InsideMetals Newsletter - 03/20/2010 | Volume 5, Number 6 - Precious Metals Market Trends, Geopolitical View, Gold Producer News and Website Updates

March 8, 2010: AngloGold Ashanti Ltd. (AU). CEO Mark Cutifani said that AU could split its global business to increase its valuation and boost returns to shareholders. AU has 21 operations on four continents. Cutifani said that AU would like to acquire assets in North America, and hopes to unwind its hedge book earlier than a previous target date of 2114. AU plans to settle about 800,000 ounces of gold each year for the next five years. AU expects gold to trade in a range between $1,000 and $1,200 per ounce in 2010. Any price drop below $1,000 would provide the company opportunities to trim its forward sales. AU expects to produce 4.6 million ounces of gold in 2010 and between 4.8 to 5.0 million ounces in 2011.

March 8, 2010: Eldorado Gold Corp. (EGO) announced an update to its mineral reserves and resources for the Eastern Dragon Project (EDP) in Heilongjian Province in China. EDP is a high grade epithermal vein system that will be mined by a combination of open pit and underground methods. This update consists of 77 holes totaling 10,000 meters which has increased proven and probable reserves by 42% to 747,000 gold ounces, and increased measured and indicated gold ounces by 47% to 852,000 ounces, with an additional 190,000 ounces in the inferred category.

March 11, 2010: Coeur d'Alene Mines Corp. (CDE) announced that its San Bartolome mine in Bolivia has begun mining operations in higher grade material located in the Huacajchi deposit above the 13,000 foot level per its agreement with the Cooperative Reserve Fiscal. The Huacajchi area is composed of a gravel deposit leased by the major Cooperative Reserve Fiscal which was excluded from the October 2009 resolution restricting mining above the 13,000 foot level on Cerro Rico Mountain. The Huacajchi lends itself to simple, free digging surface mining techniques and can be extracted without drilling and blasting. Extraction of this higher grade material will have a positive impact on production and costs. San Bartolome is a surface silver mine near Potosi where commercial production commenced in June 2008. The mine produced 7.5 million ounces of silver during its first full year of operation in 2009. Mining above 13,000 feet was suspended while stability studies of the Cerro Rico Mountain were undertaken by COMIBOL, the Bolivian state-owned mining organization

March 11, 2010: Goldcorp Inc. (GG) reported gold production of 601,300 ounces of gold at a total cash cost of $289 per ounce for the fourth quarter ended December 31, 2009. Fourth quarter adjusted net earnings amounted to $182.7 million. For the full year GG produced 2.42 million ounces of gold at a total cash cost of $295 per ounce, which generated adjusted net earnings of $588.2 million. On gold sales of 573,100 ounces, revenue for the fourth quarter increased by 28%, to $778.3 million. GG expects to increase its output by almost 50% over the next five years to nearly 3.8 million ounces by 2014. Refer to the press release for details on exploration, development and operations on specific projects.

March 11, 2010: Harmony Gold Mining Ltd. (HMY) expects to resume work at its Evander No. 8 shaft on Friday morning, March 12, following a fatality on Wednesday when a worker was killed by a rock fall at a work area 2,125 meters below the surface. The mine has lost about 18 kg of gold production over the two days when operations were suspended.

March 11, 2010: Kinross Gold Corp. (KGC) entered into a letter agreement to acquire 91.5% of the outstanding common shares of Underworld Resources Inc. not owned by KGC, by way of a friendly take-over bid. The Board of Directors of Underworld unanimously recommended that shareholders agree to the offer. The Board and management have tendered their shares to the offer. KGC will offer 0.141 of a KGC share, plus $0.01 in cash for each Underworld share. The offer represents an implied offer price of approximately $2.62 per common share based on a March 10, 2010 closing price of $18.54. The transaction, on a fully diluted basis is valued at $139.2 million. Underworld is a junior exploration company focused on its key asset the White Gold Project located in the Tintina gold belt approximately 95 km south of Dawson City in the Yukon.

