TSX rises, April 1-5: Kirkland Lake, Labrador Iron Ore, North American Palladium

The S&P/TSX Composite Index rose 1.83% to 16,396.15. Spot gold finished the week at US$1,291.40 per oz., down 60¢ from the previous week. The S&P/TSX Global Gold Index rose 0.91% to 197.13, and the S&P/TSX Global Base Metals Index increased 4.27% to 123.84.

Kirkland Lake Gold topped the value charts during the trading week with a gain of $2.56 to $43.20. The company reported first-quarter production of 231,879 oz. gold, up from 231,217 oz. gold in the fourth quarter of 2018, and the 147,644 oz. it produced in the first quarter of 2018. The jump owed to record quarterly production from its Fosterville mine in the state of Victoria in Australia and its Macassa mine in northern Ontario, Canada. Kirkland Lake Gold’s Holt and Taylor mines in Matheson, Ont., produced 17,225 oz. and 12,377 oz., respectively. The company said it is well positioned to achieve its full-year guidance of between 920,000 oz. and 1 million oz. gold this year. 

Shares of Labrador Iron Ore Royalty surged $2.35 to $31.73, on uncertainty over iron ore supply since the collapse earlier this year of the tailings dam and the deaths at Vale’s Corrego do Feijao mine in Brumadinho, Brazil. At the end of January, Vale said it planned to cut production of 40 million tonnes a year, including the pellet feed needed for making 11 million tonnes of pellets a year. Vale announced another cut of 30 million tonnes a year in February. The Brumadinho disaster is expected to lower pellet supply, Labrador Iron Ore says, and predicts “continued strong cash flows” in 2019. Labrador Iron Ore holds a 15% equity interest in the Iron Ore Co. of Canada (IOC), and receives a 7% gross overriding royalty and a 10%-per-tonne commission on all iron ore products produced by IOC.

News of a secondary bought-deal equity offering sent the shares of North American Palladium down $2.32 to $12.86. The company announced on April 4 that Brookfield Business Partners LP — North American Palladium’s majority shareholder, with 53.46 million common shares — is selling 5.77 million shares at a price of $13 a share to a syndicate of underwriters led by BMO Capital Markets and RBC Capital Markets. Brookfield has also granted the underwriters an option to buy another 15% of the offering to cover over-allotments, within 30 days of the close at the same price. Brookfield owns 90.85% of North American Palladium’s common shares and will own 81.05% after the offer closes (and before selling any more shares). The company’s Lac des Iles mine is 106 km northwest of Thunder Bay.