2012 – Off to a Bang!

Happy New Year! The markets are off to a bang in 2012.

2012 is upon us and it was a good opening week for the both the markets and mining companies alike. On the heels of intense tax-loss selling in December despite positive economic data hitting the headlines as 2011 came to a close, nothing seemed to stem the tide of December tax-loss selling as many mining issuers set new lows to close out the year. 2011 left many investors wondering what’s in store for the upcoming year? But in the first week of 2012 few stocks suffered a New Year’s hang-over and the markets are off to a bang.

Perhaps the recent positive move in the mining investment sector was driven by “smart money”. Wealthy investors plan to increase their allocations in commodities and decrease their cash holdings this year, according to a survey released on January 5th, 2012 by the Institute for Private Investors (IPI). IPI’s member survey confirmed about 48 percent of respondents said they plan to add to commodities investments during 2012 while about 45 percent plan to increase real-estate holdings. IPI members are families with at least $30 million in invested assets. “It’s part of that whole movement toward actually owning real assets,” Mindy Rosenthal, executive director of IPI, said in an interview. “They’re looking at going back to the old school way of making money.”

Regardless of who’s buying, we look back on the first week that was in 2012 and highlight three newsworthy notes to start the year.

1. Rare Earths lead the way.

Without question, the big story so far this year is the big move in rare earth stocks. A sector that was clearly down as we ended 2011 was evidently not out. Rare Element Resources Ltd. (TSX:RES – AMEX:RES) was the biggest gainer for the week chalking up a hefty 76.7% gain closing the week at $5.83 up $2.53. Rare Element Resources released the results of their updated NI 43-101 mineral resource estimate of rare-earth elements plus yttrium for the Bull Hill area of the company’s Bear Lodge project in Wyoming. The updated resource estimate consists of 6.8 million tons averaging 3.75 per cent rare-earth oxides in measured and indicated categories up from last year’s estimate of 4.9 million tons averaging 3.77 per cent REO. The Rare Element news sparked the sector. Avalon Rare Metals Inc. (TSX:AVL – AMEX:AVL) moved up 20.3% on the week closing at $2.90 while venture board issuer Quest Rare Metals Ltd. (TSX-V: QRM – AMEX:QRM) up $0.57 this week to $2.79, a move of 20.4%.

2. Gold is good again: up $52 an ounce.

This week marked a resurgence in the price of gold with some gold-bugs claiming the market appears to have bottomed, technicals are improving, and valuations of both producers and juniors are quite compelling. Gold was up and Sulliden Gold Corporation Ltd. (TSX:SUE) was the week’s big golden-gainer on the TSX moving up 23.6% to $1.52. On Wednesday, the company announced drill results including a 53.8 metre intersection of 0.85 gram per tonne (g/t) gold and 71.4 g/t silver in oxides from its Shahuindo property in northern Peru. While on the Venture Board, a junior penny stock lead the way. Quia Resources Inc. (TSXV:QIA)  is undertaking a $3.3 million unit financing at $0.15 and is undoubtedly making some noise with 681,930 shares traded hands: up 68.8% closing the week at $0.27. Quia Reources is focusing its exploration activities on the San Lucas gold belt in Colombia.

3. Potash giants post big absolute losses on Friday.

Potash Corporation of Saskatchewan Inc. (TSX:POT – NYSE:POT). Potash Corp. was down $1.02 on Friday, or 2.32 per cent, closing the day at $42.94 on volume of 2,176,223 shares. The company said Friday it plans a four-week production shutdown starting next month at its Allan mine in the Saskatoon area. “It’s what we call an inventory adjustment,” said Bill Johnson, senior director, public affairs. While counterpart Agrium Inc. (TSX:AGU – NYSE:AGU) was down $1.30 marking a 1.8% decline on volume of over half a million shares. Both stocks posted modest gains for the week.

Mike Luft

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