TSX down as dark clouds form

Investors took a dismal view of the global economy and their mood took a toll on Canadian markets as the TSX Composite index fell 169 points to finish the holiday shortened Oct. 9-12 period at 12,202 points.

Investor’s turned sour after Alcoa (a bellwether of the global economy) reported disappointed earnings and issued a weaker outlook on global aluminum demand and Standard & Poor’s downgraded Spain’s sovereign credit rating two notches to just above junk status because of a deepening economic recession.

Gold failed to rally against the grim economic outlook as the price for the metal fell US$37 to US$1,739.00 per oz. That drop pulled the Global Gold Index down 11 points to 335 points. The diversified miners slumped as well with the Capped Metals and Mining Index falling 8 points to 906.02 points as the price for copper fell 4¢ to US$3.69 per lb.

AuRico Gold was one of the few good stories amongst gold miners for the period. The company’s shares went up 21% per cent after it announced the sale of its Ocampo mine in Mexico for $750-million. AuRico told the market that after paying off $300 million in debt the bulk of the funds will go back to investors in the form of a one time payment. The move highlights investors growing appetite for yield and companies increased willingness to provide it. Buying up Ocampo is Mexican billionaire Carlos Slim, who is making the acquisition through his Minera Frisco.

Shares of Keegan Resources were up 15% to $3.64 on the back of a new resource estimate for its Esaase gold project in Ghana. Keegan also announced it will cut costs at the mine by using a more selective approach that targets lower mining rates and higher grade. The scaled down development plan should lower capex down to US$260 million with a drop in cash operating costs as well. Global resources fell under the new calculation by 2% but the average grade jumped by 55%. Measured and indicated resources now stand at 68.92 million tonnes grading 1.73 grams gold per tonne for 3.83 million oz. of gold and inferred resources add 22.23 million tonnes grading 1.75 grams gold for 1.25 million oz. contained gold.

A strategic partnership for St. Augustine Gold and Copper had the company’s shares up 40% to 41¢ for the period. Its new partner will be Philippines-based Queensberry Mining and Development, which will take a 24% interest in the company through option agreements and a private placement.

Ram Power saw its shares run 23% higher to 25¢ after it said the Nicaraguan Government approved a power sales tariff increase for the company’s San Jacinto-Tizate geothermal power project. The tariff increase is 17% and goes into affect as of October 1 with an annual increase of 3% through and including 2022. The increase will let the company recover unanticipated project costs associated with both the development of the resource and plant construction.