March 11, 2010: Kinross Gold Corp. (KGC) expects to add approximately 1 million ounces of gold production by 2015. KGC will complete a prefeasibility study on its Fruta del Norte project in Ecuador by the end of the year. KGC expects to produce about 2.2 gold-equivalent ounces (GEO) in 2010, roughly the same as 2009 production of 2.24 million GEO. Additional production will be coming based on development progress at Lobo Marte, and Cerro Casale projects located in Chile.

March 12, 2010: Barrick Gold Corp. (ABX) is seeking to add Xsstrata Plc as a defendant in a lawsuit against New Gold Inc. (NGD) and Goldcorp Inc. (GG) over the El Morro gold-copper project in Chile. In October 2009, ABX had struck a deal to purchase Xstrata's 70% share in the project for $465 million, but to ABX's surprise, El Morro's minority stakeholder, NGD, exercised its first right of refusal and to purchase Xstrata's 70% share, and then sell that stake to GG. In January 2010, GG said that it would advance to a NGD subsidiary $463 million to facilitate acquisition of Xstrata's 70% interest. Following the transaction GG would acquire the NGD subsidiary and pay NGD $50 million in cash upon closing the transaction to purchase the NGD subsidiary. Barrick wants to have Xstrata included in the lawsuit because Xstrata reneged on its agreement to sell its stake to ABX, and thus interfered unlawfully with ABX's economic interests and conspired to injure Barrick. El Morro contains proven and probable reserves of 6.7 million ounces of gold and 5.7 billion pounds of copper, with an additional 2.2 million ounces of gold and 1 billion pounds of copper in the measured and indicated resource categories.

March 12, 2010: Goldcorp Inc. (GG), CEO Chuck Jeannes provided updates on GG's project pipeline and comments on his expectations for additional gold production in 2010, compared to the 2.3 million ounces sold in 2009. As part of the company's finances released on March 11, 2010, GG reported that a recently completed pre-feasibility study for the Elenore gold project in Quebec confirmed management's expectation for a long-lived underground gold mine with strong sustained production at low costs over a 16 year mine life expected to commence in 2015, with an expected annual gold production to average approximately 330,000 ounces at a cash cost of less than $400 per ounce. The initial capital cost is expected to be $800 million. Plans are also progressing toward development of Esobar, a world class silver discovery in western Guatemala. Measured and indicated resources at Escobar as of December 31, 2009 totaled 130.1 million ounces of silver. At Red Lake the mine remains on track to increase its 2009 gold production from 622,000 ounces to 675,000 in 2010. At Los Filos, in Mexico, production is expected to increase from 239,000 ounces produced in 2009 to 300,000 ounces in 2010. At Martin, in Guatemala, production in 2010 is expected to increase to 290,000 ounces from 274,000 ounces produced in 2009. Commercial production is expected to commence at its world class Penasquito mine in Mexico in the third quarter of 2010. GG reported production of 2.42 million ounces of gold in 2009.

March 15, 2010: Gold Fields Ltd. (GFI) announced that it will spend approximately $1.1 billion over the next five years to achieve production of 750,000 ounces of gold per year at its South Deep gold mine in South Africa. The mine is currently producing 75,000 ounces of gold per quarter. The South Deep mine currently has a resource of approximately 30 million ounces, which would give the operation a mine-life of about 45 years.

March 15, 2010: Newmont Mining Corp. (NEM) will complete the ramp-up on its Boddington gold mine located in Western Australia by the end of the third quarter of 2010. Construction, to date is approximately 70% complete, and upon completion Boddington will over take the Super Pit as Australia's largest gold producer. The mine is expected to produce 1 million ounces of gold annually for the first five years before averaging 850,000 ounces annually. The mine has an estimated gold reserve of 21 million ounces and an expected mine life of 24 years. With Boddington's production coming on line during 2009, Newmont's production outlook for 2010 has increased to between 5.3 million to 5.5 million ounces.

