Gold skyrockets to new year high

The strength of the current bull market for gold was very much in evidence during the 14th trading week of the year, as sovereign debt concerns in Europe continued to dominate precious metals and currency trading.

• In the futures market, COMEX gold for June delivery jumped US$35.80 on the week to close at a new high for the year of US$1,161.90 per oz., while silver prices rose 2.7% on the week, maintaining a steady 63-to-1 gold-silver price ratio.

But this time gold rose in tandem with a strong U.S. dollar rally as global investors grew increasingly skeptical that the latest European bailout proposal for Greece’s sovereign debt mess would work. The broad strength in gold prices was also reflected in the metal attaining new lifetime highs in Japanese yen, euros and Swiss francs.

• The palladium price also has fresh wind in its sails, with prices rising to a two-year high above US$500 per oz. on the back of increased demand from a surging Chinese auto sector and investment demand from various funds including new platinum-group- metals exchange trade funds.

This is all good news for Canada’s only primary palladium producer, North American Palladium, which has reopened its mothballed Lac des les palladium mine in northwestern Ontario, and expects to be producing soon at a rate of 140,000 oz. palladium per year.

Over the years, the mine has shifted from an open pit to an underground operation, with ore now being mined from the Roby underground zone at a rate of 2,000 tonnes per day, which will soon be ramped up to the target rate of 2,600 tonnes per day.

After a tough couple of years in survival mode, the company is firing on all cylinders at the mine: it’s operating seven days a week on two 12-hour shifts with a workforce of 180; a new collective agreement was signed with the United Steelworkers that is effective until May 2012; and the company has renewed its smelting contract with Xstrata Nickel under terms described as similar to the last one.

• Retail investors in small-cap mining stocks who enjoy sharing their wisdom with others on internet chat sites got a rude awakening, as the Ontario Securities Commission revealed its allegations that the managers and staff at investor-services supplier Agoracom had been making “fraudulent postings” on the various hubs of its website from September 2006 to July 2009.

The OSC alleges that Agoracom managers and its representatives each had between 40-50 aliases and were required to make a requisite number of posts per hub per day or risk having their pay docked. The OSC counted more than 24,000 alias posts created from within Agoracom on client and non-client hubs.

• There was a bloody coup d’tat in Kyrgyzstan, which saw antigovernment protesters seize government buildings in the capital Bishkek, security forces opening fire on protesters, and the president fleeing the capital and negotiating his final exit.

Geopolitically, the question over the future of a U.S. airbase vital to the war in Afghanistan looks to have been settled, with the new government saying the airbase lease will be extended another year. For miners, the bigger question was the status of Centerra Gold’s huge Kumtor open-pit gold mine in the country, which reportedly has been able to continue production throughout the upheaval.

• In grassroots exploration, Quest Uranium unveiled a new resource estimate for the B-Zone of its Strange Lake rare earth elements (REE) project in the far northeast of Quebec, west of the Voisey’s Bay nickel mine in Labrador.

The B-Zone now hosts an inferred resource of 114.8 million tonnes grading nearly 1.0% total rare earth oxides, 1.973% zirconium oxide, 0.208% niobium pentoxide, 0.053% hafnium oxide and 0.082% beryllium oxide.

For readers not closely following the somewhat complex rare earth elements subsector, these are excellent preliminary results, and the project should see some exciting years ahead as the new frontier of REE exploration and mining continues to grow in importance and opportunity.

• Investors in Crowflight Minerals got a pleasant April surprise, as Chinese nickel major Jinchuan Group launched a $150-million takeover bid, offering 26¢ in cash per Crowflight share.

The deal demonstrates how Chinese majors are continuing to look at a full range of company sizes with respect to potential acquisitions, in stark contrast to Western miners who go out of their way to avoid any kind of M&A activity with junior producers having limited growth potential.