STOCK MARKETS — U.S. royalty bill chips away at gold

For the Toronto Stock Exchange, it has been a year when records of all sorts have given way to new benchmarks. But, alas, the week just past was not a record-breaking one — in the resource sector at least. The TSE Gold and Silver Index bounced up to 10,519.89, probably on the strength of an overall US$2.40 rise in the price of gold, which closed our trading week at US$376.10 per oz. But it settled at 10,410.59, roughly the territory it began the week in.

Bad news came from south of the border that the House of Representatives had passed a bill slapping an 8% net smelter royalty on metal mines in the U.S. Though not totally unexpected, the news did whittle away at a few of the gold equities. American Barrick, the company in the spotlight because of its vast Nevada production, was jolted for a loss of about $2 the day following passage of the bill. Euro Nevada dropped 40 cents, and even Franco Nevada took a backward step, falling $1.

The news was likely tempered by the fact that the House bill is expected to be watered down before it gets approval in the Senate (see report on page 27). By the end of the report week the Nevadas had regained lost ground. Franco, for example, climbed back to a new 12-month high of $90.50 before sliding to a little over $89.

Lac Minerals was another winner, gaining 50 cents to $10.88. (Still no confirmation of the rumor about a Cyprus takeover of Lac.)

Wheaton River cored another nice intersection (see front page) at its Golden Bear property. The stock has strengthened since drifting lower in the past couple of weeks. It closed the week at $4.30, up about 5 cents. Dakota Mining failed to break out of a month-long decline. The stock peaked at $3.25 in early November and has been shedding value ever since. It closed at $2.50, representing a 30 cents slide for the week. A reported 3-month loss of $2.5 million likely did not warm the cockles of investors’ hearts. Dakota is former Minven Gold Corp., which owns the Gilt Edge gold mine in South Dakota. The mine hasn’t proven to be gilded at all and Minven became increasingly debt-laden and cash-starved until it was restructured and renamed in mid-September.

President Alan Bell, speaking by phone from his Denver office, said he hopes “1993 is the end of the bad news.” On the plus side are several factors: the 1.7-million-oz. sulphidic ore potential at Gilt Edge; rising production at its 40%-owned Golden Reward mine; and a return to 30,000 oz. per year at its Stibnite mine. “It’s a nice, clean start for a debt-free company,” Bell said. Chase Resourcess displayed a tendency to move up this week, rising 35 cents to $3.80. This is probably because of generally positive news of its prefeasibility study on infrastructure requirements for the Taysan copper-gold property in the Philippines.

Chesbar Resources and its Venezuelan partner, Montreal-listed Spirit Lake, announced that an extensive trenching program is due to get under way on their jointly owned La Salle concession in the Anacoco district of Venezuela. Spirit Lake President John Hansuld said geochemical and geophysical work has outlined a gold mineralized zone 2.5 km. long and 100-500 metres wide. The property adjoins Tombstone Exploration’s property, where very preliminary numbers suggest 1.5 million oz. gold can be exploited within only 25 metres of the surface.

Another company in Venezuela, Gold Reserve, has skyrocketed to $20.25 on news that a court case over its lease has gone in its favor. (The main lawsuit, however, has yet to go to court.) Gold Reserve’s shares climbed more than $3 over the week. Its Kilometre 88 property sits to the south of Placer Dome’s Las Cristinas. The market is awaiting assay results, due out soon. On the base metal side, Inco continued its surge, rising another $1.38 and hitting a 12-month high of $32.50 before closing our report week at $32.25. Noranda was nudging its 12-month high as well, trading up 25 cents over the week to close at $24.

While investors were kind to the base metal equities, they were rather more critical of the diamond stocks. For example, Dia Met lost $2 to close at $41.50. Aber slid 29 cents and seems to be threatening to dip to its 12-month low of $1.38. It closed at $2.11, while SouthernEra lost 55 cents to $4.45.