Quiet week for metals in regrouping market

Sept. 27 to Oct. 3 were five days of treading water for the mining stocks on the Toronto Stock Exchange, with both sectors showing slight declines while the broader market, as measured by the composite index, was up fractionally. The TSX Composite rose 75.72 points to close at 11,081.19, a gain of 0.7% on the five trading days.

The Toronto gold equities were a little weaker, with the sector index down 2.68 points at 218.08. The quiet in the markets belied a week full of news in the gold business.

Trouble brewed between Placer Dome and joint-venture partners Bema Gold and Arizona Star Resource over their Cerro Casale gold project in northern Chile. Placer Dome notified the two non-operating partners that it would not go ahead with development of the project, which has a measured and indicated resource of 1.1 billion tonnes grading 0.7 gram gold per tonne and 0.26% copper. Bema and Arizona Star said they would seek to remove Placer from the project under the joint-venture agreement, and have sent a notice of default to Placer.

Placer shares were down 35 at $19.92, while Bema was off 30 at $3.07 and Venture-listed Arizona Star fell 15 to $4.50.

Golden Star Resources, off 55 at $3.75, was one of the newsmakers, announcing a friendly deal to take over Venture-listed St. Jude Resources in a paper deal and seeing the predictable bidder’s sell-off. St. Jude’s Ghanaian projects, Hwini-Butre and Benso, are within hauling distance of Golden Star’s Wassa gold mine.

Golden Star would trade 0.72 of a share for each St. Jude share, good for a 38% premium over St. Jude’s recent average trading price. St. Jude shareholders would own 19% of the merged company and its president, Michael Terrell, would join Golden Star’s board. St. Jude shares were up 15 at $2.55, although the implied takeover price is around $2.70.

Uncertainty around the status of Venezuelan gold projects weighed on Crystallex International, which fell a further 30 to $1.60, and on off-index gold miners and developers Bolivar Gold (down 20 at $2.45) and Gold Reserve (down 6 at $2.54). After the Monday close, wire service reports from Venezuela quoted the country’s deputy environment minister as saying the mining-permit process is temporarily “frozen” until a review of projects can be completed.

The Metals and Mining index was off 0.27 points at 362.60. The most active stock on the index was Ivanhoe Mines, trading 7.4 million shares and finishing 46 higher at $9.90. On Sept. 29, Ivanhoe announced plans for a 70,000-tonne-per-day project to mine the Oyu Tolgoi copper-gold deposit in Mongolia. The plan would have a capital cost around US$1.2 billion.

Teck Cominco shares went both ways, with the more widely held B-series off 63 at $51.75, on a volume of 5.2 million, but multiple-voting A-series shares up $4.89 to $61.14 in much lighter trading. Teck and the two United Steelworkers locals at the Trail smelting and refining complex — 480, which represents production employees, and 9705, which represents technical and office workers — reached a tentative agreement for a new contract. The union had been on strike since July 19.