Golds lower in lacklustre market

The Toronto Stock Exchange made another half-hearted effort at climbing during the report period Nov. 20-25, but the rally ran out of steam on Nov. 26, leaving the TSX composite index at 6,477.77, up only 54.12 points from a week before.

Still, the hint of a market rally and generally favourable economic news were enough to chill out the gold market, with bullion prices sliding US80 to close at US$318.20 in the London morning fix on Nov. 27. That and general market profit-taking brought the TSX gold index down 8.62 points, or 4.9% of its value, to 165.71.

The biggest noise in the gold group was a controversy over Meridian Gold, which had threatened legal action over a story by South African web journal Mineweb. The story had suggested mine planning had gone awry at Meridian’s El Peon gold mine in Chile, and that stockpiles and “satellite” open pits were providing more ore than was called for in the El Peon mine plan.

At an analysts’ meeting in Toronto, Meridian’s president Brian Kennedy said the company had “overreacted” in threatening suit, and reassured analysts that the El Peon ore-blending system was still intact. Meridian, which had fallen $3.82 in the two trading days leading up to the Mineweb report, rallied after the meeting, but then followed the rest of the golds downward, closing at $23.40, down $2.38, for the five trading days ended Nov. 26.

Hopeful economic news — especially capital-goods and purchasing data out of the U.S. — perked up the base metal sector, with the TSX mining and minerals index adding 1.21 points to finish at 125.19, outpacing the broader market.

Inco was the most heavily traded in the sector, with 3.8 million shares turned over. The big nickel producer advanced 87 to finish the report period at $31.98.

Things were less rosy for another heavy trader, Noranda, which fell 7 to $14.93 on a volume of 2.3 million shares. The company acknowledged continuing problems at its Magnola magnesium plant in Quebec, and although the plant’s extended teething troubles are widely known in the industry, bond-rating agency Standard & Poor’s revised the outlook for Noranda’s corporate debt rating (currently BBB-) to negative from stable. The revision also applies to Noranda subsidiary Falconbridge, which was lightly traded and managed a 22 gain to close at $15.34.

Cameco, up 55 at $33.55, announced that its gold subsidiary had outlined a high-grade gold zone at its REN property in Nevada’s Carlin trend. Cameco, which is operating the project in joint venture with Barrick, has defined a zone of Carlin-style epithermal gold about 2.5 km north of Barrick’s Meikle mine. The known length of the JB zone, as it’s called, is about 200 metres, and mineralized drill holes have returned gold grades of 8-21 grams per tonne over core lengths of 5-29 metres.

The market yawned at some excellent drill results from Ivanhoe Mines, which fell 4, closing at $2.99.