U.S. markets, July 8-12

U.S. stocks closed the trading week in the green, with the Dow Jones Industrial Average adding 2.2%, or 328.46 points, to 15,464.30. The S&P 500 Index rose nearly 3%, or 48.3 points, to 1,680.19, and the Philadelphia Gold & Silver Index added 3.13 points to 89.57, as the spot price for gold jumped US$61 per oz. to US$1,284.80.

Rare earth stocks dominated the top-gainers’ list as the Chinese government cracked down on illegal mining, which has recently pushed up prices for certain rare earth oxides. Avalon Rare Metals jumped 43% to US83¢, Tasman Metals gained 31% to US72¢, Quest Rare Minerals climbed 28% to US59¢ and Molycorp rose 22% to US$6.96.

Quest shares also got a boost after announcing a tentative contract with TAM Ceramics Group — a leading manufacturer of zirconia chemical products — to sell all of the zirconia produced from its Strange Lake rare earth deposit in northern Quebec. Under the deal TAM may buy up to 24,000 tonnes of zirconia produced each year from Strange Lake. While the parties are still negotiating the price and length of the transaction, Quest says a definitive off-take agreement would likely have a five-year term that could be renewed five times to cover the project’s 30-year life.

Newmont Mining reported preliminary second-quarter results, with attributable gold and copper output of 1.17 million oz. and 34 million lb. Attributable gold and copper sales were 1.21 million oz. and 37 million oz.,which is largely in line with predictions. Cash costs will be released in the full financials on July 25.

BMO Nesbitt Burns analyst David Haughton cut his target on Newmont to US$35 from US$55.50, and his rating to “market perform” from “outperform” to reflect the lower metal prices. He says that while the company has taken steps to rein in costs and reduce its debt, BMO Research expects “balance-sheet pressure at prevailing metal prices in the absence of further cost reductions, capital conservation . . . and free cash flow relief, while the dividend is linked to the gold price.”

The miner has kept its full-year 2013 attributable production guidance at 4.8–5.1 million oz. gold and 150–170 million lb. copper. It closed the period at US$27.43, down US35¢.

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