TSX posts marginal gain, June 10-14: Serabi, Avesoro, Stornoway

The S&P/TSX Composite Index rose 0.44% to 16,301.91. The S&P/TSX Global Mining Index increased 3.44% to 75.85, and the S&P/TSX Global Base Metals Index was up 3.52% to 109.49. Spot gold rose 0.09% to US$1,341.10 per oz. gold.

Brazil-focused Serabi Gold posted the largest percent gain, surging 34.7% to 97¢ per share. President and CEO Mike Hodgson told shareholders at the company’s annual meeting that the company is on budget and on track to achieve its full-year guidance of between 40,000 and 44,000 oz. gold. He also noted that the company expects results from a preliminary economic assessment of its Coringa project during the early part of the third quarter, and that the study will reflect a 37% increase in the project’s mineral resource.

Trouble at Avesoro Resources’ Youga gold mine in Burkina Faso and New Liberty gold mine in Liberia sent the company’s shares down 50.7%, or 77¢, to 75¢. On June 10, Avesoro cut its 2019 production guidance from 210,000 to 230,000 oz. gold to 180,000 to 200,000 oz. gold in the wake of ore dilution at Youga during the first quarter of the year, and in the first two weeks of June. It also revised its 2019 guidance for operating cash costs, which it says will increase to between US$889 and US$960 per oz. sold, up from its previous estimate of US$850 to US$910 per oz., while all-in sustaining costs will likely rise to between US$1,152 and US$1,248 per oz., up from US$1,110 to US$1,190 per oz. gold. The company said it plans to transition its Youga and New Liberty operations to contractor mining to lower mining costs and lift volumes. After the announcement, open-pit mining fleet operators at Youga refused to work, and disrupted mining activities and gold production at New Liberty. Two days after the announcement, Avesoro declared it had temporarily suspended gold-processing operations at Youga. Mining and processing resumed at Youga on June 15, and the company said it continues to assess project optimization options — including ore-sorting and heap-leach scenarios, at both mines — to improve economics.

Stornoway Diamond was the most traded stock of the week, and fell 2¢ to 2¢ per share. The diamond producer reported a $48.4-million net loss — or 5¢ per share — on revenues of $53.3 million in the first quarter of the year, and is undergoing a strategic review to consider its options. Stornoway said that downward pressure on the market price for rough diamonds had inhibited its ability this year to generate positive free cash flow from its Renard mine in Quebec. On June 11, the company entered into a binding bridge-financing term sheet, with secured lenders and key stakeholders including Osisko Gold Royalties. The funds will ensure the company operates during its strategic review. The Renard mine, 350 km north of Chibougamau in the James Bay region of north-central Quebec, is the province’s first producing diamond mine, and Canada’s sixth. Commercial production began in January 2017.