The modest recovery in the Canadian markets proved short lived as the price of oil dropped lower for five consecutive trading days this week, prompting investors to once again lighten their exposure to resource equities. The TSX Ventures Exchange, home to most junior exploration issues, ended the week down 3 percent.
Investors unloaded shares in UGL Enterprises after a little mistake in translation created uncertainty over its Nergui uranium property in Mongolia. At the end of March, the junior reported historic grades of between 4% and 10% uranium over up to 700 meters long and 30-40 meters wide in one zone and between 1.07% and 1.27% uranium over up to 100 meters in length with widths of 0.2 to 3 meters in another. Well, if the numbers appear too good to be true they probably are because this week UGL came out with a correction stating, “It is apparent from the documents obtained that the original Russian reports, when summarized into Mongolian tabular reports, were at least in part mis-transcribed. For instance a column in the Mongolian summary with the heading “Grade (%)” contains some figures that, in the Russian original, have been reported in grams per tonne.” Oops. Investors bailed on the news, driving the stock down as low as C$0.48 before closing at C$0.52, down C$0.38 on the week.
Another uranium player that got caught in the down draft was Uranium Power Corp., which has a letter of intent to option the Sahara Uranium mine in Utah. The mine was developed in the late 1970’s, with a decline being driven 790 meters. The records of the mine operator, Energy Fuels Nuclear, indicate a proven and probable resource of approximately 500,000 lbs U3O8 with an average grade of about 0.23 percent. Uranium Power ended the week at C$0.50, down C$0.18.
HudBay Minerals moved higher despite reporting a loss of C$9.92 million for 2004. The producer added C$0.14 to close at C$3.55. For those that don’t know this interesting story, late last year Ontzinc acquired 100% of Hudson Bay Mining and Smelting from Anglo American for a cool $325 million and changed its name to Hudbay Minerals. The Hudson Bay operation produces about 115,000 tonnes of zinc and 88,000 tonnes of copper per year.
Long time Bolivia explorer Eaglecrest Explorations caught the eye of traders after the company reported that a 15,000-tonne underground program on the Dona Amelia zone on its San Simon property will begin in May. Total development is expected to include two declines for a total length of 900 meters. The company has drilled well over 100 holes into the property since 1996, but has had difficulty with the continuity of the high-grade gold mineralization. Shares in the junior added C$0.03 to close at C$0.145 on heavy volume.
Glen Hawk Minerals cooled slightly this week after setting a torrid pace of late. A 2,000-meter diamond drilling program to test the high-grade Lion Gold Zone on the Leo Lake property in Manitoba is now underway and recently the company inked a deal with Energy Metals to earn up to 75% in the San Rafael property in Utah. Glen Hawk, which has more than doubled in the past two weeks, lost C$0.05 to close at C$0.47.
Toronto-listed merchant bank Quest Capital has attracted the services of Bob Buchan, who just stepped down as CEO of the world’s sixth-largest gold producer Kinross Gold after 12 years at the helm. Bob will now become executive chairman of Quest. He must really like the outfit because he is also taking down a non-brokered private placement in Quest to the tune of C$7.5 million. Buchan did build Kinross into a C$2.5 billion company and with Quest earning C$12.7 million last year the company has a market value of about C$178 million – we will have to wait and see if Buchan can do it again. Quest ended the week up C$0.13 to C$2.05, while Kinross closed out at C$7.38, down C$0.10.
The other big gold miners inched higher with Placer Dome ending the week up C$0.04 to close at C$19.39, while Barrick Gold added C$0.24 to close at C$29.34.
There was a surprisingly muted response to the latest drill results from Anatolia Minerals Development’s Copler gold project in Turkey. At the Marble Zone, hole 263 cut 6 meters grading an impressive 188 grams gold per tonne with another 60-meter step-out hole returning 5.8 grams gold per tonne over 98 meters. By March 31, 59 reverse-circulation holes and 7 diamond core holes for 12,357 meters have been put down, mostly in the Manganese Mine area, with results received for more than 50 holes. Investors obviously are taking a wait-and-see attitude towards the 4-million ounce deposit, as shares in Anatolia added a modest C$0.20 to close at C$1.30
Moving forward, it looks like a battle between the bulls and the bears will be won or lost depending on the direction of interest rates and the price of oil. Higher interest rates typically lead to weak markets, while higher oil prices mean gains for energy-related issues.