Gold Investing News

By Dave Brown - Exclusive to Gold Investing News

The financial markets have found themselves under tremendous downside pressure this week in the wake of the collapse of Lehman Brothers, and the crisis at AIG.

Central banks have infused US$200 billion in order to alleviate some of the volatility. Leading the way, the European Central Bank injected US$99.8 billion, with the U.S. Federal Reserve adding US$50 billion, followed by the Bank of England and the Bank of Japan inserting US$36 billion and US $24 billion, respectively.

On Monday, amidst the volatility of the equity markets, the spot price of gold added 3 per cent to its valuation; by the end of Tuesday’s close, however, it traded slightly down 0.8 per cent, to US$776.50 per troy ounce.

Company news

Before the markets opened on Tuesday, Rainy River Resources Ltd. (TSX-V: RR) issued a press release announcing that it had intersected a new gold zone (’17 East Zone’) on its Rainy River gold project in western Ontario. The news follows closely a similar discovery earlier in September in an area of thin overburden and extensive bedrock outcrops outside the previously interpreted eastern margin. President and Chief Executive Officer of Rainy River Resources Nelson Baker was extremely bullish on the announcement. “This marks the second important new gold discovery for Rainy in the space of a few weeks. Both occur in an area that was previously thought to be outside of the large gold footprint. This is truly an unusual gold project with so much potential for additional discoveries”, he said.

Analyst for Genuity Capital Markets, Michael Gray issued a “buy” recommendation on Rainy River Resources shares with a target price of CA$10.00. The recommendation highlights the indications in the zone are of higher grade mineralization, documenting “high-grade upside” that are expected from an overall gold system that contain a 3.0mm oz resource at an average grade of 1.34 g/t gold. Additionally, the blind nature of the mineralization supports the overall underexplored nature of the Rainy River project and new district potential. Gray’s target price implies a 471 per cent premium to current valuations.

Rainy River Resources Ltd. is a Vancouver based junior exploration mining company with a market capitalisation of CA$107.2 M. The company shares were down slightly 1 per cent on Tuesday’s session to CA$1.70 per share.

Goldcorp Inc. (TSX: G, NYSE: GG) announced on Monday that it had halted mining operations at its Pamour mine, one of the three mines that makes up its Porcupine operations in Ontario, due to current gold price weakness. The Pamour open pit mine has been under inflationary pressure as production costs continue to climb, and lower ore grades have contributed to missing company forecasts. In 2007, the overall Porcupine operation produced 300,000 ounces of gold. The company stated it would consider re-opening the mine in the future, depending on the gold price, and that it does not anticipate further mine closures.

Maintaining his valuation methodology based on the application of historic multiples to the company’s assets at face value, analyst Haytham Hodaley has upgraded his recommendation on the stock to a “buy” rating with a price target of CA$41.00 per share which represents a 38 per cent premium to the current share price. Hodaly forecasts that the Porcupine operation could produce approximately 275,000 ounces of gold in 2008 and the suspension could cause a decrease to production of approximately 10,000 to 15,000 ounces of gold in 2009 and could have an impact on production of between 10 per cent and 15 per cent post-2009. The analyst believes that despite a decrease in gold ounces produced at the Porcupine operation, the decrease has no material impact to Goldcorp’s overall production.

With its headquarters based in Vancouver, Goldcorp Inc. currently has a market capitalization of CA$21.1 bl. Goldcorp Inc. is one of the world’s largest gold mining companies, with operations in the United States, Canada, Mexico, Brazil, Argentina, Australia, Guatemala, and the Dominican Republic.