U.S. markets make up for previous losses, April 14-17

U.S. markets bounced back over the holiday shortened period after two straight periods of giving up ground. A modest surprise to the upside in China’s growth domestic product drove gains for the Dow Jones Industrial Average, which was up 380 points to 16,408.54 points. The S&P 500 Index spiked 46 points to 1,864.85 points and the Nasdaq gave back 57 points to land at 4,095.52 points.

The big news in the mining sector wasn’t really news at all — just rumours. But the whiff of a possible merger between gold giants Barrick Gold and Newmont Mining made the companies some of the sector’s most actively traded stocks. Barrick shares came in at 27.9 million, with its stock off 35¢ to US$17.98; and Newmont shares were off 12¢ to US$23.54, on 17.3 million shares traded. While the deal was expected as early as April 22, talks between the world’s number-one and number-two gold producers were said to have broken down over which assets would be put into a spin-off company. Lower gold prices have forced miners to consider consolidation as a way to unlock synergies and drive down costs. The miners have neighbouring operations in Nevada, and operations in proximity in both Peru and Australia. Newmont has generated close to US$600 million from selling assets since mid-2013, while Barrick has done more than US$1 billion in divestitures. Combined, the two companies’ market cap would top US$30 billion.

Fellow gold miners Yamana Gold and Agnico Eagle Mines went further down the mergers and acquisitions road as they reached an agreement to buy Osisko Mining for US$3.5 billion, beating out a previous hostile offer from Goldcorp.

Rumours were also behind Mechel’s strong market performance. Word that China could help finance the steel and coal producer’s Elga coal project in Russia had Mechel’s stock climbing 11% to US$1.99 for the period. Mechel has US$9.4 billion in debt but is seeking to develop Elga, which has one of the biggest coking coal reserves in the world, but could cost $2 billion to $4 billion to build. The deal will likely see China supply equipment in exchange for coal.

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