TSX starts strong, then stumbles

The TSX Composite index began the New Year looking to shake off the down trend of the year past. But fears around the European debt situation re-surfaced by the end of the Jan. 3-6 period and curtailed some of those market gains. Overall, however, the Index was up 91 points to finish at 12,188.64 points.

Markets turned jittery on two key pieces of news coming out of Europe. The first was that rather than lend to one another, European banks were stashing away record amounts of cash with European Central Bank – a sign of enhanced credit risk – and the second was the steep discount that Italy’s largest bank, UniCredit SpA, issued new equity at.

Despite the bad news the Global Gold Index managed a 9 point gain for the period, finishing at 375.63 as gold prices started the year on a strong note climbing US$45 to US$1,616 per oz.

The Capped Metals & Mining Index was also up as it gained 37 points finishing at 1,147.82 points as the prices for aluminum, nickel, tin, lead and zinc were all higher. Copper prices, however, fell slightly finishing at US$3.40 per lb.

First Quantum Minerals surprised investors by getting US$1.25 billion for its Congolese assets. The money will come from Eurasian Natural Resources (ENRC-L), a company that First Quantum had filed a lawsuit against alleging that the company was conspiring with the government of the DRC to expropriate its Frontier and Lonshi copper mines. Now First Quantum will sell those same mines to Eurasian for US$700 million when the transaction closes and another US$500 million in a three-year promissory note. The company’s shares climbed 10% to $22.05 for the period.

Rare Element Resources saw its share price climb by 77% to $5.83 after releasing an updated resource estimate that boosted measured and indicated resources at its Bear Lodge rare earths project in Wyoming by 38%. The project now has 6.2 million tonnes averaging 3.75% rare earth oxides (REO) in the measured and indicated category and
inferred resources of 22 million tonnes at 2.74% REO. All of the measured and indicated resources and 15 million tonnes of the inferred resources are near-surface oxide mineralization. The company is working on a prefeasibility study that it expects to have finished by the first quarter of this year.

Western Lithium’s shares shot up 36% to 34¢ for the period. The company is developing the Kings Valley Lithium project in Nevada and in mid-December released results from a pre-feasibility study that outlined a mining facility that would cost US$248 million to build and would generate a net present values of $552 million using an 8% discount rate and an internal rate of return of 24%.

And Gran Colombia Gold saw its share price fall by 13% to 45¢. The company is in the midst of negotiating an agreement with artisanal miners at its Marmato project in Colombia, and is also mapping out a plan to move the town of Marmato 1.5 km away so that it can construct an open pit mine.