TSX slides as investor faith in commodities is rattled

Investor frustration over the slow pace of the global economic recovery was seen as the culprit in the TSX Composite Index decline of 143 points to 12,392.18 points for the March 26-30 period.

Resource stocks and commodities were particularly hard hit and that lack of faith in materials led to the selling of the Canadian dollar, which lost 0.2 of a cent to finish at US$1.01. A tighter federal budget led to the demise of the penny, which cost more to make than it was worth, while other key factors such as the European debt crisis and higher than expected U.S. jobless claims shared the blame for markets downward trends.

Despite the bad news on the global economic front, gold continued to hold value as the metal was up US$7 to US$1,669.30 per oz. That increase, however, didn’t transfer over the miners as the Global Gold Index dropped 6 points to 336.40 points

The diversified miners faired no better as the Capped Metals & Mining Index dropped 31 points to 1,044.20 points. Selling in the base metals sector came on a mixed bag of metal prices as copper prices were flat, aluminum and nickel prices were down and lead, zinc and tin prices were slightly higher.

Lower nickel prices were the least of Mirabela Nickel’s problems. The Australian-based miner was the period’s biggest loser by percentage points, as its shares came off 34% to 58¢ after Standard & Poor’s lowered its credit rating to CCC+ from B-. The downgrade was based on a three-month delay in a processing facility upgrade at its Santa Rita mine in Brazil and higher production cash costs. The rating agency said those factors, when combined with possible lower nickel prices, could lead to lower liquidity.

On the other end of the spectrum, strong test results from Energizer Resources’ Green Giant Project in Madagascar lifted the company’s share price by 68% to 42¢. The one time vanadium project is now being explored for its graphite potential, and initial results from the project’s Fotsy and Molo zones yielded flake sizes of over 50 mesh and graphite concentrates at purities of over 90%.

Silver producer Scorpio Mining announced a net loss of $1 million in the fourth quarter of last year and its stock fell 23% to finishing the period at $1.30. The Vancouver-based company reported that net earnings were down 59% largely because sales for the quarter were off 12% to $13.8-million. That dip came because of metallurgical variances in the concentrate Scorpio produces and a drop in copper production to the tune of 17%.

Fortuna Silver Mines was also punished for poor financial results. The company’s shares were off 27% to $4.50 after announcing that cost escalations meant it missed its guidance for last year. The company said the higher costs would persist through 2012 and were caused by abnormally high taxes, metal sales that were less than production, a pricing adjustment, and higher-than-expected smelter charges. All of those factors added up to a loss of US$1.8 million for the fourth quarter.