While participants at Canada’s largest mining show, the PDAC in Toronto, were busy touting their wares, investors were following the traditional seasonal pattern and selling mineral resource stocks. The TSX Venture Exchange, Canada’s largest mineral exploration bourse, dropped 3.3% during the week.
Robert McEwen and what is now being dubbed the McEwen factor took center stage on Monday as his OTC company U.S. Gold tabled take-over offers for White Knight Resources, Nevada Pacific Gold, Coral Gold Resources and Tone Resources. All these juniors have properties that are adjacent to or near U.S. Gold’s Tonkin Springs property. Under the deal, U.S. Gold would issue 0.35 of its shares for each share of White Knight; 0.23 shares of its shares for each share of Nevada Pacific Gold; 0.63 of a share for each Coral Gold share; and finally 0.26 of a share for each share of Tone Resources. Total value as of the last closing price before the deal was announced is C$256.9 million.
Now let me explain this McEwen effect. In mid-2005, McEwen purchased a one-third interest in U.S. Gold through a private placement of 11.1 million shares at $0.36 apiece and took over control of the company. Today, in the total absence of any exploration results, shares of U.S. Gold go for $6.26 a piece. Investors are betting that McEwen will create another Goldcorp, only this time in Nevada. This so-called McEwen effect helped propel the shares of the proposed takeover targets higher with Coral Gold gaining C$0.93 to C$4.18, White Knight tacking on C$0.16 to close at C$1.95, Nevada Pacific rising C$0.09 to $1.29, and Tone Resources adding C$0.15 to close at $1.50.
LionOre Mining had investors running for the exists after the company reported a fourth-quarter loss of $128.6 million on a huge write-down involving LionOre’s Activox nickel refining technology and a review of gold assets and some nickel exploration sites in Australia. The loss for the quarter ended Dec. 31 amounted to C$0.59 a share, versus a profit of C$0.12 per share a year earlier. The company also determined that the first-and third-quarter net earnings were overstated by one cent and 1.6 cents per share, respectively, due to accounting errors. Shareholders were not a happy lot as LionOre ended the week down C$0.98 at C$5.13.
A big percentage gainer was Metalcorp as stock in the junior exploded following news of a hot hole on its 100% owned Big Lake project in Ontario. The intercept yielded 7.5% copper, 2.2% zinc, 138 grams silver and 9.2 grams gold per tonne over 4 metres. Investors applauded the news by bidding up Metalcorp shares by C$1.24 to C$1.96.
It was a roller coaster ride for shareholders of Kodiak Exploration this past week. First off the company aggressively promoted the visual estimates from its first hole on the Caribou Lake copper-nickel-PGE property 90 kilometres southeast of Yellowknife, Northwest Territories. On the back of this touting, Kodiak shares climbed as high as C$3.25 before sellers jumped on the band wagon. The hole intersected 3.25 metres of strongly disseminated to massive sulphide mineralization containing visible chalcopyrite, pyrrhotite and possible pentlandite. Results are due in a couple of weeks. This is the first of 16 diamond drill holes planned to test 11 large priority near-surface geophysical targets along a 9 kilometre nickel-copper mineralized trend. Kodiak ended the week at C$2.17, up C$0.07.
Northern Peru Copper increased the size of its Galeno copper-gold-molybdenum deposit some 600 km north of Lima, Peru. At a 0.4% copper equivalent cut-off, the company now holds an indicated resource of 504 million tonnes grading 0.54% copper, 0.12 gram gold per tonne and 0.015% molybdenum (totaling 0.71% copper equivalent). The deposit hosts an additional 554 million inferred tonnes at 0.39% copper, 0.09 gram gold and 0.01% molybdenum (0.5% copper equivalent) at the same cut-off. The company ended the week up a modest C$0.03 to C$3.11.
Palmarejo Silver and Gold failed to rally on news that drilling at its La Patria prospect in Chihuahua, Mexico returned 10.6 metres grading 7.07 grams gold and 156 grams silver per tonne, 4.6 metres grading 6.3 grams gold and 46 grams silver per tonne and 4.6 metres grading 2.12 grams gold and 101 grams silver per tonne. Palmarejo ended the week down C$0.02 to C$8.90.
Canada’s biggest gold miners felt the pain of falling bullion prices as Barrick Gold dropped C$1.45 to close at C$30.32, Kinross Gold closed out the week down C$0.59 at C$10.63, and Goldcorp lost C$1.13 to close at C$30.62.
Despite the setback this past week, the January U.S. trade deficit of $68.5 billion, a 5.3 percent increase from December, combined with increasing pressure on U.S. wage rates, has the bulls in an upbeat mood. Perhaps too upbeat….but only time will tell, so stay tuned.