STOCK MARKETS — Bre-X debacle leaves TSE bloody

The Toronto Stock Exchange looked like it was having a routine week, until the junior mines went over the cliff.

The chain of events started with an announcement, on the morning of March 26, that trading in Bre-X Minerals and parent Bresea Resources had been “halted pending news,” at the company’s request. A short time later, the New York Stock Exchange halted trading in Freeport McMoRan Copper & Gold, which had been busy with a due diligence investigation at the Busang project.

The news came at about 1 p.m., when Bre-X and Freeport issued news releases stating that the former was “reviewing” its resource estimates. Respected consulting firm Strathcona Mineral Services had told Bre-X Minerals that resource estimates at the Busang gold project in Indonesia had been placed in doubt “because of invalid samples and assaying of those samples.” The TSE instantly placed a cease-trade order on Bre-X.

The principals were insulated from the announcement’s effects by the trading halt, but other companies with Indonesian interests saw their stock prices crushed. Indochina Goldfields was off $4.15 at $14, International Pursuit lost $1.25 to close at $3.05, Scorpion Minerals fell $3.60 to finish at $3.65, and Yamana Resources shed $1.05 to close at $4.20. The floor was bloody in Montreal, too, with Mispec Resources down $1 to close at $2, and Diadem Resources down $1.60 to close at $2.85.

Neither was it safe to have your projects in places other than Indonesia, as the market abandoned the junior mines. Golden Rule Resources fell $2.30 to $7.85, trading more than a million shares; Corriente Resources, a favorite of the newsletters, lost $4.50 to close at $13.10; Franc-Or Resources was off 23 cents at $1.16; and Geomaque Exploration lost 29 cents to finish at $3.26.

The TSE 300 composite index was up 14.48 points over the report period — a lean 0.2% of value — to close at 6,143.76 on March 25. The oil and gas sector propped up the market early in the period but was joined by the banks and the long-suffering forest products sub-group in the last two days. The base metal and gold groups performed poorly, losing 3.3% and 4.1%, respectively.

The Canadian dollar was 23 basis points higher against its U.S. counterpart, with its noon rate at US72.77 cents on March 26. It also recovered against other major foreign currencies, with the exception of sterling, which continued to skyrocket.

Gold was fixed at US$346.80 per oz. in the March 26 London bullion market, for a fall of $2.15 over the report period. Platinum fared even worse, dropping $5.25 to land at US$372 per oz.

The gold and precious minerals sub-group was 451.92 points lower at 10,445.53 as the market responded to price weakness. The Bre-X factor was strong as well; with the company off $2.15 to $15.50 at the close on March 25, the index suffered a severe blow.

Among the majors, Placer Dome was the volume champ, with 4.3 million shares changing hands. The shares fell $1.05 to close at $26.10. Barrick Gold was down $1.25 at $35, and Teck B-series shares were off $1.40 at $31.85. The gold issues were broadly higher on March 26; at presstime, Barrick was trading at $35.25 and Placer Dome at $26.45.

Base metal markets were mixed, though huge drawdowns of the major metals appeared in the London Metal Exchange warehouse figures on March 20 and 24.

Over the report period, the TSE metals and minerals sub-group lost 188.52 points, or 3.3% of value, to close March 25 at 5,577.66. Most active was Inco, which lost $2.10 to finish at $47.55, with 2.8 million shares traded.

Next came Aur Resources, which was trimmed 20 cents to close at $8.15, and Noranda, which fell a quarter to $32.10. Most of the large base metal miners were off by another fraction of a dollar at presstime, following the Bre-X debacle.