March 16, 2010: Barrick Gold Corp. (ABX). Production was suspended at African Barrick Gold's (ABG) Bulyanhulu mine in Tanzania while it worked to rescue miners trapped by a fall of ground. Rescue workers recovered the body of one miner, two more were trapped 900 meters below ground in the mine. The rescue team was able to speak directly to the trapped miners through broken rock, by utilizing the leaky feeder cables that are run through the mine to facilitate communication. The mine produced 249,000 ounces of gold in 2009 at a cash cost of $651 per ounce of gold sold. ABX reported last month that it is spinning off its African assets into a new London based company called African Barrick Gold.

March 16, 2010: AngloGold Ashanti Ltd. (AU) reported that it has entered into an agreement to sell gold-bearing materials to Goldplats Plc for processing at its Tema facility in Ghana in order to boost Goldplats' overall monthly output of its Gold Recovery Ghana (GRG) business. GRG would acquire fine carbon and mill liners, which were byproducts from the mining process, from AU's Obusai and Iduapriem operations in Ghana, for processing.

March 16, 2010: AngloGold Ashanti Ltd. (AU) reported that it has suspended operations at its Moab Khotsong mine in the Vaal river area of South Africa following a fatal accident on March 15th after a worker was killed when two trains collided.

March 17, 2010: Goldcorp Inc. (GG) has started a 2,000 meter drilling program on three gold targets on the Wabamisk gold property owned by Azimut Exploration Inc. The Wabamisk property is 57 km long and comprises 755 claims covering a 400 sq. km surface area in the James Bay region of Quebec. GG has the option to earn a 51% interest, and can earn an additional 19% interest upon delivery of a bankable feasibility study. GG will be the project's operator. The drilling will test three targets:

· GH prospect will test felsic volcanics with intense quartz veining, silica, and potassic alteration positioned within a 3-5 km strong antimony and arsenic soil anomaly that corresponds with an IP geophysical anomaly.

· Brenda Prospect will test mafic volcanics with intense silica alteration and quartz veining and anomalous geochem in an area with sparse rock outcrops.

· ML prospect will test along the eastern extension of the gold-bearing Dome area which has a recognized strike length of at least 1.7 km. Historic grab samples from the Dome area have produced gold grades ranging from 0.25 oz/ton to 2.0 oz/ton gold.

March 17, 2010: Barrick Gold Corp. (ABX) reported that three workers were killed in its previous reported rock fall at its Bulyanhulu mine in Tanzania.

March 17, 2010: Harmony Gold Mining Ltd. (HMY) said that a rock fall on March 17, 2010 resulted in the death of a mine worker at its Tshepong mine in the Free State. The Department of Mineral Resources stopped blasting operation at the mine to conduct an investigation.

March 18, 2010: Newmont Mining Corp. (NEM) and partner Sumitomo Corp. have sold another 7% of the company that owns their Batu Hijau copper/gold mine in Indonesia to local entities. The 7% stake was sold for $247 million to PT Multi Daerah Bersaing (PTMDB), a consortium owned by regional and local governments near the mine, and PT Multicapital a private Indonesian company. This sale was per a 1986 agreement that required a 51% interest in the mine to be sold to local entities in stages over the agreed timeframe. The sale reduces Newmont's direct interest in the mine to 31.5%, but NEM owns an effective 48.5% interest because PT Pukuafu Indah, which owns 20% of the mine, pledged its holdings and all of its shares as collateral for a loan provided last year by NEM. The sale lowers NEM's attributable gold production from the mine in 2010 by about 25,000 ounces of gold and 20 million pounds of copper.

March 3, 2010: Endeavor Silver Corp. (EXK) announced its fifth consecutive year of increasing combined reserves and resources from its producing Mexican silver mines in Guanacevi in Durango State and Guanajuato in Guanajuato State, and from the Parral project in Chihuahua State. Highlights are presented below:

· Proven & Probable silver reserves increase 113% to 16.6 million ounces (15.0 million oz at Guanacevi and 1.6 million oz at Guanajuato)
· Proven & Probable gold reserves increase 87% to 44,000 ounces (22,500 oz at Guanacevi and 21,500 oz at Guanajuato)
· Indicated silver resources increase 21% to 23.6 million ounces (17.8 million oz at Guanacevi, 4.3 million oz at Guanajuato and 1.5 million oz at Parral)
· Indicated gold resources increase 35% to 119,100 ounces (37,100oz at Guanacevi, 38.200 oz at Guanajuato and 43,800 oz at Parral)

