TSX drops sharply, Aug 17-21

The S&P/TSX Composite Index contracted five days in a row and finished at its lowest level in 18 months, down 5.6% to 13,473.67. The sell-off — mirrored in markets around the globe — was triggered by fears of a hard economic landing in China, where weak data from the factory sector showed manufacturing was slowing at its quickest rate since the 2009 financial crisis. The flash Purchasing Managers’ Index (PMI) for August stood at 47.1, down from 47.8 in July. China’s main stock markets also dropped 11% (A-shares plunged 12% and H-shares fell 8%). The economic data, which followed China’s currency devaluation the previous week, ignited fears about how economic deceleration in China will affect global growth and commodity markets.

Oil prices continued their descent, with West Texas Intermediate crude closing at just over US$40 per barrel, bad news for Canada’s energy-heavy economy. Base metal prices also felt the chill, with copper down 1.8% to US$2.30 per lb., nickel off 4% to US$4.61 per lb., lead 2.8% lower at US77¢ per lb. and zinc sliding 3.8% to US80¢ per lb. Spot gold climbed 4.2% to finish at US$1,160.40 per oz. and the S&P/TSX Global Gold Index rose 7.3% to 139.78. The S&P/TSX Capped Metals & Mining Index dropped 10.4% to 436.80 and the S&P/TSX Global Mining Index slid 3.0% to 51.44.

Eldorado Gold’s shares fell 65¢ to $4.48 after Greece’s Ministry of Energy revoked technical studies of its Skouries and Olympias projects, and the company said it would suspend all mining and development activities. Eldorado will take legal action against the decision and file an injunction request before the Council of State, Greece’s Supreme Court on administrative and environmental matters. The suspension is based on test-work completed on the Olympias Phase III flash smelting process. The pilot scale test-work was completed at Outotec’s metallurgical and smelting facility in Finland, while the Ministry of Energy believes it should have been done in Greece.

A 35% increase in inferred resources to 2 million oz. gold (9.7 million tonnes grading 6.47 grams gold) at its Amaruq project in Nunavut, lifted Agnico Eagle Mines to $34.47 per share, a $3.48 gain. Amaruq’s Whale Tail deposit is 50 km northwest of Agnico’s Meadowbank mine. The resource update shows Whale Tail could be mined by open pit with potential for a higher grade underground operation.

Lucara Diamond rose 11¢ to $1.74 after it recovered “exceptional” diamonds at its Karowe mine in Botswana, including a Type IIa, 336-carat diamond plus three stones weighing 184 carats, 94 carats and 86 carats, and a 12-carat pale pink diamond. Since Lucara recovered the first large diamond from Karowe in 2013, it has found 216 diamonds that have sold for more than $250,000 each, including 12 for more than $5 million apiece.