TSX Venture heads downward alongside gold, Feb. 11-15

VANCOUVER — The S&P TSX Venture Composite Index lost 1.7% or 20.16 points during the Feb. 11-15 trading sessions en route to a 1,185.65 point weekly close. Canadian stocks were weighed down by falling commodity prices, and further economic uncertainty in the European Union (EU).

Finance ministers from the G20 nations continued meetings in Moscow with a focus on manufactured currency devaluations amid what is being dubbed a potential “currency war” amongst major global economies. Meanwhile, Eurostat revealed that the EU economy contracted 0.6% in the fourth quarter of 2012, marking the third consecutive quarterly loss for the Eurozone and the largest decline since first quarter 2009.

Commodities led markets downward, with gold stocks being a major decliner as April contracts for bullion dropped US$26 to close out the week at US$1,609.50 per oz. Copper fared a touch better, remaining relatively static at US$3.73 per lbs., while March contracts for crude oil lost $1.45 per barrel en route to a US$95.86 weekly close.

Orko Silver was a big name on both the trade activity and value added side of the ledger. Orko traded 20.5 million shares this week after news broke that a bidding war had erupted over its La Preciosa silver project in Durango State, Mexico, between producers Coeur d’Alene Mines and First Majestic Silver. Orko jumped 25¢ en route to a $2.50 per share weekly close.

First Majestic tabled a friendly bid in December before its stock dropped roughly 20% and impacted the value of its stock-heavy offer — now valued at around C$307 million. Under Coeur’s offer, Orko shareholders can choose to exchange shares under three options: 0.0815 of a Coeur share and 70¢ in cash; 0.1118 of a share; or $2.60 in cash. The cash and share components are capped at C$100 million and 11.6 million shares. Coeur’s offer is valued at roughly C$384 million, and First Majestic has until Feb. 19 to submit a counter offer.

Not surprisingly, junior gold stocks were hit hard by the drop in gold prices, with three Vancouver-based companies registering the largest losses on the Venture.

Chesapeake Gold dropped 63¢ before ending the trading week at $8.57 per share. Chesapeake has lost 14% or $1.42 per share since announcing results of a pre-feasibility study on its Metates gold-silver project in Durango State, Mexico, on Jan. 31. Metates is a bulk tonnage, sedimentary-hosted gold deposit and the study carried a hefty, US$4.36-billion development cost.

Two Yukon-focused explorers also had a rough week on the back of declining gold prices. ATAC Resources lost 37¢ en route to a $1.25 weekly close. The company holds 100% in the Carlin-style Rackla gold project between the regional-scale Dawson thrust and Kathleen Lakes fault in the Yukon. ATAC has dropped 30% or 54¢ since the beginning of February.

Kaminak Gold similarly struggled this week, dropping 27¢ en route to a $1.01 per share close. The company is working on its multi-million ounce Coffee gold project in the Yukon’s White Gold district, and has dropped 27% or 37¢ since the end of January.