TSX Composite continues to stumble

Tsx/akv/may.16.11

Tough times continue to reign down on Canadian markets as evidenced by the TSX Composite Index falling 251 points to land at 13,377 points for the May 9-13 period.

The big story of the week dealt with the market itself as the Canadian banks, along with some key pension funds, announced they want to takeover the TMX Group for $3.6-billion. The offer represents a 24% premium over the price connected with the friendly merger between the London Stock Exchange Group and the TMX that was announced a few months back. While the latest offer would keep the TMX wholly Canadian, it would have to clear anti-trust laws to be successful as the Banks already own a competing trading system.

On the economic side of things inflation continued to be the key topic overhanging Canadian markets as an increase in inflation is expected when data is released later this week. Higher prices for food and energy, combined with stronger economic in Canada, are said to be the key drivers behind inflation.

Inflationary worries didn’t, however, spill over and help out gold miners as the Global Gold Index was off 15 points to 362.70. That drop came as the price of gold fell US$4 to US$1,492 per oz.

The Capped Metals & Mining Index didn’t fare much better as the Index was off 57 points to 1,365.43. The minor drop came with copper, nickel and tin all selling for less then what the began the period selling for. Lead and zinc prices were flat for the period while aluminum prices finished higher.

North American Palladium saw its share price take a serious tumble after it released first quarter results. The fall came after the company reported a net loss for the period of $10.3 million. North American said production levels didn’t meet targets due to weather -related issues. The company’s shares were off 29% to $3.80 for the period.

Operational issues and poor quarterly results were also behind the sell-off of Eastern Platinum’s shares. The company posted a quarterly loss and suffered through a suspension of mining at its key Crocodile River mine in South Africa. Trouble at the mine began after a worker’s union rejected a revised wage offer. The workers turned on the mine itself and did enough damage to cause flooding which forced an evacuation. Eastern Platinum says the mine is running again but that workers are still protesting and blocking the mine entrance to prevent non-striking employees from entering. Eastern Platinum shares were off 14% to 92¢ for the period.

The impending merger between Medoro Resources and Gran Colombia Gold did little for either company’s market cap. Grand Colombia was off 21% to 91¢ while Medoro shares fell 15% to $1.40. Shareholders are slated to vote on the merger in early June. Gran Colombia holds 95% of the former Frontino gold and silver assets while Medoro holds the Marmato project which sits on the same mid-Cauca gold belt as Frontino.