Price squeeze has base metal issues jumping

Toronto equities were little-changed over the report period Dec. 3-9, a modest gain of 48.34 points putting the TSX Composite index at 7,975.94. The base metal and gold stocks headed in opposite directions, in spite of the continued heat in the precious metal markets.

Gold bullion prices stayed above US$400 per oz. during the period, with the London fixing price at US$408.25 on the morning of Dec. 9. The gain, US$7.20 on the week, did little for gold equities, which have been depressed by profit-taking since the TSX Gold index hit a high of 244.47 on Dec. 3. The index closed out the period at 231.81, a fall of 11.65 points (about 8%) from the previous period.

The most active of the index constituents was Wheaton River Minerals, which saw 47 million shares traded and closed at $4.06, down 8. Another heavily traded gold was Bema Gold, with 17 million shares moving; Bema, which announced a US$71-million program to put the Refugio mine in Chile back into production, was off 52 at $4.85. Eldorado Gold, also heavily traded at 14 million shares, was off 39 at $4.25.

The bad times were shared around the seniors, mid-tiers, and small producers, as Placer Dome fell back $1.16 to $22.99, Goldcorp dived $1.34 to $22.29, and Glamis Gold plunged $2.09 to $21.16. Off the index, Queenstake Resources was 10 worse at 78, on a volume of 24 million shares.

There was interest in the junior diamond developers as well, with Tahera seeing 32 million shares change hands. It concluded an agreement with the Kitikmeot Inuit Association for compensation and benefits at the Jericho diamond project in Nunavut.

DiamondWorks was up a quarter at $1.60, thanks to results from commissioning tests at its Koidu diamond project in Sierra Leone. The company reported pulling 282 gem-quality diamonds from its Koidu pipe in Sierra Leone, with the three largest stones weighing an impressive 14.5 carats, 6.5 carats and 6.2 carats respectively. The company holds a 40% interest in the project, along with Magma Diamond Resources (40%).

Unlike its precious metal counterpart, the TSX Diversified Metals and Mining index responded positively to gains in the metal markets, picking up 8.13 points to close at 212.19. One leading light was Teck Cominco‘s B-series shares, which were $2.41 higher at $20.16; B-series warrants jumped $1.48 to $2.69 in the same period, and voting-series A shares were $2.59 better at $21.59.

Robert Friedland’s Ivanhoe Mines fell $1.73 to $9.57 after it announced it would be raising $130 million for development of its Oyu Tolgoi copper deposit in Mongolia by way of a share issue.

Alcan, which rose $1.71 to $58.02, extended its offer to buy up shares of French aluminum producer Pechiney to Dec. 23. Alcan had tied up 92% of Pechiney’s shares by Nov. 24 in its cash-and-shares offer but wants to push that to 95% to allow French compulsory-acquisition rules to kick in.