Franco-Nevada issue benefits from gold rally

Taking its cue from a robust gold price rally and some brisk trading in precious metals issues, Franco-Nevada Mining shot to an all-time high of $30.50 on The Toronto Stock Exchange, during the past week.

The Toronto-based company, which holds a royalty interest in American Barrick Resources’ Goldstrike gold mine, was responding to this week’s US$7.80-per-oz. upsurge in the price of gold

The gold rally also pushed a number of other issues into new 52-week territory, including Agnico-Eagle Mines, American Barrick, Golden Star, Goldteck, International Corona, Pegasus Gold, Rayrock Yellowknife, Royal Oak Mines and Wharf Resources. Franco’s sister company Euro-Nevada Mining closed just 25 cents below its $19.75 high.

Action on the gold front occurred as Corona shareholders were tendering their shares under the Homestake Mining merger offer that will make the combined entity North America’s largest gold producer with annual output of 1.8 million oz.

Lac Minerals also took the opportunity to reduce its gold hedge position to 704,000 oz. from a previously announced level of 2.4 million, thereby increasing its average hedged price to US$407 from US$378 per oz. Analysts attribute gold’s improving fortunes to a recent decline in the U.S. dollar and concerns that an economic recovery in the U.S. may be stifled by rising European interest rates.

But what is good for gold doesn’t necessarily benefit other market sectors and news of rising interest rates in Germany sparked a selloff that sent Toronto share prices sliding throughout much of the week. Today, July 22, the slide continued as the composite 300 index gave up 13.11 points to close at 3412.10 after 23.9 million shares, valued at $317.7 million, had changed hands. Like the metals index, which closed down 14.23 points, the 300 was posting its fourth consecutive loss.

Casualties included Metall Mining, which fell to $13.63 from last week’s $14 level. However, the market downturn didn’t prevent shares of Noranda from hitting a new high after its minerals unit exercised a 1989 option to purchase 1.7 million shares of Societe Miniere Louvem at $3.06 a share. After hitting $20.75, Noranda was down 25 cents today to $20.38.

While Louvem didn’t trade on Toronto this week, the shares are being exchanged in Montreal for $3.45. After reporting a second-quarter profit of 26 cents per share, Noranda’s 67% owned Brunswick Mining and Smelting subsidiary peaked at $10.50 before slipping back to $10.38. In the 1991 period, Brunswick lost 26 cents a share.

Echo Bay Mines was unchanged at $7.75 today, following news that an issue of five million shares of Echo Bay Finance Corp. convertible preferred stock has been priced at US$25 a share to yield 7%. The shares are convertible into 2.985 common shares of parent company Denver-based Echo Bay Mines at $8.375. The issue would consist of four million shares.

Diamond issues were mostly quiet despite news that BHP Minerals Canada has resumed drilling on the 850,000-acre Dia Met Minerals block at Lac de Gras, N.W.T. Aber Resources dropped 2 cents to $1.65 while SouthernEra gave up 13 cents to finish at $1.40.

Placer Dome was up 13 cents today, as dispute continued over portions of the Pipeline gold deposit in Crescent Valley, Nev. In the latest development, Placer Dome has withdrawn legal action against Gold Fields Mining of Denver until other litigation involving the deposit is resolved.

Shareholders of Asamera Minerals voted this week to privatize the company, which will result in minority shareholders receiving $1.40 a share. After the $2.9-million privatization, Asamera Inc. of Calgary, which is wholly owned by Gulf Canada Resources, will own 100% of the common shares of Asamera Minerals. Asamera finished at $1.35, down 2 cents.