Canadian mining market behavior

It was another ugly week for the bulls as increased concerns that some nations will default on their debt had investors heading straight towards the perceived safety of the US dollar. That in turn put pressure on commodity prices, which were weaker across the board. Interestingly, the broad basket of gold producers actually gained ground even as bullion prices touched three month lows. Perhaps this is setting the stage for an imminent rally for the gold guys. Once all the trading was done the TSX Ventures Exchange, home to more junior exploration companies than anywhere else in the world, had dropped another 2.41 per cent, while the TSX Gold Index went the other way, having posted a 4.96 per cent gain.

First Uranium was dealt a blow by the South African government's unexpected decision to revoke the environmental permits needed for its Mine Waste Solutions tailings recovery project. Without the permits the company has been forced to discontinue development and now is going into cash preservation mode.

Gold Wheaton has also been impacted by this news.

Yep, the gold royalty upstart paid US$125 million in exchange for the gold purchasing rights from First Uranium’s mines. First Uranium’s inability to deliver the gold could trigger a US$42 million payment to Gold Wheaton, but the question is: will First Uranium have the money to pay?

Meanwhile I see Gold Wheaton consolidated its shares on a 10-old-for-one-new basis and has moved over the TSX from the TSXV.

The idea behind Gold Wheaton was to emulate the very successful strategy of Silver Wheaton. So far the idea has not really delivered on its promise, but a big board listing doesn’t hurt. In the meantime, First Uranium is seeking strategic alternatives and will restructure its operations. Gold Wheaton ended the week down C$0.67 on a share split adjusted basis at C$2.35, while First Uranium fell C$0.48 to close at C$1.44.

Elsewhere, the long running take over saga of Khan Resources may finally be coming to a conclusion. After a number of false starts and stops, Chinese run CNNC Overseas Uranium Holding has tabled a C$0.96 per share cash offer for Khan. That tops the C$0.65 per share offer currently on the table from state-owned Russian rival JSC Atomredmetzoloto. And investors obviously smell a potential bidding war because Khan ended the week up C$0.14 at C$1.00.

In exploration news, Apoquindo Minerals tagged 167 metres grading 0.89% copper and 0.18 grams per tonne gold at its Zafranal property in southern Peru. The junior is earning a 51 per cent interest in the ground from Teck Resources. Apoquindo ended the week down C$0.03 at C$0.82, while Teck closed at C$34.20 for a C$0.81 loss.

Also in Peru, International Minerals boosted the resource at its 51 per cent-held Inmaculada gold-silver project. The indicated resources now tallies 1.2 million tonnes grading 3.9 grams gold per tonne and 122 grams silver per tonne, while the inferred resource adds 4.7 million tonnes averaging 3.4 grams gold and 147 grams silver. London-listed Hochschild Mining holds the other 49 per cent stake in Inmaculada. The news was not good enough to keep the company in the black because International Minerals ended the week down C$0.10 at C$4.25.

Also doing well with the drill bit, Treasury Metals added C$0.08 to close at C$0.55 after reporting a drill intercept of 19.34 grams gold per tonne over 1.5 metres at its Goliath gold project in northwestern Ontario.

And Rubicon Minerals continues to hit the goodies at its Phoenix project in Red Lake, Ontario. The latest results included 14.3 metres of 20.7 grams gold per tonne. Rubicon ended the week up C$0.50 at C$4.76.

Meanwhile, American Bonanza Gold tabled a feasibility study for its small Copperstone gold mine in Arizona. The study showed that some 45,891 ounces of gold could be produced over the first three years at cash production costs of US$415 per ounce. Capital costs ring in at US$17.74 million and the after tax net present value amounts to just over US$51 million. American Bonanza ended the week up C$0.005 at C$0.18.

On the legal front, various legal claims involving Coalcorp were settled this week, and Coalcorp ended the week up C$0.04 at C$0.20.

In fundraising news, Nevsun Resources is looking to pocket some C$117 million after announcing a non-brokered private placement financing involving the issue of 52 million shares priced at C$2.25 per share. The funds are earmarked for the development of the company’s Bisha gold-rich massive sulphide deposit in Eritrea. Nevsun ended the week up C$0.25 at C$2.30.

And sticking to the financing theme, Gleichen Resources is looking to raise a cool C$50 million for its Morelos gold deposit in Mexico. The price per share is set at C$1.00. Gleichen ended the week down C$0.13 at C$0.96.

Finally, over to the copper side of things where Equinox Minerals announced that it had secured bank financing to the tune of C$400 million. The money will be used to repay some of the company’s existing debts, incurred to fund the development of its Lumwana mine in Zambia. Equinox ended the week down C$0.08 at C$3.39.

Canadian stocks continued to fall as investors unloaded a portion of their metals and mining exposure in the wake of falling commodity prices. Bullion had its worst week since 2008 but the gold bugs remained firm in the view that the US dollar will eventually crumble. For the junior bourse, the first trading week of February resulted in the fourth consecutive weekly loss. So far in 2010, we have only had one winning week. On the bright side, buyers did enter the market late during Friday’s session so perhaps the selling tide is started to reverse. We will see what next week’s trading has in store.

source: minesite

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