TSX drops as gold declines, April 8-12

It was a bumpy ride for the resource-heavy TSX during the April 8–12 trading week as the price of gold tumbled.

The S&P/TSX Composite Index edged down 6 points to 12,337.59, after erasing the gains it made earlier during the week. The spot price of gold dropped US$105.30 per oz. to US$1,477. During presstime gold continued its recent decline, trading at US$1,366 per oz.

During the week the S&P/TSX Global Gold Index dropped 22 points to 213.95, while the S&P/TSX Capped Diversified Metals & Mining Index shed 17 points to 833.81.

Barrick Gold was the week’s most actively traded stock as it took another blow at its large Pascua-Lama gold-silver project, which straddles the Chilean and Argentine border in the Andes. A Chilean court ordered the miner to stop construction due to complaints over alleged environmental damage. While construction activities in Argentina continue, this announcement could further derail the off-track, over budget US$8–8.5 billion project. The major lost $4.19 to close at $22.94 on 32 million shares traded.

Also impacted by Pascua-Lama’s new roadblock was Silver Wheaton, sliding $2.74 to $26.82 per share. The company entered a silver purchase agreement with Barrick in 2009 providing US$625 million in cash for the right to buy 25% of the project’s total silver output, as well as 100% of the silver mined from three other Barrick mines until the end of 2013. But Silver Wheaton could potentially terminate the contract, impacting its growth, if Pascua-Lama is not 75% complete by the end of 2015.

Delrand Resources, an African-focused diamond and iron ore explorer, led the week’s percentage gains, surging 211% to 14¢. The Toronto-based junior has proposed to raise $270,000 by offering 6 million units for 4.5¢ apiece. Each unit consists of one share and one warrant, with the proceeds slated for general corporate purposes. The company is in the midst of a TSX delisting review similar to First Nickel, which jumped 40% to 4¢ after restructuring its debt.

The Toronto-based nickel miner said the refinancing includes increasing its credit facility with the Bank of Nova Scotia to US$15 million from US$10 million and extending the maturity dates for several of its loans. Normally the refinancing would have required shareholder approval, but since the company didn’t have the time to conduct this vote it applied for an exemption, triggering a de-listing review by the TSX.

Perth-based Elemental Minerals gained nearly 70% after receiving an “incomplete and conditional” acquisition proposal from Hong Kong-listed Dingyi Group Investment, which if formalized could result in the company being taken over for A$0.66 per share, representing a 126% premium to its 20-day volume weighted average price. Elemental, which owns the Sintoukola potash project in the Republic of Congo, closed the week at 48¢.