STOCK MARKETS — Gold issues hard hit by abrupt end to price

Gold stocks added some volatility to an otherwise sluggish Toronto market during the week ended Aug. 18. Gold fell to a new yearly low before bouncing back slightly to US$336.10 per oz. in London.

The sharp drop came as a surprise to market watchers, some of whom were calling for US$400 gold by year-end. But a number of factors, including low inflation in North America, central bank and producer selling, and relative calm in South Africa, combined to put heavy pressure on gold during the first two weeks of August, they say.

Platinum, further depressed by a plunging stock market in Japan (a large consumer of the metal), plummeted US$21 to US$347.75 per oz. Some analysts, encouraged by the new volatility in the precious metals market, expect gold to resume climbing as quickly as it fell. Among the hardest hit stocks in the gold sector were American Barrick Resources (TSE), down $2 to $32.63 on a volume of 2.3 million shares; Lac Minerals (TSE), down 88 cents to $8; and Placer Dome (TSE), down 50 cents to $12.50.

Homestake Mining reached a new low of $14.75 after announcing 180 layoffs in its administration and exploration sectors. The restructuring will cost about $14 million but is expected to save the company more than $25 million per year starting in 1993. Lac is also attempting to cut costs by laying off 16 employees at the Macassa mine in Kirkland Lake, Ont.

Also suffering is Royal Oak Mines, whose second-quarter profit plunged to $750,000 from $2.7 million for the same period last year as a prolonged strike at the company’s Giant mine raised the company’s production costs by almost US$20 per oz. Royal Oak closed down 25 cents to $2.09. Bucking the trend was Guyanese explorer Golden Star Resources, which set a succession of new 52-week highs throughout the week, finally closing at $4.40 today (Aug.19), for a weekly gain of $1. “People are beginning to realize that the developments in Guyana and Suriname are very significant and very real,” said President David Fennell when asked about the price rally. Golden Star, whose principal asset is a 35% interest in the Omai gold mine in Guyana, recently secured $6 million through a private placement to finance exploration on its gold and diamond properties in the two South American countries. Several analysts have recommended the stock in recent weeks. As it prepares to welcome media representatives at a preopening reception at Omai, Golden Star’s partner, Cambior, is also gearing up for production at the Sleeping Giant project near Amos, Que.

Cambior and partner Aurizon Mines expect Sleeping Giant, which hosts reserves of 455,000 tons grading 0.22 oz. gold per ton, to produce about 35,000 oz. gold per year at a cost of about US$260 per oz. Aurizon, with a 50% interest in the project, shed 2 cents to close at 24 cents, while Cambior lost 75 cents to $9.

Spurred on by a bidding war, shares of Nova-Cogesco Resources reached a new high of 32 cents on the Montreal Exchange. The company’s fate lies in the hands of its shareholders who must choose among competing bids by Deak Resources, VSE-listed Hughes Lang Corp. and its subsidiary Orofino Resources, and health service company Sunport Medical.

Deak, which finished the week off 6 cents to 24 cents, has proposed a merger with Nova-Cogesco in order to gain control of Nova’s $5-million treasury for future mine development. Together with Hughes Lang, Orofino — up one penny to 7 cents — has secured a 29% interest in Nova.

Shares of United Reef Petroleums more than doubled to 13 cents today as 719,500 shares of the Toronto-based junior changed hands. The company has agreed to option a 50% interest in a diamond venture in the Republic of Central Africa. Diamonds recovered in 1989 from alluvial pits on the 507-sq.-km property were all gem quality and valued at $100 per carat.