TSX drops on fiscal cliff concerns

Canada’s main index fell during the Nov. 5-9 trading week as investors fretted over the U.S. economy toppling over the “fiscal cliff” as several laws, such as the Bush tax cuts, are set to expire at year end, after which a drop in government spending and tax hikes are slated to kick in at the start of 2013. This could potentially drive the U.S. economy back into a recession, unless U.S. lawmakers reach an agreement on how to avoid the fiscal cliff. 

The S&P/TSX Composite Index lost nearly 183.61 points to end at 12,380.41. While the spot price of gold gained US$53.90 per oz. to finish at US$1,738.80, pushing up gold miners. The S&P/TSX Global Gold Index rose 9.57 points to 334.13. However, the diversified miner didn’t do too well, as the S&P/TSX Capped Diversified Metals dropped l8.24 points to 953.95.

Entrée Gold was one of the week’s top percentage gainers, advancing 39.5% to 60¢, after announcing that Turquoise Hill finalized a power purchase agreement with Inner Mongolia Power Corp. to supply power to the Oyu Tolgoi mining complex.

Entrée is a joint venture partner with a carried interest on part of the Oyu Tolgoi mining complex, specifically the Hugo North Extension deposit and the larger Heruga deposit. The junior expects first development production on its jointly held property as early as 2015.

Gold miner Centamin jumped 24.4% to end at $1.12 after it shares took a blow in the previous week when it announced on Oct. 30 that its 18-year-old concession agreement to extract gold from the Sukari mine in Egypt was annulled.

A day later, it clarified only a part of the agreement was deemed invalid, and on Nov. 5 updated the market, saying the administrative court indicated its exploitation lease was invalid because it didn’t have a copy of the agreement Centamin and Egypt’s Mineral Resources Authority had reached, something the company believes could be resolved during the appeal process, as it has the original lease documentation in hand.

Uranium One was the most actively traded stock after posting its third-quarter results. It reported a headline loss of US$61 million or US6¢ a share, or an adjusted profit of US1¢ a share, missing analyst consensus of US3¢ a share.

The loss included a US$79-million impairment charge at the Zarachnoye South exploration property, near the Zarachnoye mine in Kazakhstan. The miner said it was uneconomic to mine the property at current uranium prices. 

During the quarter, the company reported revenue of US$142.6 million on sales of 2.9 million lbs. of U₃O₈, at an average price of US$49 per lb. Year-to-date, it has sold 6.6 million lbs. and has reiterated its full-year sales guidance of 11 million lbs.

Attributable production for the quarter was 3.1 million lbs.

Uranium One closed the week up 6¢ to $2.05 on 23.2 million shares traded.