UK auction ushers in summer doldrums for gold

The decidedly lacklustre response to the Bank of England’s latest auction may have set the tone for gold prices for the rest of the summer.

On July 12, the bank sold 804,000 oz. gold at US$279.50 per oz., with an oversubscription rate of only 1.3 times.

Gold prices fell during the July 5-11 report period in advance of the auction, slumping US$4.85 to reach a London morning fix of US$282.85 per oz. on July 12. Following the auction, gold hovered around the US$280-per-oz. mark.

Most of Canada’s major gold producers retreated in step with gold: Placer Dome was off 12 to $9.38; Franco-Nevada Mining fell 35 to hit $16.55; Kinross Gold edged down 12 to $1.20; TVX Gold fell 8 to 81; and Cambior was down 15 to 60, touching an all-time low of 56 along the way. The exception was industry leader Barrick Gold, up 30 on the week to $27.05.

In contrast, nickel prices continued their steady climb, rising 7 to US$3.79 per lb. Workers at Falconbridge‘s Sudbury operations voted decisively for a strike mandate and now have the legal right to walk off the job on Aug. 1 if no new deal is reached. The major also announced it had inked a tentative agreement with Broken Hill Proprietary to form a joint venture to explore and possibly develop the Gag Island nickel-laterite project in Indonesia. Falco can earn a 37.5% stake in Gag by spending US$75 million. Over the week, Falco fell $1.65 to $17.40, while rival Inco rose 20 to $23.50.

Also of note in the nickel world was the demand made by the prosecutor general’s office in Russia that Vladimir Potanin, head of the Interros group, which controls Noril’sk Nickel, should pay the government US$140 million — an amount claimed to be underpaid when Noril’sk was privatized in the mid 1990s.

Canada’s remaining base metal majors were mixed: Noranda was up 80 to $15.45; Rio Algom rose 35 to $17.75; Teck‘s B shares were off 30 to $9.85; Cominco fell 35 to $19.70; and Breakwater Resources crept down 10 to $2.89.

Boliden, tail firmly between legs, announced it was packing up its Toronto head office and returning home to Stockholm. Shares in the struggling miner flickered to life, gaining 32 to $2.08.

De Beers Consolidated Mines’ attempted hostile takeover of Winspear Resources took another twist as the latter hurriedly released a new resource estimate of its Snap Lake diamond project in the Northwest Territories. The new study roughly tripled the deposit’s tonnage while keeping the grade about constant. Winspear ended the week up 5 to $4.70.