Gold miners weigh on TSX, March 24-28

Weaker gold prices and slumping tech stocks outweighed signs of an improving economy south of the border, and the S&P/TSX Composite Index fell 100 points to 14,178.84 points for the period.

The rosier picture for the U.S. economy was based on stronger gross domestic product numbers and fewer jobless claims. Nevertheless, the Canadian dollar gained on its U.S. counterpart, rising 0.24¢ to finish the period at US90.46¢.

Gold’s strength to start the year disappeared when its price dropped US$42 to US$1,293.80 per oz., while the S&P/TSX Global Gold Index fell 10 points to 185.65.

Thankfully for metal investors the base-metal camp offered better results, with the S&P/TSX Capped Diversified Metals & Mining Index up 8 points to 798.09, and the copper price up 9¢ to US$3.04 per lb.

Avnel Gold Mining was the period’s largest gainer, as its stock climbed 60% to finish at 28¢. The momentum came from a resource estimate and preliminary economic report for its Kalana gold deposit in southwest Mali. The deposit has 1.25 million oz. in the indicated category, and the economic study showed an after-tax net present value of US$194 million and a 53% IRR using a US$1,110 per oz. gold price. It would cost US$188 million to build a mine turning out an average 138,000 oz. in the first four years, and 98,000 oz. each year over the remaining 14-year mine life.

Stornoway Diamond addressed rumours that had its share price volatility rising recently. The company confirmed it was negotiating a financing plan for its Renard diamond project in north-central Quebec. The market liked what it heard, as the company’s stock gained 19% to $1.08, even though it warned investors that negotiations could be fruitless.

Banro couldn’t find similar traction despite posting the first reserve estimate for its Namoya gold mine in the Democratic Republic of the Congo. The calculation bolsters reserves by 53% to 2.36 million oz. Namoya is the second gold mine along the Twangiza–Namoya gold belt in the DRC that is wholly controlled by Banro. The company converted 73% of Namoya’s 1.83 million oz. gold in measured and indicated into reserves, but wasn’t rewarded — its share price fell 2¢ to finish up at 56¢.

Lydian International had worse results. The company closed a private placement financing with the International Finance Corp. for 1.7 million shares at $1 per share. Lydian will use the money to finish a feasibility study at its Amulsar project in Armenia. The market focused on the dilution, which will be amplified when it closes a deal with the European Bank for Reconstruction and Development that will see it issue another 3 million shares. Lydian shares were off 23% to $1.05.

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