TSX gains momentum, Feb. 9-13

The Toronto stock market gained on the back of positive economic growth in Europe and better-than-expected data from Canadian manufacturers. 

The benchmark S&P/TSX Composite Index rose 181 points, or 1.2%, to finish the week at 15,264.81, its highest close in nearly five months. The S&P/TSX Capped Diversified Metals & Mining Index advanced 26 points to 689.66. The S&P/TSX Global Gold Index slipped 2 points to 180.32, as the spot gold price fell US$5.40 to US$1,227.90 per oz. 

Canadian manufacturing sales jumped 1.7% in December, after declining in both November and October. This helped push the Canadian dollar to US80.25¢, up almost half a cent from the previous week. 

Rare earth juniors topped the percentage gainers’ list, on the back of an improved outlook and higher prices for some rare earth metals, such as terbium and dysprosium. Rare Element Resources shares surged 75% to $1; Quest Rare Minerals climbed 65% to 19¢ per share; Avalon Rare Metals advanced 44% to 35¢ a share; and Frontier Rare Earths moved up 33% to 20¢. 

Rare Element was the only one out of the batch to release company-related news. In a Feb. 11 release, it summarized its 2014 achievements and outlined its activities for 2015. One of Rare Element’s achievements included a preliminary feasibility study on the Bear Lodge rare earth elements project in Wyoming. The study estimates start-up costs of US$290 million to build a 38-year mine, with annual production of 6,800 tonnes of total rare earth oxide concentrate. The project has a 29% post-tax internal rate of return and a US$330-million post-tax net present value at a 10% discount rate, with a three-year payback. 

This year the junior plans to complete the draft and final environmental impact statement for Bear Lodge, confirm the separation test work completed to date on a larger scale, and look for potential off-take partners, among other activities.

Rio Alto Mining was the most traded stock. It finished the week up 52¢ at $3.80, with 28 million shares traded. On Feb. 9, Tahoe Resources announced a friendly bid for Rio Alto to create a larger precious metals firm. Tahoe operates the Escobal silver mine in Guatemala, while Rio Alto owns the producing La Arena gold mine and the Shahuindo gold project, both in Peru, where production should start in 2016.  

Under the arrangement, Rio Alto shareholders will receive 0.227 of a Tahoe share and $0.001 in cash for each share held, implying a value of $4 per Rio Alto share, or a 22% premium. The transaction should close in early April. 

B2Gold dropped 12¢ to $2.13 on 20.9 million shares traded. The major reported that two security guards were fatally shot at its Masbate gold mine in the Philippines. The Philippine National Police are investigating the incident.