The S&P/TSX Composite Index was off 103 points to 12,686.63 for the period, as market activity unfolded in anticipation of a G20 meeting addressing the emerging theme of “currency wars” — where one country after another lowers the value of its currency to stimulate its economy.
The market’s weak performance was also impacted by disappointing European growth figures and large writedowns that turned into losses for Canadian gold miners.
The latter factored in the S&P/TSX Global Gold Index dropping 14 points to 264.47, as the price for gold fell US$58 to US$1,609 per oz.
But the writedown for the world’s biggest gold producer had nothing to do with gold. Barrick Gold made another move into the copper space two years ago through a $7.3-billion acquisition of Equinox Minerals and its Lumwana copper mine. Falling copper prices and higher-than-expected costs led to lower production and profitability at the mine, with Barrick taking a US$3.8-billion impairment charge for the mine and its overall copper business. Barrick shares were off $1.02 to $31.82 for the period.
Fellow senior producer Kinross Gold also took a big-time impairment charge in connection with its recently acquired Tasiast project in Mauritania. The latest writedown is for US$3.2 billion, a number that contributed to the company’s net loss of $2.99 billion for the quarter. Kinross paid $7.1 billion for Red Back Mining and its two key assets, Tasiast and the Chirano mine in Ghana, just two years ago. The company had taken a $2.5-billion charge on the assets last year, and it has now written down 80% of the price it paid for the acquisition. The company’s shares were off 2% and finished the period at $7.99 per share.
Keegan Resources and PMI Gold nixed plans to merge when it became evident that PMI shareholders wouldn’t approve the deal. The two companies own neighbouring gold projects in Ghana. Beyond the synergies the deal could unlock, it would also have given PMI access to Keegan’s well-stocked bank account, so that the company could finish building its Obotan gold mine without extra debt. Cash flows from Obotan would have helped develop Keegan’s Esaase project. Keegan shares were off 6% to $3.10 for the period.
A downgrade and a possible funding shortfall had San Gold shares down 44% to 33¢ for the period, with disappointing production results, weaker production guidance and higher capital expenditures heightening expectations for a funding shortfall.
The gold sector wasn’t the only one suffering poor valuations. The S&P/TSX Capped Diversified Metals & Mining Index was down 11 points to 965.51, and the price for copper was off 2¢ to US$3.74 per lb.
TSX most active issues
|San Gold Res||SGR||25599||0.55||0.33||0.33||–||0.26|
TSX greatest percentage change
|North Am En Pa||NOA||125||4.49||3.86||4.4||+||15.1|
|Horizns G Bear||HGD||552||13.37||12.06||13.29||+||11.7|
|San Gold Res||SGR||25599||0.55||0.33||0.33||–||43.9|
|Red Cresc Res||RCB||417||0.09||0.06||0.07||–||22.2|
TSX greatest value change
|Horizns G Bear||HGD||552001||13.29||+||1.4|
|North Am En Pa||NOA||124960||4.4||+||0.58|
|Coeur d Alene||CDM||467853||21.23||–||2.08|