Mid-September continues to be a painful time for investors heavily weighted in junior resource stocks. Despite an onslaught of merger plans and purchase deals, investors remain leery that a slow down in the U.S. economy will drag the whole market lower on into the fourth quarter of the year. The TSX Venture Composite Index, Canada’s most speculative exploration bourse, kept its September losing streak alive by falling 3.2% over the past five trading sessions.
In the face of selling pressure, mineral resources companies both big and small announced deals this week. Leading the pack was Denison Mines and International Uranium. The companies agreed to join forces to create a uranium producer with a mill and a bevy of advanced projects in its fold. The all-share transaction, valued at $518 million, would see Denison shareholders get 2.88 International Uranium shares for each Denison share. Denison holds a 22.5% interest in the McClean Lake mine in northern Saskatchewan, and a 25.17% interest in the Midwest uranium project, while International Uranium’s holdings include uranium and vanadium deposits in the U.S. as well as the White Mesa mill in Utah. Investors were not completely overjoyed with the proposed union, as Denison shares fell C$0.80 to close at C$16 flat and International Uranium ended the week down C$0.20 at C$5.61.
On the copper front, Lumina Resources inked a deal to merge into Western Copper. Under the $26 million deal, Western Copper will issue one share for each Lumina share outstanding. For those of you that may recall, Lumina Resources was formed in mid-2005 from the restructuring of Lumina Copper, when the latter was split into four companies, based on the geographical nature of its projects. Lumina Resources has three projects: Hushamu in British Columbia, Redstone in the western Northwest Territories and the Casino deposit in the Yukon. Western Copper was formed in May 2006 as a spin-off company from Western Silver, which was formerly named Western Copper, before it was acquired as Western Silver by Glamis Gold. It holds the Carmacks oxide copper project in the Yukon and the Sierra Almoloya property in Mexico. Investors had a mixed response, with Lumina ending the week at C$0.92, up C$0.20, and Western Copper closing at C$1, for a C$0.20 loss.
On the gold front, St. Andrew Goldfields agreed to pony up $40 million to buy subsidiary Holloway Mining from Newmont Mining. The transaction consolidates the Holloway and Holt-McDermott mines in Ontario. Newmont retains a 1% net smelter return on the projects, plus a 1% net smelter return on production from St. Andrew’s “East Timmins” land package, in seven townships to the south and west of Holloway and Holt, and from its Stock Twp. mill. St. Andrew ended the week up C$0.12 at C$1.45.
The diamond industry was not to be left out of the M&A fun, with Stornoway Diamond taking control of 68.2% of the shares of Ashton Mining of Canada through its tender offer. The tally includes a 51.7% interest held by Rio Tinto subsidiaries that they had in a lock up agreement. Stornoway has extended the bid until Oct. 2, and plans to buy-up the untendered shares of Ashton. Ashton management still opposes Stornoway’s offer. Ashton ended the week at C$1.12, up C$0.02, while Stornoway closed at C$0.97, down C$0.03.
Finally, lets get down to some exploration news.
Shareholders of Goldmarca went on a rollercoaster ride after the junior announced that drilling on its Condor project in Ecuador returned 308 meters of 2.57 grams gold per tonne. True width is estimated to be 60 % of the drill widths. Goldmarca soared as high at C$1.46 before hitting a low of C$0.52 and closing at C$0.91, up C$0.39 on the week.
Another junior to rally on its Ecuador exposure was Skeena Resources. Despite no news, the junior added C$0.34 to close at C$0.87 with over 10 million shares changing hands. The company holds the El Corazon gold project, where previous drilling cut 36.21 grams gold per tonne over 16.87 meters.
It was a rough week for shareholders in Acero-Martin Exploration as investors bailed after the company tallied a resource estimate for its Pinaya gold-copper project in Peru. The indicated resource of 29.13 million tonnes grading 0.42% copper and 0.52 gram gold per tonne was too small for most as Acero-Martin ended the week down C$0.40 at C$0.75.
Canada’s biggest gold miners had a losing week with Barrick Gold dropping C$0.14 to close at C$32.60, Goldcorp, which is continuing to fall since announcing its take over offer for Glamis Gold, ended the week at C$25.23, down C$0.45, and Kinross Gold gave back C$0.36 to close at C$13.22.
A rally in the price of bullion on Friday failed to entice investors into junior resource stocks. Typically that means either gold will come down early next week or the junior stocks will be in for an over due rally. Only time will tell, so stay tuned.