TSX moves up, July 27-31

Despite poor economic data and lower oil prices, the S&P/TSX Composite Index rose nearly 2% to finish July at 14,468.44. The S&P/TSX Global Mining Index climbed 1.1% to 53.17, while the S&P/TSX Capped Diversified Metals & Mining Index fell 2% to 533.20. The S&P/TSX Global Gold Index dropped 1.4% to 122.86, as the spot gold price lost US$4.30 per oz. to finish at US$1,095.20. The September contract for crude oil settled at US$47.12 per barrel, down US$1.02. 

On July 31, Statistics Canada reported Canada’s economy retracted in May, the fifth straight monthly decline. Real gross domestic product fell 0.2% in May, largely due to weakness in manufacturing, mining, and oil and gas extraction. 

Romarco Minerals surged 42% to 52¢ per share on the back of an all-share, $856-million offer from intermediate gold producer OceanaGold. Romarco is building its flagship Haile gold mine in South Carolina, with production in late 2016. OceanaGold — which has three gold mines in New Zealand and one gold-copper mine in the Philippines — is offering 0.241 of its share for each Romarco share. This values each Romarco share at 68¢, at a 73% premium over its July 29 close. On the acquisition news, OceanaGold tumbled 17% to $2.26 per share, with analysts suggesting there may be a competing bid for the junior.  

Also losing in the percentage category was First Majestic Silver, declining 14% to finish at $4.01. First Majestic recently agreed to buy SilverCrest Mines for $154 million, largely in shares. SilverCrest operates the Santa Elena silver-gold mine in Sonora, Mexico, which recently transitioned from an open-pit to an underground operation. Once acquired, the low-cost mine will become First Majestic’s sixth silver mine in Mexico. The offer values each SilverCrest share at $1.30, a 35% premium over its July 24 close. At least one analyst has noted the offer is dilutive to First Majestic’s net asset value per share. SilverCrest Mines, however, rose nearly 15% on the acquisition news to close at $1.10 per share. 

Premier Gold Mines climbed 12% to $2.02 per share, after updating development at its 40%-owned South Arturo gold mine in Nevada. The mine, expected to start production next year, should churn out at least 200,000 oz. gold in 2016 at cash costs of US$400 per oz. Barrick Gold holds the remaining 60% of South Arturo. 

Agnico Eagle Mines was one of the biggest value losers, retreating $2.32 per share to $28.94. On July 29, the gold miner reported its second-quarter earnings dropped by 54% to US$10.1 million — or US5¢ per share from a year ago — mainly due to lower gold prices. Adjusted earnings were US9¢ per share, in line with analyst expectations. Agnico produced record quarterly production of 403,678 oz. gold at all-in sustaining costs on a by-product basis of US$864 per oz.


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