TSX hit by low commodity prices, Nov. 6-12

Canada’s benchmark index posted a triple-digit loss on the back of lower crude and metal prices. The S&P/TSX Composite Index fell 3%, or 431.6 points to 13,127.18 — its lowest level in over six weeks. The S&P/TSX Capped Diversified Metals & Mining Index tumbled 13.5% to 363.96, and the S&P/TSX Global Mining Index dropped 7.6% to 45.01. The S&P/TSX Global Gold Index declined 2% to 123.13. The New York spot gold price lost US$18.60 per oz. to finish at US$1,085. The yellow metal is down US$104 per oz., or 8.7% year-to-date. Brent crude fell 8% to finish below US$45 a barrel for the first time since August, as U.S. stockpiles grow.

First Quantum Minerals was the most traded stock, after posting a net loss of US$427 million, or US62¢ per share, driven by impairment charges due to the changes in Zambia’s taxation regime. Adjusted earnings were US10¢ per share, beating analysts’ expectations of US4¢ per share, but below the earlier year’s US$22 per share. Revenue from sales dropped 24% year-over-year to US$673 million, on the back of lower commodity prices.

First Quantum has lowered its full-year copper and gold production guidance while narrowing its nickel output forecast. Its shares fell $1.87 to $5.26, on 21.8 million shares traded.

Bannerman Resources’ shares gained 17% to finish at 4¢, after an optimization study on the firm’s Etango uranium project in Namibia. The study encompassed updated reserves and boosted the project’s net present value from US$69 million to US$419 million, and after-tax internal rate of return to 15%, from 9%. Projected life-of-mine production climbed 9% to 113 million lb. uranium oxide, over a slightly longer mine life of 15.7 years. Estimated annual production during the first five years has increased from 7.9 to 9.2 million lb., with anticipated cash costs dropping 20% to US$33 per lb. U₃O₈. Start-up costs are pencilled in at US$793 million, down from US$870 million.

The study used a rosy long-term uranium price of US$75 per lb. Despite the improvements, Etango “remains cash-flow neutral at US$52 per lb. U₃O₈, and uneconomic at current spot prices of US$36 per lb. As such, a recovery in uranium price is required for a development decision to be made,” BMO analyst Edward Sterck notes.

Thompson Creek Metals plunged 31% to 42¢ per share after reporting weak third-quarter results. Adjusted net loss was US$5 million, or US2¢ per share, up from the previous quarter’s loss of US6¢ per share, but below the previous year’s earnings of US17¢ per share. Revenues fell 38% year-over-year to US$141.7 million, driven by lower copper prices and lower molybdenum sales, after the suspension of the Thompson Creek and Endako mines. Thompson operates the Mt. Milligan copper-gold mine in B.C., where it has narrowed its annual copper-in-concentrate production target to between 70 and 80 million lb. It has also lowered its 2015 cash-cost guidance to US55¢ to US75¢ per lb. copper, after by-product credits.