TSX climbs, April 18–22

Canada’s benchmark index enjoyed another weekly gain, rising 236.8 points, or 1.7%, to close at 13,874 points, on the back of higher oil prices and encouraging economic data.

The S&P/TSX Global Mining Index rose 4.2% to 57, while the S&P/TSX Capped Diversified Metals & Mining Index soared 14.4% to 518.26. The S&P/TSX Global Gold Index added 0.7% to close at 202.68. Spot gold stayed relatively flat at US$1,232.20 per oz. The June contract for crude oil advanced 8.3% to US$43.73 per barrel, slightly down from the five-month high of US$44.18 mid-week. The commodity-sensitive loonie finished up at US78.92¢. Statistics Canada reported the country’s annual inflation rate cooled in March to 1.3%, down from 1.4% in February. However, core inflation, which strips out volatile items, climbed to 2.1% from February’s 1.9%. It also reported stronger-than-expected retail sales in February.

SouthGobi Resources rose nearly 61% to 45¢ per share, despite reporting that it has not repaid its shareholder loan due to Turquoise Hill Resources. Last October, Turquoise Hill agreed to defer the repayment of the shareholder loan to April 22, 2016. SouthGobi missed the deadline and is negotiating a repayment plan for the loan, which includes a US$3.4-million principal and US$700,000 in interest accrued up to April 22.

Dynasty Metals & Mining shares climbed 43% to 15¢, despite reporting weak first-quarter results. Dynasty sold 2,785 oz. gold from its Zaruma mine in Ecuador and produced 2,221 oz. gold. In the fourth quarter of 2015, it sold 5,634 oz. and churned out 4,133 oz. gold. The 46% drop in quarter-over-quarter production largely resulted from lower grades and a shortage of qualified underground miners, which decreased the number of mining hours. On April 1, the company suspended activities at Zaruma after a walkout by workers. While some workers have returned to the job since, the mining activity has been limited, which will likely affect production estimates for the second quarter.

Primero Mining fell 26% to $1.96 per share on poor first-quarter production figures. Output came in at 36,158 equivalent oz. gold, down 41% from the same period last year. The decline came mainly from lower output at the San Dimas underground mine in Mexico, where the company has restricted access to parts of the mine to improve safety. There have been five deaths at the site over the past five years. Given the reduced output, Primero has cut its annual guidance by 30,000 equivalent oz. gold to 230,000 to 250,000 oz., and increased its cost expectations.

Cantor Fitzgerald analyst Rob Chang says the share price drop is “unwarranted.” He argues that “the production miss — while much bigger than expected — was not due to a permanent issue, but a one-time pain to establish safety protocols.”