Equities bounce back at gold’s expense

The widespread rally in the global stock markets, which started on July 25, pulled the Toronto Stock Exchange TSX Composite index up 350.1 points in the report period July 24-30. The index closed at 6,511.18 points, a 5.7% gain for the five trading days.

The market rally has also seen a strengthening trend in the U.S. dollar, which is invariably bad news for gold. London bullion trading was marked by sharp declines over the first three days of the period as the equity rally got under way; between the afternoon fixes of July 23 and 26, gold lost US$14.75 per oz. After rallying slightly over the next two days, it was fixed at US$305.40 on the morning of July 31, down US$8.20 from a week before.

The TSX gold index, which took a severe beating as the gold price dropped, also rallied slightly near the end of the period, and closed at 158.20, down only 0.24 point from the previous Tuesday’s close.

The heaviest trading was in Kinross Gold, as it has been for several weeks. Kinross was down 8, closing at $2.65, on a volume of 39 million shares. Following their trade ratios in the proposed 3-way merger with Kinross, Echo Bay Mines was off 8 at $1.36, and TVX Gold, 98 at $16.72.

There was heavy trading in both of the big boys; Barrick Gold was up 91 at $23.76 on a volume of nearly 22 million shares, while Placer Dome fell 70 to $13.48, with nearly 19 million shares changing hands. Placer upped its bid for Australian gold producer AurionGold, offering an A35 cash component in addition to the offer of 0.175 Placer share per Aurion share. It also withdrew a minimum acceptance condition on the bid. Aurion management recommended shareholders reject Placer’s new offer, though no other bidders have appeared.

Agnico-Eagle Mines fell 30 to $18.55 despite reporting record quarterly gold production and throughput at its LaRonde mine in Quebec. During the recent quarter, the company produced 74,617 oz. gold at a cash cost of US$164 per oz., and earned US$3.4 million (US5 per share) on revenues of US$30.6 million. Agnico continues to see an excellent potential for extending the 8.4-million-oz. LaRonde deposit both at depth and to the west.

The base metal producers were a big beneficiary of the market rally, with the TSX metals and mining index up 7.25 points (or 6.3% of value) to 122.56. The recovery was led by Teck Cominco, whose B-series shares rose $1.98 to close at $12.23. Noranda gained $1.47 to close at $16.87, Falconbridge gained $1.27 to close at $17.27, and Inco was $1.40 better at $27.80. One of the few companies headed the other way was Cameco, which fell 99 to finish at $30.90.

Orezone Resources was off 9 at 37. The Ottawa-based explorer closed its merger with London OFEX-listed Coronation International Mining. Orezone also closed a $2.5-million financing, with 20% participation by South African mining house Gold Fields, and Gold Fields agreed to an option deal on the company’s Essakan project in Burkina Faso.