Markets go over cliff, headfirst

While there hasn’t yet been a screaming rush to the exits, stock markets saw heavy selling during the report period July 10-16. The Toronto Stock Exchange was no exception, with the TSX composite index plunging 339.18 points, or 4.8% of value, to 6,695.66.

Curiously enough, the heavy overvaluation in “new economy” stocks was not what was being corrected in those five trading days. Resource stocks outpaced the broader market, with the Metals and Mining index plunging 9.5% and the golds down 6.7% from the previous Tuesday’s close.

The decline in the golds was doubly strange, as the bullion markets should have provided the producers with considerable support. The yellow metal was fixed at US$317.75 per oz. in the London morning session on July 17, up $1.80, capping five days when the price broke over the US$320-per-oz. line. But the gold index told a different tale, sliding steadily since peaking at just over 200, and closing at 183.52 on July 16.

Kinross Gold was the volume leader, with 25.5 million shares riding the tape to a close of $3.33, down 13. Both of the gold index’s heavyweights traded more than 20 million shares: Placer Dome, which extended its takeover offer for Australian gold producer AurionGold to Aug. 7, was down $1.14 at $16.10, and Barrick Gold fell $2.52 to $26.98.

Good drill results from its Monument Bay project in Manitoba and the Julietta project in far-eastern Russia did not prevent Bema Gold from sliding 18 to $2.06 in heavy trading. Bema had, however, struck while the iron was hot, arranging a flow-through placement for 1.3 million shares at $2.30 the week before.

Over on the base metal side, prices were generally stable, with the only large move made by zinc, which was US$7.50 higher at US$819.50 per tonne. That didn’t help the base metal producers, who were all lower: the Metals and Mining index was off 13.58 points at 129.41.

The most actively traded of the base metal producers was Inco, which was down $4.40 at $29.50 on a volume of 13.3 million shares. Nickel-producing rivals also fell: Falconbridge was off $2.53 at $17.10, and Sherritt International slid 59 to $5.02.

NovaGold Resources slipped 20 to $3.80 despite announcing the discovery of more high-grade gold mineralization at its Donlin Creek project in Alaska. Upwards of 33 grams per tonne were intersected over long intervals in the so-called Akivik zone.

Among the few climbers was Crew Development, which rose a penny to 37 on news of having secured US$8 million in financing to advance its Nalunaq gold deposit in southern Greenland to production. Most of the funds are earmarked for underground development. NunaMinerals, which is owned by the state of Greenland, holds a minority 33% stake in the project.

Another was America Mineral Fields, which tacked on 5 to close at 70 after Anglo American announced it would be withdrawing from the Kolwezi tailings joint venture in the Congo. America Mineral Fields is buying out Anglo’s 30% interest for US$3.5 million and will hold 60% the project. State mineral enterprise Gecamines holds the remaining interest.