The sell off on the Canadian equity markets continued this past week with concerns over a slowing economy in the United States taking a toll on resource issues. On Canada’s big board it was all about financials as earnings season hit full stride, while the junior bourse was focused on drill results. When the dust finally cleared, the TSX Ventures Exchange, Canada’s largest junior exploration bourse, ended the week with a loss of just over 2.5%, while the TSX Gold Index performed better by posting a loss of just 0.4% on the week.
Leading the earnings parade was Cameco. The world’s largest uranium player posted a record profit of C$205 million in the second quarter of 2007 thanks to a surge in uranium prices, which averaged $125.83 per lb. compared to $43.42 per lb. in the same period of 2006. The earnings were not enough, however, as investors elected to focus on the current problems with Cameco’s Cigar Lake mine development and its Port Hope contamination issue. Cameco ended the week at levels not seen in months, down C$1.80 to close at C$41.20.
Barrick Gold continued to face the music with regards to its hedge book in the second quarter. The world’s largest gold miner recorded a second quarter profit of $396 million, or $0.45 a share, down from the $459 million, or $0.53 tallied a year earlier. The shortfall is attributed to higher mining costs and the dumping of hedge contracts. Costs to exit 500,000 oz of forward sales contracts at below-market prices reduced profit by $66 million, or $0.08 a share. Barrick ended the week at C$34.88, for a C$0.99 gain.
The world’s second-largest gold miner followed suit by reporting that it had cleared its hedge book of 1.85 million oz gold resulting in a $400 million charge. In total, Newmont Mining took a $2.1 billion charge, including a $1.7 billion hit for discontinuing its merchant banking operation. The end result was a loss of $2.06 billion, or $4.57 per share in the quarter. Newmont ended the week down C$0.24 at C$43.30.
On the diversified metals side, Teck Cominco posted a 21 per cent lower profit thanks to lower coal prices and lower sales volumes at the Highland Valley and Antamina copper mines. Still, cash rich Teck earned C$485 million or C$1.14 per basic share in the quarter, down from C$613 million, or C$1.48 per basic share, in the same period last year. Teck closed out the week at C$44.51 for a C$1.62 loss.
Agnico-Eagle Mines fared modestly better by reporting flat profits. The growing gold producer recorded a profit of $37.8 million, or 28 cents per share in the second quarter compared with a profit of $37.1 million or 32 cents per share in the 2006 period. Angico ended the week the up C$1.46 at C$45.10.
Northern Dynasty Minerals failed to get a boost following news that major Anglo American has been granted the right to earn a 50% stake in its Pebble copper-gold project in Alaska. Anglo is committed to spend $125 million to complete a prefeasibility study, which is expected to be done by the end of 2008 and then spend $325 million on a feasibility study, which is expected to be done by 2011. Then if a green light is given, Anglo must spend another US$975 million on development to earn its half stake. Investors were not overjoyed as Northern Dynasty ended the week at C$14.82 for a modest C$0.08 loss.
But all was not lost for investors this past week as a handful of juniors’ tallied some nice drill numbers and the market responded accordingly. Shares in Pediment Exploration surged on drill results from its San Antonio gold project in Mexico. A reverse circulation drill program targeting the Los Planes target returned 84.1 metres of 3.79 grams gold per tonne, including 12.2 metres of 19.87 grams gold in one hole, 62.5 metres grading 1.36 grams gold in a second hole and 59.4 metres of 1.58 grams gold in the third hole. Shares in Pediment soared C$0.71 to close at a new high of C$1.91.
Donner Metals followed by reporting a 19.75 metre intercept grading 22.95% zinc at its Bracemac target and 11.42 metres grading 8.91% zinc at its McLeod target in Quebec. Donner tacked on C$0.19 on the week to close at C$0.63.
Full Metal Minerals continued to tag some nice numbers at its LWM prospect on the 40 Mile project in eastern Alaska. Step out holes returned up to 31.6% zinc, 11.3% lead, 1.4% copper and 464.2 grams silver per tonne over 6.5 metres. Still shares in Full Metal gave back C$0.12 to close at C$3 even.
A week on the Canadian markets would not be complete without the mention of take overs and as expected the management of Meridian Gold is asking shareholders to reject the unsolicited take over offer by Yamana Gold. Nothing abnormal here as management says that “the Yamana offer fails to provide full value for Meridian Gold shares and is an attempt by Yamana to acquire Meridian Gold without offering adequate consideration to Meridian Gold shareholders.” Will a white knight step forward? Kinross Gold is saying it won’t be them. Meridian shares ended the week down C$0.37 at C$28.53, while Yamana dropped C$0.56 to close at C$11.24.
A stock that is moving to new highs and worthy of mention is Mineraux Maudore. The junior is working the Comtois gold project near Lebel-sur-Quevillon, Quebec. Deep drilling to nearly 900 metres has returned 6.8 grams gold per tonne over 6.5 metres. Investors like what they see as Maudore ended the week at C$2, up C$0.30.
Stock selection is the name of the game as we head into the dog days of summer. Those on the long end of disappointing results will be punished severely in the pocketbook, while those long good drill results are reaping instantaneous rewards. This is as it should be on the junior side of the market. Will this trend continue? Only time will tell, so stay tuned.
NEWS YOU CAN USE…
Phoenix Matachewan Mines Inc. (PMM) has a major gold exploration project in Nevada; a major zinc exploration play – the largest new zinc play in Canada; and a significant gold project with Agnico-Eagle moving towards production at its Swanson gold ore body near Val d’Or QC.