A pullback in commodity prices dragged the TSX Composite Index down 496.48 points, or 4.2% to 11,831.73 over the May 9-15 session; the downward trend was said to be the result of price corrections after weeks of speculative buying.
With worries that hikes in global interest rates could cut into the demand of some base metals, copper and zinc lost more than gold and silver. But the diversified miners’ index was not hit as hard as the gold index.
Copper prices fell by 9%, the most since October 2004, and zinc was down 12%, the most since 1989, but the diversified mining index fell only 7.5% to 502.11, compared with a 14.2% loss in the gold index. It fell to 314.49.
While gold closed in London as high as US$725 per oz. on the week, by May 15 it was at US$687.
Companies with assets in Mongolia got a double dose of bad news as lower metal prices combined with an initial approval of a 68% tax on gold and copper production in the country. The tax kicks in when the price of gold surpasses US$500 per oz. and copper exceeds US$1.18 per lb.
Ivanhoe Mines’ shares fell roughly 28% to $8.03 from a close of $10.25 before the news. The company is developing its Oyu Tolgoi copper-gold deposit in the country.
QGX also took heavy losses. The Waterdown, Ont.-based company with gold, copper and coal assets in Mongolia, fell 37% to $2.55 on 410,000 shares traded on May 15.
Both companies said they were negotiating with the government in the hopes that Mongolia’s president, Nambaryn Enkhbayar, would veto the tax.
Other companies with Mongolian assets whose shares fell on the news were Entre Gold, Centerra Gold, and Erdene Gold.
Inco shares slid after the company hiked its takeover bid for Falconbridge by about $2 billion to more than $19 billion and negotiated a higher break-up fee if the deal falls apart. Swiss-based Xstrata is expected to make a counter-bid for Falconbridge, which is rumoured to be as high as $20 billion. Inco shares were off $5 on the week, closing at $71.50 while Falconbridge shares fell just 51 to close at $52.35. Teck Cominco, which made a bid for Inco on May 8, was off $6.46, closing at $73.52.
Despite the bearish environment, there were winners during the period. Shares in Toronto-based Goldstake Explorations gained over 43% after the company added to recent drill results. The update reported a drill hole intersecting a copper lode at 680 ft., assaying 7% copper in primary ore.
Also on the upside was Ascendant Copper after two announcements regarding properties in Ecuador. The B.C.-based company now has the option to acquire a 100% interest in the Telimbela copper and molybdenum property in south-central Ecuador. It also purchased a 100% interest in the Magdalena property — which runs along strike of its Junin copper project.
TSX greatest percentage change
|HMZ Metals wt||HMZ.WT||125||0.02||0.015||0.02||+33.3|
|Eastern Pla wt||ELR.WT||156||0.80||0.60||0.71||+18.3|
|Northgate M wt||NGX.WT||1651||2.40||1.33||1.48||-29.5|
|Silver Wtn wtA||SLW.WT.A||862||1.87||1.33||1.36||-24.4|
TSX greatest value change
|Potash Cp Sask||POT||2012905||107.75||-8.15|
|Teck Comin B||TEK.SVB||21411035||69.99||-6.48|
|Teck Comin A||TEK.MVA||33589||73.52||-5.75|
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