Nickel juniors shine in buoyant market

While the fourteenth week of 2007 was shortened to four trading days owing to the Good Friday holiday, there was plenty of sizzling stock action for investors in the mining sector.

Nickel was the week’s star performer, riding to a new record spot price of US$23.76 per lb. — a figure described as “lunatic” by one analyst — and powering a trading surge in nickel miners and explorers.

* Vancouver-based junior GGL Diamonds proved to be a single-day ten-bagger — at least for a few moments — as it released news on April 4 that it had come across nickel showings late last year in the Northwest Territories’ Winter Lake area in the midst of its gem hunt. The news of a diamond explorer stumbling across a nickel find naturally sparked comparisons to Diamond Fields’ Voisey’s Bay discovery in the mid-1990s.

We spent time with GGL before the Easter break and see that, while it is still early days, GGL has tied up the better part of a favourable trend for nickel mineralization.

* Being long nickel juniors was a great strategy in week 14: Brilliant Mining gained 40% to touch a new high of $2.63 per share on strong results from its Lanfranchi project in Western Australia; shares of Hard Creek Nickel soared to new highs of $3.26 on optimism at its large Turnagain project in northern B.C.; Dumont Nickel rocketed as much as 200% on strong volume, but had no reason to offer when queried by the Venture Exchange; Mustang Minerals put in a very strong performance upon launching a feasibility study at its Maskwa nickel project in southeastern Manitoba; and newly listed Mirabela Nickel took off out of the gates, gaining about 30% in its first week after tabling long nickel intercepts from its Brazilian projects.

* Dollar-wise, the biggest nickel event of the week was Lundin Mining’s inspired, friendly $993-million takeover bid for Rio Narcea Gold Mines. It’s a three-way arrangement that would see Lundin take Rio Narcea’s new Aguablanca nickel-copper mine in southern Spain but unload Rio’s gold assets onto Red Back Mining for US$225 million in cash and the assumption of $42.5 million in debt.

Rio Narcea’s always been a bit of an oddball, unfocused company that spent its early days touting its eligibility for government subsidies as a major selling point — never a good sign. This deal will put the Aguablanca assets into stronger hands, and operations there should benefit by being so close to Lundin’s existing base metal operations in Portugal, which include the Neves-Corvo copper and Aljustrel zinc-lead mines.

* Going in the other direction this week was Shore Gold, which plummeted 17% in the last half hour of trading on April 3 as it announced terrible results from the Orion North kimberlite in Saskatchewan. Shares dropped $1.29 to $6.37, wiping about $227 million of Shore Gold’s market capitalization, which now stands at just over $1.1 billion. The share price has been slowly recovering ever since.

The results were so discouraging it’s remarkable the shares have held up so well: The sample run recovered 100.03 carats of diamonds from 3,404 dry tonnes of kimberlite extracted from an initial nine holes of a 20-hole large-diameter (1.2 metre) drill program. The average grade comes in at a measly 2.94 carats per hundred tonnes.

The Orion North kimberlite is part of the Forte la Corne joint venture (FalC JV) owned 60% by Shore Gold and 40% by Newmont Mining.

* Don’t feel left out gold bugs: GFMS came out on Wednesday with its definitive Gold Survey 2007, which shows strong price support for gold, including the fact that gold mine production fell 3% in 2006 to a 10-year low, despite the furious drive to bring on new production in light of higher gold prices.

While cash costs rose US$45 per oz. globally in 2006, up roughly double from each of the previous two years, gold miners’ simple cash margins swelled 66% year-over-year thanks to much higher spot prices.