The base metal producers continue to churn out cash and the price of bullion remains within striking distance of multi-year highs, so all should be sunny in the world of mineral resource stocks. Unfortunately, a lack of new buyers had the TSX Ventures Exchange, home to the most junior exploration issues, losing ground every trading session but Friday. When all the trades were settled, Canada’s junior market ended the week down 3%.
The lack of interest in the junior explorers this past week can be partially explained by the fact that all the pundits were focused on the big board as earning season hit high gear. Investors, on the other hand, totally ignored the stellar cash flow numbers being tabled by the base metal big boys. A case in point is Noranda, where high base metal prices propelled first quarter earnings. The world’s No. 8 copper and No. 3 zinc producer pocketed $176 million, or 57 cents a share, in the three months to March 31, up from a year-earlier profit of $152 million, or 49 cents a share. Not bad at all, but Noranda ended the week down C$0.35 to C$23.60.
Posting even more impressive earnings numbers was the world’s largest zinc miner, Teck Cominco. First quarter earnings came in at $205 million, double that of the same quarter in 2004. In the past six months earnings have been flowing in at a rate of almost $1 billion per year. Cash flow before working capital changes increased by $106 million over the first quarter last year to reach $288 million, and the company’s cash in the bank rose by $240 million, and amounted to $1.15 billion at the end of March. The news was not enough to beat back the general sell-off in metals stocks, however, as Teck ended the week at C$40.65, down C$0.47.
Moving over to the gold miners, earnings went in opposite directions but there was a common theme: higher production costs. For its part, Barrick Gold nearly doubled its profit in the first quarter as higher gold prices offset higher costs and lower sales. The world’s third-biggest gold producer earned $51 million, or 10 cents a share, in the first three months of 2005, which included a $10 million after-tax gain on the sale of an investment. The earnings compared with $26 million or 5 cents a share, a year earlier. The company produced 1.13 million ounces of gold in the quarter, down from the 1.27 million ounces of output in the first quarter of 2004. Barrick’s cash and total production costs per ounce of gold for the first quarter were $248 and $326 respectively, compared with $199 and $290 in the year-before period. The company ended the week on the plus side, gaining C$0.35 to close at C$28.20.
Placer Dome on the other hand had a week shareholders would like to forget. The world’s fifth-biggest gold producer earned $31 million, or 7 cents a share, in the first quarter, compared with $64 million, or 16 cents a share, a year earlier. The Vancouver-based miner produced 911,000 ounces of gold in the quarter, a decrease of 2 percent over both the first and fourth quarters of 2004. Copper production was 91 million pounds, a decrease of 17 percent from the same quarter in 2004 and down 3 percent from the fourth quarter of 2004. Placer Dome’s share of cash and total production costs per ounce of gold for the first quarter were $275 and $342, respectively, compared with $231 and $286 in the prior-year period and $264 and $330 in the fourth quarter of 2004. The company also lowered its gold production forecast for the year, cutting the figure by 50,000 ounces to a range of 3.6 million to 3.7 million ounces, citing problems at its Porgera gold mine in Papua New Guinea. Needless to say, investors ran for the exits, driving Placer’s share price down C$1.50 to end the week at C$16.80, a new 52-week low.
On the junior exploration front, the formerly red-hot uranium explorers are in the midst of a nuclear melt down with Energy Metals dropping C$0.25 to close at C$2.35, Standard Uranium lost C$0.29 to close at C$1, International Uranium Corp lost C$0.30 to close at C$4.60, Uranium Power dropped C$0.03 to C$0.44, while Strathmore Minerals and Twenty Seven Capital both managed to stay flat at C$1.85 and C$0.90, respectively.
The ongoing sell-off of Messina Minerals continued even after the company reported results from a 50 meter, step-out hole on its Boomerang massive sulphide prospect at the Tulks South Property in central Newfoundland. Three holes collared to the west of the discovery hole intersected multiple horizons of zinc-rich massive sulphides including up to 5.3 meters grading 1.1 percent copper, 5 percent lead, 14.5 percent zinc, 200 g/t silver and 1.9 g/t gold. Messina ended the week down C$0.17 to C$1.45, well off its recent 52-week high of C$4.13 hit on March 22.
Eaglecrest Explorations continued to attract investors to its San Simon property in Bolivia. The latest drill results show both high-grade and low-grade hits. Targeting the Dona Amelia zone, hole 114 returned 15.3 g/t gold over 0.8 meter, while hole 115 cut 0.8 meter grading 0.5 g/t gold. The Vancouver-based junior posted gains for the fourth straight week to close at a new 52-week high of C$0.33 on robust volume.
Concerns about a slowing U.S. economy, rising interest rates and the emergence of inflation are taking center stage as leery investors are electing to lighten their load in equities. The question of the day is, “Where is the bottom?” Only time will tell… stay tuned.