Debt ceiling fight hurts US markets

While at presstime president Barak Obama was set to sign off on a long awaited debt bill, the protracted battle between Democrats and Republicans over requirements attached to the raising of the debt ceiling disturbed markets for the July 25-29 period.

The political squabbling and the threat of the U.S. missing payments on some if its key obligations helped push the Dow Jones Industrials down 536 points, while the S&P 500 was off 52 points and the Nasdaq was down 76 points.

Going forward markets will look to rebound on increased confidence in the debt situation along with the continued release of second quarter earnings results and key economic data, such as the payrolls report which is due out by week’s end.

Agnico-Eagle’s $70 million investment in Rubicon Minerals helped to make Rubicon one of the hottest stocks for the period. Rubicon shares were up 25% to US$4.20 after it said that the private placement of common shares had closed. Rubicon owns the Phoenix project in the Red Lake mining district of Ontario. The company released a preliminary economic assessment on the project at the end of June that envisioned mining roughly 2 million oz. of gold at cash costs of just US$519 per oz.

Word that Silver Dragon Resources has made it into production was finally getting some traction with investors. The company’s shares were up 8% to 14¢ for the period. Silver Dragon announced back on July 12 that it had begun production at its Erbahuo silver mine, located in Inner Mongolia, China. The Erbahuo mine is 70% owned by Silver Dragon and is expected to turn out 160,000 oz. of silver by the end of the year.

Higher costs for mining metallurgical coal meant a lower market valuation for Patriot Coal’s shares. The company saw its share price fall 24% to close the period at US$18.91. The sell-off came after it released second quarter results that showed continued losses for the miner. The higher costs for met coal production were tied to higher selling fees and labour costs and came as the company executes its strategy to bring met coal production up to 35% of its total coal production. Those higher costs helped contribute to the company’s 12th straight quarterly loss. Patriot said it lost US$12.4 million, or 14¢ per share, compared with a year-ago loss of US$13.6 million, or 15¢ per share. Met coal prices averaged US$315 per tonne in the second quarter.