Toronto Stock Exchange Producers suffer as gold price continues

Organizers of the New York gold conference could be forgiven for wishing they had picked a better week to hold the event. As representatives of the major North American producers gathered in the Big Apple, gold continued to lose some of its glamor as the yellow metal gave up US$5 to close at $US400.50 on the second London fix today, March 7.

While analysts say the cyclical picture remains positive for gold, just about all of the big producers, including American Barrick, Placer Dome and Echo Bay Mines lost some ground this week and the gold silver index fell by 171.53 points to 7049.42.

Gold is traditionally used by investors as a hedge against inflation and a declining U.S. dollar. As the U.S. dollar has strengthened at the expense of the Japanese yen and the market has already discounted a recession, editors of the influential Bank Credit Analyst say a further correction could send gold prices down to US$384 per oz.

An indication that market sentiment generally has improved was the 5.43-point gain in the composite 300 index, which has been edging upward during one of the busiest weeks so far on the mining scene.

At the New York gold conference, Galactic Resources President Robert Friedland took the opportunity to announce his company was selling its stake in a Philippine gold/copper deposit for about $35 million. However, the news failed to impress investors as indicated by a 20 cents decrease in the Galactic issue.

After returning to profitability last year, Galactic said it is moving ahead to production at its Ivanhoe gold project in Nevada. A 50/50 joint venture involving Galactic and Cornucopia Resources, Ivanhoe is expected to churn out 60,000 oz. gold annually, starting late next year. Cornucopia dropped 5 cents to close at $1.95.

Also attempting to impress the New York audience was Cambior President Louis Gignac, who wants to add about 60,000 oz. to his company’s gold output by making an acquisition in the western U.S. Corona Corp.’s Peter Steen was similarly bullish. He predicted that the C zone of Corona’s Williams mine at Hemlo, Ont., could contain as much as 20 million tons grading 0.2 oz. Both issues, however, lost ground closing down 38 cents and 37 cents respectively.

Another development on the gold front was Bachelor Lake’s decision this week to sell a 60% stake in its mothballed mine at Desmaraisville, Que., to Hecla Mining Co. of Canada. Subject to due diligence, the deal requires Hecla to spend $11 million on underground exploration.

The recent upturn in the outlook for copper and nickel didn’t prevent the metals and minerals index from losing 8.01 points today. But rising nickel prices have persuaded Timmins Nickel to reverse an earlier decision to cut production at its 51% owned Redstone nickel mine southeast of Timmins, Ont.

A subsequent statement that suggests Timmins Nickel is planning to double its output to 11 million lb. by early next year drove the Timmins issue up to 95 cents from 69 cents before it settled back at 85 cents. The about-face will come as good news to Sherritt Gordon, which has the contract to refine concentrates from Redstone.

However, there has been no similar change of heart on the part of Inco and Falconbridge, which are both bent on cutting back their nickel output. Shares of Inco closed down 13 cents.

While Canamax Resources Ketza River gold mine is currently reported to be running at a profit, startup problems experienced two years ago continue to haunt the Amax Gold subsidiary. After being accused of misrepresenting its ore reserves by Belmoral Mines and then reaching an out-of-court settlement, Canamax is being sued for similar reasons by shareholders of former joint venture partner Pacific Trans-Ocean Resources.

In a recent interview with The Northern Miner, Canamax President Wayne Lenton attributed the company’s share price — it was steady at $2.18 — to all of the controversy surrounding the Yukon gold mine. Another company whose share price hasn’t met the expectations of its president is Audrey Resources. Even though the company has enjoyed considerable exploration successes at its Mobrun polymetallic mine near Rouyn- Noranda, Que., Audrey gave up 5 cents to close at $2.80.

President Guy Hebert hopes that things will change if he raises the $100 million to make a competitive bid for Asamera Minerals’ U.S. and Canadian mineral assets.

Still shares of Asamera and Breakwater Resources, which hold 51% and 49% respectively of the Cannon mine in Washington, benefited more from the announcement than did Audrey. Breakwater gained 13 cents, closing at $2.03 while Asamera was up 35 cents to $2.25.

Gulf Canada Resources, which owns Asamera’s parent company Asamera Inc., may be anxious for a quick sale as its credit ratings are currently under review.