March 4, 2010: New Gold Inc. (NGD) reported a fourth quarter 2009 loss of $7.7 million as it recorded a one-time $28.7 million in charges even though its revenue more than doubled. Net income for the year earlier quarter was $41.1 million. Revenue for the fourth quarter rose to $131.8 million from $36.7 million in the year earlier quarter. The one-time charges include a $14.6 million loss on investments and a $11.2 million loss on foreign exchange, and a $2.5 million goodwill impairment charge related to the acquisition of a mine near Yuma, Arizona. For the fourth quarter of 2009, NGD produced 111,672 ounces, a 41% increase from 78,950 ounces produced in the same period in 2008. For the year NGD reported a net loss of $194.3 million compared with a net loss of $102.7 million in 2008. Revenue in 2009 rose to $322.8 million from $143.1 million in 2008. NGD forecasts gold of 330,000 to 360,000 ounces in 2010 at a total cash cost of $445 to $465 per ounce sold, net of by-product sales. Refer to the press release for details on mine operations.

March 5, 2010: Apollo Gold Corp. (AGT) announced that its first assay results from drilling at the Pike River Project, which borders their Black Fox mine to the north, and their Grey Fox Project to the south intercepted high grade gold mineralization. The 4.2 meter true width intercepted in drill hole GF09-65 assayed 19.4 grams per tonne (gpt), including a 86.0 gpt assay over 0.8 meters. This hole extended gold mineralization in the Contact Zone at Grey Fox approximately 150 meters to the north into the Pike River property. The Contact Zone now has 850 meters of mineralization strike length.

March 8, 2010: Aurizon Mines Ltd. (AZK) plans to complete a feasibility study on its Joanna project in Quebec by the end of the year, which could result in the project's first gold pour being made about mid-2012. Presently, AZK owns and operates the Casa Berardi mine, also in Quebec, and expects to produce between 145,000 and 150,000 ounces of gold in 2010. Once in production, Joanna could boost AZK's production by some 60% to about 260,000 ounces annually. Construction could began in about one year from now and take about 18 months to complete.

March 9, 2010: Apollo Gold Corp. (AGT) announced that it has signed a binding letter of intent to complete a business combination by way of a court approved plan of arrangement to create an emerging Canadian mid-tier gold producer. AGT has agreed to acquire all of the outstanding common shares of Linear Gold Corp. (LRR) at an agreed exchange of 5.474 AGT common shares per 1.0 LRR common share. This represents a 20% premium to LRR shareholders based on the 20-day volume weighted average share price of both companies as of March 8, 2010. Upon completion of the merger, current AGT shareholders will hold 52.2% of the new company. The merger values LRR at approximately C$102 million. Upon completion of the merger the new company will have total reserves of approximately 2.3 million ounces (within 31.2 million tones of ore at a grade of 2.3 grams per tonne) in Canada. The new company will have expected medium-term production growth by 2013 of approximately 70,000 additional ounces of gold per year from LRR's Goldfields project in northern Saskatchewan.

March 9, 2010: Apollo Gold Corp. (AGT) as part of the above proposed merger agreement, Linear Gold Corp (LRR) will purchase by way of a private placement 62.5 million common shares of AGT at a price of $0.40 per share for gross proceeds of C$25 million. AGT's debt lenders have agreed, subject to a number of terms and conditions, to a standstill until September 30, 2010 in the event of certain events of default. Completion of the merger will allow AGT to use $10 million provided by the LRR placement, plus an additional $10 million to repay part of the $70 million project facility for Black Fox mine; thus reducing the principal to $50 million. AGT hopes to cut the debt to $35 million by the end of 2010.

