Canadian economy looks good but TSX falls

The market continued to dash the hopes of bulls as the TSX Composite Index fell 293 points for the May 30 to June 3 despite some positive developments in the Great White North’s economy.

First came word that first quarter GDP growth was better than expected, and then came the decision by the Bank of Canada to not raise rates. While both factors should have been a boon to equities the party up north was spoiled by weaker economic data from the U.S.

The downward trajectory of the overall Index was mirrored by the gold sector as the Global Gold Index was down 8 points to 381.51 even though the price for gold rose US$2 to finish at $1,542 per oz.

The diversified miners showed a more positive correlation with the metals they supply, albeit in a direction they would prefer not to be heading in. The Capped Metals & Mining Index fell 44 points to finish at 1,386.50 as a basket of metals including copper, nickel, aluminum, tin, lead and zinc all fell in price.

A budgeting shortfall hit the shares of Noventa hard. The tantalum producer says it will need to raise $25 million to bring its Marropino project up to its targeted capacity. The mine is projected to produce 600,000 lbs of tantalum by the end of the year but is now facing delays due to a funding gap. The company had already announced just days earlier that mechanical difficulties had cut into targeted production rates for the year. Noventa lost 66% of its market cap over the period as its shares finished up trading for just 92¢. Those same shares had been trading well north of $3.00 just a few months ago.

The announcement of a deal with an Indian-listed company to help develop a project in India did little to help Minemakers shares. The company’s stock price fell 22% to 50¢ for the period. Minemakers announced it had signed a memorandum of understanding with NMDC Limited that will clear the way for the development of its Wonarah phosphate deposit in the Northern Territory of India. While the specific terms of the joint venture will be negotiated as feasibility unfolds the company did say the deal lets NMDC acquire a 50% stake in the project and that NMDC will arrange project financing for the full development costs by way of debt finance.

And some good news finally came Canada Lithium’s way, as the company announced it had received a construction permit for the development of its Quebec Lithium project. While it still needs several more permits, the market still took a favourable view on the news as its shares climb 15% to 71¢. The permit is for the construction of surface service infrastructure and the upward movement in its stock price reversed the company’s recent market slide. That slide came on the back of an updated resource estimate that showed the project has considerably less resources than originally reported. Canada lithium’s own internal review revealed problems with the original resource estimate which was released in late October of last year.