Editorial: World’s stock markets head south

Panic in the global stock markets gripped a little tighter during the week ended Jan. 19, the third trading week of 2008, and metal prices and mining stocks were swept along in the crowd’s rush for the exits.

By way of explanation for the market correction, the phrase “recession fears in the U.S.” was repeated in just about every business article and TV segment, as market indicators such as the Dow Jones Industrial Average contracted 4% to 12,099 points and the TSX plummeted 6% to 12,737 points.

Prices for base metals plunged, and oil fell well below recent record highs as the prospect of an economic slowdown threatened demand.

Setting the tone for the banking sector early in the week was Citibank, which posted a US$9.8-billion loss in the fourth quarter owing to an US$18-billion writedown in bad mortgage loans.

* Some history was being made in the New York Stock Exchange’s board room, too, as the company announced it would acquire its junior rival in lower Manhattan, the American Stock Exchange, for US$260 million in shares.

The deal is expected to close in the third quarter, and the NYSE envisages savings of some US$100 million in time, partly by selling Amex’s lower Manhattan headquarters.

* A little more history was made in the gold sector, with GFMS — the top tracker of global supply and demand for gold — revealing that China had supplanted South Africa in 2007 as the world’s largest gold producer. This ends South Africa’s 102-year reign at the top of the heap.

Overall, global gold mine production fell more than 1% last year to 2,444 tonnes (78.6 million oz.), as significantly higher output from China, Indonesia, Brazil and Ghana could not outstrip declines seen in South Africa, the U.S., Canada and elsewhere.

* Brazilian mining magnate Eike Batista — best known to Canadians as the flamboyant driver behind TVX Gold in the 1990s — ended the week an even richer man, as Anglo American tabled a US$5.5-billion bid for his stake in Toronto-listed Brazilian iron ore miner MMX Mineracao e Metalicos, which will have its ownership in various projects reorganized under the deal.

Turning its back on gold, Anglo aims to pump up its iron ore business, and the Batista-MMX deal will give it the 51% interest it doesn’t already own in the Minas Rio iron project, slated to start production next year, and 70% of the Amapa mine, already in operation. Both mines should be cranking out a combined 33 million tonnes of iron ore by 2011.

Cynthia Carroll, Anglo’s new CEO, says the company expects to be producing 150 million tonnes of seaborne iron ore per year by 2017.

* The Colorado Mining Association was rightly upset this week as two Fort Collins representatives continue to move forward with sweeping changes to Colorado’s Mined Land Reclamation Act without seeking significant input from the state’s miners and other affected constituents regarding the amendments’ feasibility and impact.

Of particular concern to miners is the provision that will give local governments veto power over operations and technologies, effectively bypassing the state’s more technically competent regulators. (The CMA still supports existing local land use powers.)

The CMA says that in its current form, the bill would “ban many technologies essential to modern mining operations without enhancing environmental protections.”

Mining directly contributes nearly US$3 billion in value to Colorado’s economy.

* Sadly, the Canadian diamond mining industry’s first major bankruptcy drew a little closer on Jan. 16, as Tahera Diamond obtained bankruptcy protection after a critical financing fell through. Operations at its Jericho diamond mine in Nunavut are complicated by the need to use winter roads, which leave only a narrow window of time to resupply the mine if it is to continue operating into the spring. Shares ended the week at 8, compared with the all-time peak of $4.15 in February 2006. It’s hard to see how Tahera’s common shareholders will be left with anything but memories within a few months.