Venture hits new lows in May 14-18 period

VANCOUVER — The tough markets took on a whole new level of decline in the May 14 to 18 period. The S&P TSX Venture Composite Index dropped no less than 118.45 points or 8.8% to end at 1227.88 points, its lowest level since October 2009. Volume was actually up to an average of 90 million shares traded daily, but the high volume was more caused by particularly damaging news rather than any optimism.

Leading the volume boost was Canaco Resources with about 41 million shares traded after the company announced its much anticipated Handeni resource estimate. With about 721,000 indicated oz. gold at 1.48 grams gold per tonne, plus 292,000 inferred oz. at 1.36 grams gold, the resource fell far short of analyst and investor expectations. The company’s stock price plunged 58¢ to 30¢ on the news, having already fallen from a high of $6.45 in early 2011. Analysts had been looking for somewhere in the 3 million oz. range for the Tanzania-based project.

With about half the volume but even worse share price losses, Hana Mining fared no better than Canaco. The company released a scoping study on its Ghanzi copper project in Botswana that showed higher operating costs and a lower net present value than expected, despite factoring in fairly bullish copper and silver prices. Using US$3.40 per lb. copper and US$30 per oz. silver, the project showed an NPV of US$262 million and an internal rate of return of 19.3%. Life-of-mine cash costs came in at US$1.82 per lb. copper, net of by-products. Hana’s share price dropped 89¢ or 69% to 41¢ on the news with 20 million shares traded.

Neither company, however, lost the most in the value category. That distinction went to Lumina Copper after its share price ended down $2.62 at $9.88, having dropped as much as $4.31 to $8.15 at one point. The company had no news, issuing a release to emphasize there were no updates and the drop was likely due to market conditions. In mid-April the company’s share price was hit after Argentina, where Lumina’s huge Taca Taca copper project is located, nationalized the oil company YPF. After an initial scare investors looked to have concluded the move was isolated, but nervousness about the country has by no means gone away.

As far as companies that actually ended up in the period, Chesapeake Gold managed to climb 99¢ over four days and end up 33¢ at $9.02 to be the highest value gainer. The gains, however, came after 10 days of straight losses that saw the company lose $4.97 of its share price. Like Lumina the company did not release any news. Chesapeake announced in early March that a pre-feasibility study on its Metates gold-silver project in Mexico would be delayed, but should be out early in the second quarter. The company has still not released the study.

Atac Resources had the second highest value gains, jumping 44¢ on one day of trading to end up 14¢ in the period at $2.38. The company announced it had started exploring its Rackla Carlin-style gold project in Yukon, with one drill turning on the Isis East zone and two more expected within the month. The two other drills will target the Conrad zone. The company is also conducting preliminary regional exploration.