US markets down, June 26-30

Real gross domestic product in the U.S. increased at an annual rate of 1.4% in the first quarter of 2017, down from 2.1% in the fourth quarter of 2016. Consumer spending, which makes up more than two-thirds of U.S. economic activity, rose 1.1% from January to March, while exports posted a 7% gain. The gold price was down 1.23% to US$1,241.20 per oz. and the Philadelphia Gold & Silver Index dropped 3.18% to 80.78. The Dow Jones Industrial Average fell 0.21% to 21,349.63 and the S&P 500 Index lost 0.61%, finishing at 2,423.41. West Texas Intermediate crude rose 7% to US$46 per barrel.

Rio Tinto’s shares jumped 8%, or US$3.14, to US$42.31. After considering revised bids from both Glencore and Yancoal for its wholly owned subsidiary Coal & Allied Industries, Rio confirmed that it preferred Yancoal as the buyer, given the “high level of completion certainty and an improved offer of $2.69 billion.” Yancoal’s offer consists of US$2.5 billion in cash payable in full on completion and US$240 million via unconditional guaranteed royalty payments, with US$200 million received before the end of 2018. The break fee was raised from US$100 million to US$225 million and the offer stipulates the receipt or waiver of all regulatory approvals. Rio reported that it cut its gross debt another US$2.5 billion. Since January 2016, Rio has lowered the nominal value of its outstanding bonds from US$21 billion to US$9.5 billion. The early redemption costs could lower its underlying earnings by US$180 million and cash flow from operating activities by US$260 million, but the company says the reductions “will be offset by savings in future periods.”

Shares of Eldorado Gold fell 9%, or US27¢ to US$2.64, after it revised production guidance for its Kisladag mine in Turkey. Eldorado reported that the low-grade, bulk-tonnage open-pit operation will produce 180,000 to 210,000 oz. gold in 2017 rather than its original guidance of 230,000 to 245,000 ounces. The company said gold solution grade and gold recovery from the leach pad has lagged expectations. The ounces that aren’t produced in 2017 are expected pushed into the first half of 2018.