MINING MARKETS & INVESTMENT NEWS — EASTERN MARKETS — Yellow metal stages dramatic comeback

Finally the dog had its day. After a long, lean summer trading below US$260 per oz., gold prices broke out in spectacular fashion during the Sept. 22-28 report period, soaring above US$300 and even briefly touching a high of US$327.30 on Sept 28.

The sudden rush to gold came after two major announcements on Sept. 26 by the European Central Bank and the International Monetary Fund regarding their gold reserves. The ECB, along with the central banks of England, Switzerland and Sweden said they would limit their gold sales to a maximum of 400 tonnes in any one year over the next five years. The IMF declared that it was abandoning a plan to assist the world’s poorest countries by selling up to 10% of its 103 million oz. of gold on the open market. Instead, the IMF plans to revalue a 14-million-oz. portion of its reserves from US$48 per oz. to its market value.

On Sept. 27, gold prices enjoyed their best one-day rally in 15 years, with the spot price rising to US$283 per oz. in Asian trading. With short sellers diving for cover, most gold majors posted single-day advances of 20-35%, while the juniors advanced 50% or more. The following day was even better for gold, with prices hovering above US$310 before closing in New York at US$307.90 per oz.

Among the gold majors, Barrick Gold rose $5.90 to $35, Placer Dome shot up $6.80 to $22.90, Kinross Gold gained $1.35 to $4.70, Franco-Nevada Mining climbed $4.25 to $31.25, and Cambior added $2.41 to reach $6.20. The TSE’s gold and precious minerals index surged 26% to 6,806.89 points.

Platinum, palladium and silver moved in sympathy with gold, with platinum rising $46.50 to US$429 per oz., palladium advancing $30 to US$396 per oz. and silver gaining 45 cents to reach US$5.71 per oz. on Sept. 29.

Among the juniors, Vengold rose a stunning 329% after announcing it had raised US$100 million by dumping 95 million shares in Nasdaq-listed Lihir Gold, owner of the giant Lihir gold mine in Papua New Guinea. The company plans to retire US$85 million of its US$105 million in outstanding debt, leaving it with US$21 million in cash. The company still retains a 5.7% stake in Lihir, as well as a right of first refusal on a 17.2%-interest held by London-based Rio Tinto. The company ended the period at 30 cents, though it had fallen back a nickel at presstime.

In light of gold’s newfound strength, Orvana Minerals has canceled a $2.3-million rights offering to Franco-Nevada Mining and, instead, amended an unrelated royalty agreement on its advanced Don Mario copper-gold project in Bolivia in exchange for US$1 million from the holder. The junior rose 39 cents to 62 cents, a gain of 169.57%.

Not to be outdone, base metals put in a solid performance, with nickel rising 2 cents to US$3.21 per lb., zinc inching up 1 cents to US55 cents per lb., and both lead and copper staying the course.