Canadian markets performed over the past week

It was all about earnings, as the big gold guys and the big uranium kid on the block all reported financial results for the fourth quarter of 2010. And, once all the trading was done, the TSX Ventures Exchange, home to more junior exploration companies than anywhere else in the world, had added 2.8 per cent, while the TSX Gold Index had rallied 4.8 per cent.

Let’s start off with the big guns.

Righto. Barrick Gold’s fourth quarter earnings soared to a record US$896 million, or US$0.90 per share, well up on the US$215 million, or US$0.21 per share, reported for the same period in 2009. For 2010, the world’s largest gold miner posted a profit of US$3.27 billion, or US$3.28 per share, compared with a loss of US$4.27 billion, or US$4.73 per share, in 2009, the year in which it wrote down its monstrous hedge book. Despite the nice financial numbers, gold production actually dropped in the fourth quarter to 1.7 million ounces of gold, and copper production was also slightly lower, at 82 million pounds. Barrick ended the week up C$4.00 at C$50.82.

Kinross Gold did not fare as well on the earnings front. Kinross’s fourth quarter profit fell to US$210.3 million, or US$0.18 per share, compared to a profit of US$235.6 million, or US$0.34 per share, in the corresponding period of 2009. The fall is due to higher production costs. In the quarter, Kinross produced 676,635 ounces at total cash costs of US$551 per ounce. For 2011, the company expects production to come in at between 2.5 million and 2.6 million ounces, but also expects costs to increase to US$565 to US$610 per ounce. Kinross ended the week up C$0.05 at C$16.25.

It wasn’t all one-way traffic, though. Shares of Agnico-Eagle Mines were sold off after the company also reported fourth quarter results. Agnico earned US$88 million or US$0.53 per share in the fourth quarter, compared to US$47.9 million, or US$0.31 per share, in the same period of 2009. During the quarter, Agnico produced 256,500 ounces of gold at net cash costs of US$462 per ounce. But investors were concerned about lower production at the company’s Meadowbank and Kittila projects, which has been put down to lower throughput and lower grades. There’s also been lower production at LaRonde because of lower grades. For 2010, the company posted a profit of US$332.1 million, or US$2.05 per share. The company’s payable gold production in 2010 was a record of 987,609 ounces at total cash costs per ounce of US$451. Even so, Agnico ended the week down C$0.79 at C$70.26.

Switching to the red-hot silver market, Pan American Silver earned US$46.4 million, or US$0.43 per share, in the fourth quarter, compared to US$27.8 million, or US$0.31 per share, in the same period a year earlier. Pan American closed at C$37.17 for a C$3.54 gain.

Elsewhere, Cameco, the world's largest supplier of uranium, tabled a fourth quarter profit of US$207 million, or US$0.52 per share, on production of 6.4 million pounds of uranium. For the whole of 2010, Cameco earned US$515 million or US$1.30 per share. In 2011, Cameco expects production to tally 21.9 million pounds of U308. Cameco ended the week down C$0.21 at C$41.34.

With all that money being made, one has to wonder what these majors are going to do with all the cash?

Well, one obvious solution would be for a massive increase in their dividend payouts, but more than likely they will actually go on an acquisition binge.

Which should be good news for the junior market.

Yep, because even these gigantic companies have to face off against some very wealthy individuals in any bid to buy quality assets. A case in point is the battle that’s currently being fought for control of Ventana Gold, which is now, finally, nearing an end. The company has accepted a sweetened bid of C$13.06 per share from AUX Canada Acquisition, which is controlled by Brazil's Eike Batista. The all-cash offer is a modest jump from the US$12.63 per share offer tabled in November. Ventana is focused on the development of its La Bodega gold-silver project in Colombia. Its shares ended the week at C$12.99, for a C$0.71 gain.

Any interesting exploration news?

Making waves with the drillbit was Rockgate Capital, which added C$0.25 to close at C$3.31 after it announced results from its Falea project in Mali. Highlights included 0.22% U308, 1,482.7 grams silver per tonne and 0.4% copper over three metres.

And Euromax Resources cut 336.5 metres running 0.30% copper and 0.37 grams gold per tonne gold at its Ilovitza project in Macedonia. However, the company closed down a penny, at C$0.33.

And in development news, Fire River Gold came out with a preliminary economic assessment for its Nixon Fork mine in Alaska. This envisages an initial two year operation producing 150 tonnes per day, with an average mined grade of 30.1 grams gold per tonne. Capital costs ring in at a fairly modest US$6.3 million. Fire River ended the week unchanged at C$0.54.

We’ll be hearing more from Fire River Gold on Minesite within the next week or so.

Yes, it’s an interesting one. The man at the helm, Harry Barr, also has other companies in his stable, including Pacific Northwest, which is beginning to look interesting.

In that case, we might have a look at that one, too, before too long. And to round off, what’s your view of the macro scene?

Well, China is trying to rein in accelerating inflation by raising its bank reserve ratio by 50 basis points, the fifth such increase since October. This brings up the issue of global imbalances and how the financial markets will respond over the next few years. Emerging market economies continue to accelerate, but developed nations are struggling with near double-digit unemployment. Commodities are at the pivotal point of these imbalances, because a slowdown on the emerging side could cause a monster sell-off, but alternatively a pick-up in developed nations means prices move higher. This week, Canada’s junior bourse closed at new two and a half year highs, so it’s clear which way investors think the global economy will go. We will see what next week has in store.

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