Market News

Toronto Stock Exchange

Volatility reigned supreme and investors rattled by troubles south of the border and across the Atlantic sent the S&P/TSX Composite Index down 332 points to 11,871.23 points for the period. 

A disappointing payroll report put the slow growth theme on the front burner for Canada’s largest trading partner, and across the ocean the news wasn’t much better. 

Toronto stocks followed the global trend downwards as investors worried over how well the sovereign debt crisis would be handled, with two new governments coming to power in France and Greece. 

The election results were read as a sign that the countries’ populations wouldn’t tolerate the path of austerity favoured by Germany. 

The bleaker global picture did little to help gold, and the metal fell US$18 to US$1,645.20 per oz. The loss in value hit gold miners, and the S&P/TSX Global Gold Index was off 11 points to 299.43. 

Base-metal miners also suffered a price drop in copper, aluminum, nickel, tin, lead and zinc, and the S&P/TSX Capped Metals & Mining Index fell 74 points to 982.08 points. 

But the news wasn’t all bad for miners, and Allana Potash made a 35% gain to 69¢ after the latest resource estimate from its Dallol potash project in Ethiopia. The company announced an updated resource estimate that puts measured and indicated resources at 1.3 million tonnes, with an average grade of 19.32% potassium chloride (KCI) for 250 million tonnes of contained KCI. The project now boasts inferred resources of 588.15 million tonnes grading 18.56% KCI.

Scorpio Mining improved its results from last quarter, which had investors in a buying mood. The company’s shares gained 19% to finish at $1.07 after the silver miner announced a 13% increase in revenues to $15.6 million over the previous quarter. The increase came from better grades and higher metal prices. The results also showed low cash costs of $7.78 per oz., which beat the previous quarter’s US$10.81 per oz.

On the downside, Gabriel Resources -—which is trying to build its large-scale Rosia Montana gold mine in Romania — lost 32% of its market capitalization as its share price sunk to $1.82. The slump came as a centre-left cabinet geared up to take office in the country. The new cabinet said it plans to reassess the project so that “decisions are in-line with the national interest, environment protection regulations and European legislation.” 

Prime minister-designate Victor Ponta has already threatened to block the project once he comes to power. Onlookers believe the project’s status won’t be truly known until after November’s general elections.

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TSX Venture Exchange

The S&P/TSX Venture Composite Index slipped back to negative territory in the period, ending down 7.71 points at 1,405.05 after three days of losses outweighed two days of gains. Volume was down to an average of 77.3 million shares daily after spiking to 102 million the week before following Iamgold’s proposed takeover of Trelawney Mining and Exploration.

Trelawney was again the most active company with 23.1 million shares traded. There looks to be little speculation of a rival bid, with Trelawney’s share price holding steady at just under the $3.30 bid price, closing up a penny at $3.29. Further committing Trelawney to the deal is a non-solicitation clause, the right to match covenants and a $21-million break fee. Analysts reacted somewhat negatively to the deal, citing the low-grade and early stage nature of the deposit, and potential cost overruns and permitting risks.

Amex and Venture-listed Gold Reserve climbed 41¢ to $4.55 for the period’s second-highest value gains after entering into an option agreement with Soltoro. Gold Reserve signed on to earn 51% of the 115.6-sq.-km La Tortuga property in Mexico’s Jalisco state by paying US$650,000 cash and US$3-million in exploration spending. Venezuela expropriated Gold Reserve’s main Brisas property in 2009, leading to the company’s  downgrade from the TSX to the Venture last year, and in search of a new project. The company’s Amex listing also came close to being revoked, but the exchange gave the company until the end of 2012 to become compliant. Soltoro ended down 6¢ at 52¢.

Bolero Resources was also up after announcing an option agreement and climbing 7¢, or 70%, to 17¢ with 4.8 million shares traded, after securing a graphite property in northern Ontario. The 50-sq.-km graphite prospect fully surrounds Northern Graphite’s 30-sq.-km Bissett Creek  property, which helped propel Northern’s shares from 90¢ in mid-January to an early April peak of $3.72. Bolero can earn in 100% of the property by paying $100,000 and issuing a million shares to GeoInvest Enterprises. Bolero did not specify what makes the property prospective to graphite in its announcement, other than its proximity to Bissett.  

Penny-stock New Guinea Gold saw 7.9 million shares traded to become the second-most active stock on the Venture after announcing a management cease-trade order and updating its potential acquisition by PNG Gold. Believing the takeover would have been complete by now, management has not prepared the necessary financials for the exchange. PNG Gold had offered to issue 0.125 of a PNG share for each New Guinea share held. New Guinea closed unchanged at 2¢ while PNG closed down a penny at 18¢.

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U.S. Markets

It was one of the worst weeks on Wall Street this year. Ahead of key elections in Europe that threatened to derail advocates of tough austerity measures in France and Greece, U.S. payroll data showed hiring in the U.S. slowed for a third-straight month, dimming hopes that the economy was turning the corner. The S&P 500 Index fell 2.44%, or 34.26 points, to 1,369.10 in its poorest performance this year. The Nasdaq Composite Index fell 3.77%, or 112.86 points, to close at 2,956.34 in its sharpest weekly decline since November, while the Dow Jones Industrial Average slid 1.44%, or 190.04 points, to 13,038.27. The Philadelphia Gold and Silver Index was off 5.46%, or 9.05 points, at 156.76. 

Unusually mild winter weather and decade-low natural gas prices contributed to the fall in the fortunes of coal miners Arch Coal and Alpha Natural Resources. Shares of Arch Coal — the most actively traded stock of the week — dropped US$1.38 to US$8.08 per share after releasing disappointing first-quarter results. Net income in the first quarter reached US$1.2 million, or $0.01 per diluted share, compared with net income of US$55.6 million, or $0.34 per diluted share in the first quarter of 2011. Alpha Natural Resources fell US$1.42 to close the week at US$14.45 per share after reporting a first-quarter net loss of US$29.1 million, or US$0.13 per diluted share, compared to net income of US$49.8 million, or US$0.41 per diluted share last year.  

Compass Minerals posted the largest gain of the week, climbing US$1.22 to close at US$76.68 per share on no news. In late April Compass reported net earnings of US$39.9 million, or US$1.19 per diluted share, compared with US$56.5 million, or US$1.69 per diluted share in the first quarter of 2011. The results included losses caused by a tornado that struck the company’s salt operations in Ontario last August. Excluding the effects of the tornado, the company estimated that first-quarter net earnings would have been US$49.5 million, or US$1.48 per diluted share. The mild winter curtailed de-icing demand and limited the company’s salt sales to US$254.3 million, down from US$332.4 million in the 2011 quarter.

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