Base Metal Prices propel market

After a steep 1-day dip and an even steeper 1-day rebound, the Toronto Stock Exchange settled into a quiet trading period that finished with the TSX Composite Index up 66.15 points to 11,008.78 on Dec. 5. The Canadian dollar was also strong, climbing almost US1 to US86.45 in anticipation of a Dec. 6 increase in the Bank of Canada’s overnight target rate; the bank did not disappoint, increasing the rate a quarter-point to 3.25%.

The metals and mining index rose 12.03 points to 384.20 over the five trading days, a 3% gain that outpaced most other sectors on the market.

Much of the rise was driven by commodity prices: spot nickel prices on the London Metal Exchange were up modestly during the period — US$620 per tonne at US$13,525 — but most of the nickel producers were up: Inco rose 28 to $52.61, Sherritt International 20 to $9.95, FNX Mining 6 to $13.06 and LionOre Mining International 7 to $5. Only Falconbridge lost ground, shedding 18 to finish at $35.60.

Zinc was up US$111 per tonne at US$1,787, boosting Teck Cominco B-series shares $4 to close at $52.75. With copper up US$185 per tonne at US$4,565, the copper-sensitives also showed big gains; the biggest went to First Quantum Minerals, which was up $4.45 at $33.70. Inmet Mining, another copper producer, rose $2.65 to $26.10.

Off the index, but still in base metal news, Nevsun Resources unveiled an early-stage economic study for the Bisha massive-sulphide deposit in Eritrea that showed a US$346-million net present value, undiscounted, and a 35% internal rate of return based on historical average commodity prices. Bisha has a measured and indicated resource of 22.8 million tonnes grading 1.7% copper, 3.9% zinc, 1.9 grams gold and 42 grams silver per tonne, in four zones that would require three separate phases of mining — the first to mine gold-bearing oxide material, the second to mine supergene copper mineralization, and the third to exploit two zinc-rich zones.

The gold index was down 5.85 points to 228.61 amid several merger stories and at least one non-story. In the non-story, nobody bid for Placer Dome and the stock was down 56 to $25.25 after Barrick Gold and Newmont Mining were reported to have traded faxes over a proposal by Newmont to pick up a few Placer assets, presumably those in Nevada, in exchange for not bidding for Placer. Although Placer has opened a data room, there has been no sign yet of a competing bid to Barrick’s US$20.50 cash or 0.7518 of a share with a US5 dividend.

Yamana Gold and RNC Gold reached an agreement to merge, with Yamana bidding 0.12 of a Yamana share for one RNC. RNC, which holds the San Andres gold mine in Honduras and the La Libertad gold mine in Nicaragua — two former Greenstone Resources properties — rose 10 to 66, while Yamana was up 27 at $5.85.

The other merger story came from Iamgold, which signed up the management of Australian-based gold producer Gallery Gold to a merger agreement that will see Gallery shareholders receive one Iamgold share for 22 Gallery shares, effectively valuing Gallery at A46 per share, or about A$230 million ($200 million).