March 9, 2010: Northgate Minerals Corp. (NXG) reported its financial and operating results for the fiscal quarter and year ended December 31, 2009. Adjusted net earnings for the quarter were $27.9 million and $73.2 million for the year. Adjusted net earnings exclude a non-cash impairment charge of $83.5 million against the accounting carrying value of the Fosterville mine. In the fourth quarter NXG produced 80,753 oz of gold and 11.8 million lbs of copper. Gold production for the year was a record 362,398 oz. The average net cash cost for the fourth quarter was $537/oz of gold, bringing the net cash cost for the full year to $477/oz, which was in line will guidance. In the fourth quarter NXG sold 78,015 oz of gold at a realized gold price of $1,181/oz and 10.4 million lbs of copper at a realized price of $3.54/lb. At December 31, 2009, NXG reported proven and probable reserves of 3.8 million oz, which include reserves of 2.8 million oz at the Young-Davidson project; 502,000 oz at Fosterville; 287,000 oz at Starwell; and 207,296 oz of gold and 74.5 million lbs of copper at Kemess South. At the beginning of 2010, NXG announced that the final Feasibility Study for Young-Davidson was released and the Board of Directors approved development of the mine. The Feasibility Study confirms a 15 year mine life with average annual production of 180,000 oz of gold. At a current spot gold price of $1,100/oz of gold and an exchange rate of US$/C$0.95 the project would generate pre-tax operating cash flow of $1.2 billion, net present value @ 5% of $683 million, with a 20% IRR. Construction is scheduled to start in the summer with production slated for 2012.

March 11, 2010: Northgate Minerals Corp. (NXG) announced that its Starwell Gold Mine in Australia produced its two millionth ounce of gold during the first week of March 2010. The mine has had a production history of over 26 years. NXG completed acquisition of the mine in February 18, 2008. The mine is expected to produce 99,500 ounces of gold in 2010, and the company is expected to produce a total of 316,000 ounces from all properties.

March 15, 2010: Minefinders Corporation Ltd. (MFN) announced that the company will be added to the S&P/TSX Global Mining Index on the open on Monday March 22, 2010. Inclusion on the index is reflective of the company's transition from developer to producer at the Dolores mine in Mexico.

March 15, 2010: North American Palladium (PAL) announced that the company will be added to the S&P/TSX Global Mining Index on the open on Monday March 22, 2010.

March 17, 2010: Apollo Gold Corp. (AGT) reported operating income of $6.7 million and net cash flow of $3.4 million for the year ended December 31, 2009. For the year the company sustained a net loss of $61.7 million mainly due to (i) an unrealized loss from the mark-to-market change in fair value of the gold hedge book of $44.2 million, slightly offset by an unrealized gain from the Canadian dollar hedge contacts of $6.8 million for a net un-realized, non-cash loss of $37.4 million; (ii) a realized loss on gold delivered against gold forward contracts of $6.4 million; (iii) a non-cash loss of $10.7 million as a result of the fair value of Canadian currency dominated warrants issued by AGT; and (iv) and interest expense of $8.0 million. During the year AGT produced 52,152 ounces of gold and sold 46,016 ounces at a total cash cost of $567 per ounce from its Black Fox mine, which under went processing upgrades to increase throughput to planned levels in the fourth quarter of 2,040 tonnes per day. All of the gold sold was delivered into forward sales contacts at a realized price of $875 per ounce. At December 31, 2009, AGT's hedge book was reduced to 200,331 ounces at a weighted average of $876 per ounce, with 57,646 ounces to be delivered in 2010. In the third quarter AGT completed acquisition of the Pike River property from Newmont Canada which is contiguous and between AGT's Black Fox and Grey Fox properties. In the third and fourth quarters a 53-hole, 9,936 meter drilling program at Grey Fox and Pike River cut numerous shallow, thin intercepts of gold mineralization in the Contact Zone in rocks similar to the ore bearing rocks at Black Fox.

March 18, 2010: New Gold Inc. (NGD) announced that the Cerro Pedro mine in Mexico will resume operations following removal of explosive restriction permits. The restriction was lifted after a Federal District Court in San Luis Potosi overruled an earlier court order prohibiting the use of explosives at the mine.