TSX down as market awaits QE3

The TSX Composite Index went into the Labour Day weekend on a down turn as it shed 148 points to 11,949.26 for the Aug 27-31 period.

The slump came as market participants tried to decipher just what U.S. Federal Reserve chairman Ben Bernanke’s position is on further quantitative easing. Speaking in Jackson Hole, Wyoming Bernanke wasn’t clear on whether markets could expect another round of quantitative easing anytime soon although he did leave the possibility out there.

Markets were disappointed by the lack of clarity and also had to digest word that consumer confidence was falling against stronger real-estate prices south of the border.

While markets didn’t respond well to Bernanke’s speech, gold held its own as the metal was up US$14 to US$1,687.60 per oz. The move did little to help miners though as the Global Gold Index was flat at 314 points.

The diversified miners, however, must have been envious of their cousins in the gold camp for just being able to hold water. The Capped Metals & Mining Index fell 35 points to 825.64 over a period in which the price of copper fell 2¢ to US$3.46 per lb.

Peregrine Diamonds was one of the period’s big gainers as investors anticipate positive news. The company is in advanced discussions regarding its corporate and financing options but said the parties involved are bound by confidentiality and released no details of any possible deals. Peregrine has diamond exploration projects in Canada’s far north. The company’s shares were up 52% to 50¢ for the period.

Inter-Citic Minerals also saw its stock make gains after saying it was being acquired by a subsidiary of China-based Western Mining Group in a deal that values Inter-Citic at $250 million. Western Mining is offering $2.05 per share in cash for all outstanding shares of Inter-Citic, which is developing the Dachang gold project in China. The offer represents a 41% premium and helped boost Inter-Citic shares by 34% top $1.95 for the period.

The news wasn’t so good for Eco Oro Minerals, which saw its market cap nearly cut in half. The company’s share price was off 42% to $1.14 after it wasn’t granted an extension to concessions that make up over half of its gold project in Colombia. The Colombian national mining agency didn’t extend the rights to 54% of its ground because it lies in an environmentally sensitive area knows as the Paramo. Even worse for Eco Oro is the fact that the ground it is losing holds roughly 70% of the gold deposit. Eco Oro, which was formerly known as Greystar Resources, has been struggling to develop its Angostura project for more than 17 years. The company is arguing that the mining agency missed a deadline on its request for an extension to existing concession and therefore has no authority to make the ruling. It also says the agency made a mistake in determining which areas around the Paramo are eligible for mining.