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Agnico-Eagle's Meadowbank mine in Nunavut.STAFF/Reuters

It's a wonderful time to be a gold miner. It's a miserable time to be a base-metal miner.

The divide between the two resource sectors is gaping wider as a staggering world economy propels people into the perceived safety of precious metals while scourging producers of industrial raw materials.

"In Canadian dollar terms, gold is just about at an all-time high," Sean Boyd, chief executive officer of precious-metals producer Agnico Eagle Mines Ltd., noted on Thursday, as gold miners ripped higher on the Toronto Stock Exchange.

"This has been a year of profound base-metal and oil-price weakness, with nickel down 40 per cent and fuel oil down 50 per cent in 2015," said David Pathe, CEO of Sherritt International Corp., the nickel and oil producer that reported a $2.1-billion loss for the year after markets closed on Wednesday.

Oddly enough, the forces shaping the destinies of both base-metal producers and gold miners are much the same. The dominant trend is disappointing growth in China, which is by far the world's biggest single consumer of commodities such as iron ore, copper and nickel.

The Asian giant's deceleration has dampened growth around the world, but it has been particularly painful for companies that produce those vital industrial metals.

On the flip side, the resulting environment – a new normal of chronic economic weakness – has helped keep interest rates ultralow. And that has been excellent news for gold, which pays no yield and does well in times of uncertainty.

Among the beneficiaries of a rising gold price are Agnico Eagle and Kinross Gold Corp. Both Toronto-based miners reported late Wednesday and both recorded losses for the fourth quarter, but delivered operational improvements and solid guidance for the year ahead.

Agnico shares jumped 5.5 per cent on Thursday, while Kinross stock shot up 13.7 per cent. Other Canadian gold stocks, including Barrick Gold Corp. and Goldcorp Inc., also advanced as the metal soared as high as $1,260 (U.S.) an ounce, its loftiest level in a year.

A World Gold Council report published on Thursday argued that the strength of the U.S. dollar has helped to mask the metal's surprisingly strong performance in other currencies.

The council, which represents the gold industry, pointed out that China's central bank accumulated more than 600 tonnes of gold over the preceding six years. The stockpile is evidence of growing official demand for the metal, according to the gold group.

Gold has roared ahead since December as negative interest rates in Europe and Japan, lacklustre U.S. growth and jittery stock markets have combined to unnerve investors.

In contrast, base metals such as copper, iron ore, coal and nickel have shown few signs of life, while oil prices remain mired in depression.

The sector's challenges are exemplified by Teck Resources Ltd. On Thursday, the Vancouver producer of copper, coal and zinc reported a loss of $469-million (Canadian) in the fourth quarter, largely as a result of a $736-million pretax impairment charge.

The bulk of the charge was related to a $598-million writedown of the company's Fort Hills oil sands project, which is not expected to start pumping fuel until late next year.

Falling metal prices also hammered the company. Copper slid 20 per cent in 2015, while steel-making coal declined 19 per cent and zinc lost 11 per cent, in U.S. dollar terms.

"The commodity cycle continues to provide us with a very challenging environment," CEO Don Lindsay said.

However, Teck did manage to squeak out $16-million in adjusted profit, an in-house measure of profitability. "Results were a little above our expectations," wrote Fraser Phillips, an analyst at RBC Dominion Securities.

Mr. Phillips was less impressed by Sherritt, which reported a loss of $5.99 a share for the fourth quarter, largely as a result of a $1.6-billion after-tax writedown on its co-owned Ambatovy nickel project in Madagascar. The result fell short of analysts' expectations even when adjusted for one-time charges.

The Toronto miner, which also has operations in Cuba and Canada, has felt the impact of the long crash in nickel prices. The metal's value has slid 85 per cent since 2007.

Sherritt has stopped funding its share of Ambatovy, and the writedown has resulted in a breach of the conditions attached to some of its loans, although its lenders have waived the covenant.

Mr. Pathe, the Sherritt CEO, said the emphasis now is on keeping a healthy balance sheet, enforcing strict cost discipline and driving the company's already low cost of production even lower. "Nickel's price has been a pretty dismal performer … but our focus is on controlling what we can control," he said.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 3:44pm EDT.

SymbolName% changeLast
ABX-T
Barrick Gold Corp
+2.46%22.53
AEM-N
Agnico-Eagle Mines Ltd
+3.11%59.65
AEM-T
Agnico Eagle Mines Ltd
+2.9%80.77
G-N
Genpact Ltd
+0.58%32.95
G-T
Augusta Gold Corp
+6.93%1.08
K-N
Kellanova
+1.13%57.29
K-T
Kinross Gold Corp
+3.88%8.31
KGC-N
Kinross Gold Corp
+4.25%6.13
S-T
Sherritt Intl Rv
0%0.28
TECK-N
Teck Resources Ltd
+4.23%45.78

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