TSX edges up, July 13-17

Canada’s benchmark index added 109.62 points, or 0.8%, to close the turbulent week at 14,642.84. The S&P/TSX Capped Diversified Metals & Mining Index plunged 6.8% to 614.32, while the S&P/TSX Global Gold Index fell 6.7% to 136.72. The spot gold price sank US$29.50 per oz. to US$1,133.30 in New York. It lost another US$35.60 per oz. to finish July 20 at US$1,097.70. 

On July 17, Statistics Canada reported the country’s annual inflation rate crept up to 1% in June from 0.9% in May, led by higher food and shelter prices. Canada’s annual core inflation, which excludes volatile consumer items such as food and energy prices, rose 2.3% in June, slightly above the expected 2.2% increase.   

 Earlier in the week, the Bank of Canada cut its key interest rate by 25 basis points to 0.5% to stimulate the sluggish economy. The central bank adjusted this interest rate to keep core inflation at a 2% midpoint. 

Torex Gold Resources, which is developing its wholly owned Morelos gold property in Mexico’s Guerrero belt, slipped 4.5% to $1.06 per share. Morelos has two projects: the ELG mine, which is under development, and the Media Luna project. 

On July 21, Torex published a positive preliminary economic assessment on Media Luna, including a new inferred resource. The study says the project could produce 313,000 equivalent oz. gold annually for 13 years at pre-production costs of US$482 million. It included 51.5 million inferred tonnes grading 4.48 equivalent oz. gold for 7.42 million equivalent oz. gold. The study pegs Media Luna’s after-tax internal rate of return at 24.6%.

Pretium Resources rose 8% to $6.88 per share. On July 15, the company reported a second batch of results from an underground infill drill program at Brucejack’s Valley of Kings deposit in northern B.C. The results confirmed the “style and grade distribution of the gold mineralization in area currently being tested,” the company says. Highlights included 164.54 grams gold per tonne uncut over 13.8 metres, with 3,424 grams gold uncut over half a metre, and 259.48 grams gold uncut over 10 metres, with 4,980 grams gold over half a metre. Pretium has finished 9,000 metres of the 40,000-metre infill program. 

New Gold shares finished relatively flat at $3.32. On July 20, the company agreed to sell a precious metals stream on its Rainy River project in Ontario to Royal Gold for US$175 million. Royal Gold will provide US$100 million once the agreement closes and US$75 million after capital spending is 60% complete, expected by mid-2016. 

 Under the terms, Royal Gold will receive 6.5% of Rainy River’s gold production until it reaches 230,000 oz., and 3.3% thereafter, plus 60% of the project’s silver output until it has 3.1 million oz., and 30% thereafter. Upon delivery, it will pay New Gold 25% of the metal’s spot price.


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