori Krishnan Exclusive to Gold Investing News
Gold which has had a really powerful run in the last few days, slipped a little at the end of last week, as participants booked profits in thin trading conditions. The precious metal had ended 2008 trading up 5.5 per cent, its eighth consecutive yearly gain and its longest winning streak since at least 1980.
Gold had soared to an intraday high of $892 an ounce on Globex last week, which was the precious metal’s highest level since October 9. Gold futures too had surged to their highest level since early October, on safe-haven buying as Israeli air strikes against Hamas targets in the Gaza Strip continued unabated. Gold’s losses on Friday were “tracking movement in the dollar,” said economists at Action Economics. “However, expectations of more U.S. economic-data weakness and continued tension in the Middle East should limit the pace of any decline,” they added.
Aside from geopolitics, gold and oil were also boosted by a return to broadening U.S. dollar weakness, “especially in the aftermath of mid-December’s jobless claims and personal consumption reports,” said Ashraf Laidi, chief market strategist at CMC Markets, in a research note. Dollar weakness typically boosts dollar-denominated commodities such as gold and oil.
In Europe, gold slipped 1 per cent on Friday, the first trading day of the New Year, as the dollar strengthened against the euro and oil prices tumbled 5 per cent. According to traders who spoke to Reuters, Â prices remain underpinned by firm physical demand for gold, however, as investors bought the metal as a haven from risk over fears about the global financial outlook. “On the currency front, the dollar is trading slightly stronger against the euro,” Standard Bank analyst Walter de Wet said. “The dollar has been under some pressure over the past three weeks,” he added. “Part of this depreciation has been seasonal and we could see some appreciation of the greenback when participants return in full force on Monday,” he added.
Gold futures ended higher in the New York stock market, pacing gains in U.S. stocks and crude-oil futures and marking the metal’s eighth straight yearly gain - the longest winning streak since at least 1980. The metal’s annual return of 5.5 per cent, however, is the smallest since 2004.
New Year’s Picks
Be that as it may, but if you are in the market to own a high-quality, well-run gold company, we have some picks. Randgold Resources, whose market cap is in excess of $3 billion, is a gold mining company with major gold mines located in politically-stable areas of western Africa. Major discoveries to date include the 7.5 million ounce Morila deposit in southern Mali, the 7+ million ounce Loulo deposit in western Mali, and the 4+ million ounce Tongon deposit in the Ivory Coast.
Gold production at the company’s flagship Loulo mine in western Mali is being expanded. Higher output from the Loulo mine means that Randgold Resource’s (NASDAQ:GOLD) annual gold production will jump 50 per cent, rising from 400,000 ounces in 2008 to more than 600,000 ounces in 2011. Randgold Resources’ stock price has ranged between $22.28 and $56.28 over the past 52 weeks. The stock is currently trading near $43. An excellent entry point for investors.
Shares in junior gold and copper miner PanAust (PNA.AX) leapt on news it had improved its debt position by rolling over an $US80 million ($A112.2 million) subordinated debt facility for about 15 months. Time Â for investors to move in. The company also announced it had secured a revolving working capital facility. Managing director Gary Stafford said the agreed rollover of the facility with Goldman Sachs JBWere to March 31, 2010, significantly improved PanAust’s debt profile amid significant investor focus on the issue. The company also had identified several potential funding sources to ultimately replace the Goldman Sachs JBWere facility. “Consequently, we believe we will be able refinance the facility well before the new maturity date in 2010,” he said.
In a separate transaction, PanAust has secured an $US8.1 million ($A11.3 million) revolving working capital facility with three banks for its Phu Kham mine in Laos. Ore grades at Phu Kham would rise this year. Copper production (www.copperinvestingnews.com) is expected to exceed 65,000 tonnes in 2009 while gold output will total 70,000 to 80,000 ounces. At the end of September, the company had loan facilities totalling $US287 million ($A402.6 million) with $US14.13 million ($A19.82 million) cash on hand.
We also like Colossus Minerals Inc. (TSX: CSI) which already has defined ounces proven and very high grades. Colossus is an exploration and development company focused on mineral resource properties in Brazil. The company is currently focusing its efforts on the high grade gold-platinum-palladium Serra Pelada project in Para State, Brazil. Between 1980 and 1986 Serra Pelada was host to the largest precious metals rush in Latin American history.
On August 11, 2008, Colossus Minerals announced that it had purchased the outstanding 15 per cent net profit interest of its future earnings from the Serra Pelada project for US$4.2-million.
On September 29, 2008, the firm announced that it had intersected further high-grade gold-platinum-palladium in the Central Mineralized zone of the Serra Pelada project. Drilling to date shows continuity of high-grade gold-platinum-palladium mineralization along 100 metres of strike length, over vertical intervals of more than 70 meters and with widths up to 40 meters.
Its program for 2009, which includes a budget of CDN$9.0 million, includes conducting of a further 12,000 m of diamond drilling, establishing a 43-101 compliant resource and complete a scoping study leading to the application for a mining lease and a feasibility study in 2010.
Though a small company at this point of time, when looking at the junior space, one needs to conduct an adequate due diligence. A goodÂ pick.