Uncertainty punishes US markets, Nov. 26-Dec. 3

Comments by Federal Reserve chair Janet Yellen about a stronger U.S. economy and the risks of delaying an interest rate hike, combined with lower-than-expected stimulus from the European Central Bank, and a mass shooting in southern California that left 14 people dead, put pressure on U.S. equity markets. The Dow Jones Industrial Average fell 1.9% to 17,477.67, and the S&P 500 Index declined 1.9% to 2,049.62. Gold touched a five-year low of US$1,046 per oz. on Dec. 2, before recovering on Dec. 3 to close at US$1,061.60 per oz. on Dec. 3. The Philadelphia Gold & Silver Index gained 2.6% to 47.17.

An updated operating and financial outlook lifted Newmont Mining’s shares US82¢ to US$18.73. Newmont forecast that its gold all-in sustaining costs (AISC) would improve from US$900 to US$960 per oz. this year to US$850 to US$950 per oz. in 2017. The company expects AISC below US$1,000 per oz. through 2020, and production between 4.5 and 5 million oz. gold per year over the next five years. Newmont expects its copper AISC will average US$1.70 per lb. in 2016, with higher-grade ore at Batu Hijau. AISC could increase slightly to US$1.80 per lb. copper in 2017, and to US$2.60 per lb. in 2018. The cost increase owes to low production volumes at Batu Hijau as Phase 6 ore depletes, as well as mine sequencing at Boddington though 2018.

Shares of Rio Tinto were down US$1.87 to finish at US$31.80. On Nov. 27, the company approved its US$1.9-billion Amrun bauxite project. Amrun is 40 km south of Rio Tinto’s East Weipa and Andoom mines on the Cape York Peninsula in northern Queensland. The project involves building a bauxite mine with processing and port facilities, and planned initial output is 22.8 million tonnes a year. The material will replace production from the depleting East Weipa mine. The project’s design provides options for expansion to 50 million tonnes a year, with most capital expenses scheduled for 2017 and 2018. Rio Tinto chief executive Sam Walsh described Amrun as “one of the highest-quality bauxite projects in the world.”

In other news, Rio Tinto unveiled a 187.7-carat, gem-quality rough diamond — one of the largest in Canada — from the Diavik diamond mine in the Northwest Territories. Rio Tinto owns a 60% stake in the mine.