Toronto Stock Exchange, May 13-17

The S&P/TSX Composite Index rode an up-and-down period and came out ahead, as it gained 41 points to 12,613.12, largely on sentiment that the U.S. economy is recovering.

The price of the yellow metal hit its longest losing streak in four years, after falling in value for the seventh-straight period. The drop came as word leaked that the Federal Reserve may soon rein in monetary easing. The price for gold was down US$63 to US$1,384.10 per oz., and the S&P/TSX Global Gold Index was down 18 points to 180.2. 

It wasn’t much better for diversified miners, with the S&P/TSX Capped Diversified Metals & Mining Index down 26 points to 840.51, and copper down 6¢ to US$3.32 per lb. 

But these losses paled in comparison to those suffered by Verde Potash. The company’s stock plummeted by 52% to $1.10 after it missed a performance guarantee for its yet-to-be built fertilizer facility. The company said engineers at FLSmidth wouldn’t give a performance guarantee on the planned 12,000 tonnes a day, and instead would only guarantee 3,000 tonnes. The company is trying to develop a process to convert potash-rich rock at its Cerrado Verde project in Brazil into a conventional fertilizer. The performance guarantee is a critical step towards securing the US$2.4 billion it needs to build the mine. The company will need to convince FLSmidth of the process’ merits by building a  demonstration plant, or find a different third party. The news coincides with the exit of two of Verde’s directors and its chief financial officer. 

 The period also saw Gabriel Resources update the market on progress at its Rosia Montana gold project in Romania in connection with its first-quarter results. The company says the new coalition government elected in the country bodes well for project development, and that it has met with its technical assessment committee for the first time since late 2011. The committee is responsible for assessing the project’s environmental impact and compliance. While this is a positive step, Gabriel said it couldn’t give guidance on the time it might take the committee to conclude its review. The company’s shares were up 11¢ to $1.62 for the period. 

Barrick Gold’s woes continued, as the company’s stock fell $2.04 to finish the period at $19.07. The latest dip coincided with a downgrade from Macquarie Capital’s analyst Tony Lesiak. The analyst cut Barrick to “underperform” from his previous “neutral” rating, citing a lack of real growth options considering its high debt levels. Lesiak also pointed to less-favourable terms between Barrick, Goldcorp and the Dominican Republic government in connection with the Pueblo Viejo mine as a reason for his bearishness. The new deal calls for another US$1.5 billion flowing into government coffers over the mine’s life.

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