Editorial: Global market downturn hammers gold, silver

The biggest story for the week ended March 2, the ninth trading week of 2007, was the worldwide stock-market meltdown that started with a surging yen and a 9% drop on the red-hot Shanghai Exchange, and then quickly translated by Feb. 27 into some of the worst declines North American equities have seen since the days after 9/11.

Gold companies and Bay Street brokers will hesitate to do it, so we’ll be the ones to point out the uncomfortable truth that physical gold and silver and precious metals stocks all failed spectacularly as a safe haven during the market turmoil.

While broad North American stock indices dropped 3.5%-4.5% over the week, gold bullion fell 4.5%, gold indices sank around 8%, and silver bullion plummeted almost 12%.

Gold bugs love to bash the greenback, but cash was king in this correction.

* Love him or hate him (and we’re in the former camp), you just can’t ignore Rob McEwen, founder and wildly successful former CEO of Goldcorp. This week he announced his intention to return to the place that made him and his followers very rich — northwestern Ontario’s Red Lake gold camp — via a minimum $10-million investment in Rubicon Minerals. McEwen-related gold properties in Alaska and Nevada will also be thrown into the mix to create the “new” Rubicon.

McEwen’s move worked its usual magic: Rubicon’s stock soared about 55 to a new 52-week high of $1.85 midweek on the news, before settling down to close the week at $1.50.

* The week’s most significant deal was in the red-hot uranium sub-sector, with up-and-coming junior uranium producer Paladin Resources tabling an inspired A$1-billion, all-scrip offer for Aussie uranium explorer Summit Resources.

The testosterone must really be flowing at Paladin’s offices these days: The takeover offer comes on the heels of the previous week’s board approval for construction of the Kayelekera uranium mine in Malawi, targeting an annual production profile for Paladin of 7 million lbs. U3O8 per year by 2009, including the Langer Heinrich post Stage II expansion in Namibia.

* It’s been a long, long wait, but well worth it: on Monday a positive feasibility study of the Tenke Fungurume concessions in the Democratic Republic of the Congo was released, revealing — not surprisingly — a robust, long-life mining scenario. Tenke Fungurume’s measured and indicated resources were last tallied at 235 million tonnes of 3.01% copper and 0.31% cobalt, plus another 265 million inferred tonnes at 2.6% copper and 0.19% cobalt.

The project is owned 24.75% by Tenke Mining, 57.75% by Phelps Dodge and 17.5% by state-owned Gcamines.

* Mineral exploration press releases were coming out at a torrid pace in the run-up to the Prospectors and Developers Association of Canada convention in Toronto, but a few Canadian ones stood out from the pack.

British Columbia’s molybdenum prospects enjoyed significant market attention with a pair of junior explorers bucking the market correction. Bard Ventures proved it was not just a one-hole wonder by delivering results from a second hole from its Lone Pine project just outside Houston, B.C. Almost 500 metres of core averaged 0.07% MoS2 and ended in mineralization. Shares of TTM Resources also lit up the boards, posting major gains on strong volume after it tabled initial drill results from its Chu moly project near Vanderhoof in northern B.C. A 198-metre intercept of 0.132% molybdenum had the junior already contemplating laying out agreements with a moly developer in the region.

Another Canadian duo posted major gains: partners Silver Spruce Resources and Universal Uranium drilled a 30-metre interval grading 0.11% U3O8 on its Northwest claim package in Labrador’s Central Mineral Belt. With mineralization hosted in a similar environment to Aurora Energy Resources’ Michelin deposit to the east, we see that the camp holds strong potential.

Send your Letters-to-the-Editor and other op-ed submissions to the Editor at: tnm@northernminer.com, fax: (416) 510-5137, or 12 Concorde Pl., Suite 800, Toronto, ON M3C 4J2.