Canadian markets performed over the past week

The corporate gurus were all busy this past week preparing for the Prospectors and Developers Association of Canada Convention Trade show in Toronto, due to start on Sunday. Ahead of the world’s biggest mining conference, Equinox Minerals dropped a bombshell by offering to buy Lundin Mining, and that’s sure to set them talking in amongst the booths and in the pubs outside. The context has also been set by a decent performance on the markets last week. Because, once all the trading was done, the TSX Ventures Exchange, home to more junior exploration companies than anywhere else in the world, had added 2.70 per cent, while the TSX Gold Index had rallied 1.45 per cent.

Speaking of bombshells, it looks like shareholders of Canada Lithium took a direct hit?

Canada Lithium recently closed a C$126.5 million bought deal financing at C$1.50 per share for the development of its lithium carbonate mine and processing plant near Val d'Or, Quebec. This week, though, the company announced that an independent review of the company's mineral resources will have to be undertaken, because the reported results do not seem to match up with a separately undertaken internal audit. The result is that a material reduction the resources used in last year’s 43-101 report might now be necessary. Back then, on October 28th, Canada Lithium reported measured and indicated mineral resources of 46 million tonnes grading 1.19% Li2O, plus an inferred mineral resource of 57 million tonnes grading 1.18% Li2O. Shares in Canada Lithium closed down C$0.34 at C$0.99.

Okay, bad week for Canada Lithium. How was it for shareholders in Lundin?

The first thing they needed to do was recover from their shock. Equinox’s hostile offer to acquire Lundin Mining for C$8.10 per Lundin share, or around C$4.8 billion in cash and stock, looks pretty brazen. Under the proposal, Lundin shareholders can elect to receive either C$8.10 in cash or 1.2903 Equinox shares plus $0.01 for each Lundin Share. The move trumps an earlier offer for Lundin by Inmet Mining. The combined Equinox-Lundin would contain five substantial producing operations by mid-2012. Equinox operates the Lumwana mine in Zambia and is currently constructing the Jabal Sayid project in Saudi Arabia. Lundin has a 24 per cent stake in the Tenke Fungurume mine in the Democratic Republic of the Congo, and also owns Neves-Corvo in Portugal and Zinkgruvan in Sweden.

I see that the cash component would be financed through a US$3.2 billion bridge facility. Are there any other bidders waiting in the wings?

Inmet could raise its bid, but the only other entity rumoured to be potentially interested is Freeport McMoRan. We will see. Equinox ended the week down C$0.51 at C$5.76, while Lundin added C$1.45 to close at C$7.90.

This one may run on.

Yep. Elsewhere, it was a good week for shareholders of Richfield Ventures. The company announced an initial resource estimate for its Blackwater gold project in British Columbia, and the result did not disappoint. Using a cut-off grade of 0.4 grams gold per tonne, the indicated resource tallies 53.46 million tonnes grading 1.06 grams gold per tonne for a total of 1.83 million ounces. An inferred resource of 75.45 million tonnes grading 0.96 grams gold per tonne adds another 2.34 million ounces. Richfield ended the week up C$0.65 at C$5.95, while Richfield’s joint venture partner on the northern portion of the project, Silver Quest Resources, added C$0.15 to close at C$0.66.

On the production side, Allied Nevada announced that it produced 20,000 ounces of gold and 42,900 ounces of silver at net cash costs of US$462 per ounce in the fourth quarter of 2010. For 2011, the company expects production of between 125,000 and 135,000 ounces at net cash costs of between US$450 and US$490 per ounce. Proven and probable gold and silver oxide reserves at its Hycroft operation in Nevada stand at 2.6 million ounces of gold and 49 million ounces of silver. Allied ended the week at C$32.96 for a C$3.50 gain.

And sticking with production news, Quadra FNX Mining produced 57.3 million pounds of copper in the fourth quarter and 224.3 million pounds for 2010 as a whole. Revenues rang in at US$332 million and earnings hit US$0.55 per share. Quadra ended the week up C$0.44 at C$13.96.

Any drilling news?

Batero Gold cut 592 metres grading 0.72 gram gold per tonne and 0.13% copper on the Batero-Quinchia copper-gold project in Colombia. Batero added C$1.65 on the week to close at C$6.30. And staying in Colombia, Galway Resources cut 96 metres grading 1.1 grams gold per tonne from the Pie de Gallo zone on its California property. The California property is along strike of Ventana's La Bodega project, and three kilometers to the southwest of Greystar's Angostura project.

The Galway management team are a might elusive, though.

That’s true. The market tends to make up its mind without ever hearing from them. This time round Galway closed at C$1.20, for a C$0.08 loss.

But shares of Manitou Gold added C$0.38 to close at C$0.72 after the company reported a mind-numbing intersection 53,700 grams gold per tonne over 0.55 metres at its Kenwest property in Northwest Ontario.

And it’s not only Equinox and Lundin that are hitting the headlines at the corporate level. The hostile takeover bid for Copper Canyon Resources from NovaGold Resources has now turned nasty, and Copper Canyon has filed a statement of claim against NovaGold in the British Columbia Supreme Court. The issue is that NovaGold has transferred its 60 per cent interest in the Copper Canyon property in British Columbia to the Galore Creek Partnership, which is held equally by NovaGold and Teck. This Partnership owns the huge Galore Creek project that adjoins the Copper Canyon property. But it appears that the transfer of the interest represented a change of ownership, and Copper Canyon says that NovaGold has therefore failed to honour a right of first refusal for Copper Canyon to buy the stake. Let the games begin. NovaGold closed at C$13.81 for a C$0.31 gain, while Copper Canyon added C$0.05 to C$0.84.

One sign that the markets are perhaps overly optimistic at the moment is the latest news from East Asia Minerals. The company is looking to cash in on the red hot market by splitting into four separate companies. East Asia added C$0.79 on the news to close at C$6.34.

The Bank of Canada left interest rates unchanged at one per cent, and that surprised many pundits given the strength of the Canadian economy. However, the Bank is worried about the surging Canadian dollar, which now sits well above its United States counterpart. Meanwhile, all eyes will be on the PDAC in Toronto next week. We will see what kind of interesting news that brings us.

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