Latest UK auction drives brief gold rally

During the March 15-21 report period, attention in the gold market was directed toward the Bank of England’s latest gold auction, held on March 21.

The bank sold 25 tonnes (803,600 oz.) for US$285.25 per oz., and the amount offered was oversubscribed by three times. Gold rebounded briefly above US$290 per oz. following the sale, to end the period up 70 to US$289.30 per oz.

The Bank of England also announced the dates of two more 25-tonne gold auctions: May 23 and July 12, 2000. The remaining four auctions scheduled under the bank’s current program will likely take place in September and November 2000 and in January and March 2001.

Most of Canada’s major gold producers advanced in step with gold’s post-auction jump: Barrick Gold rose $1 to $25.20; Placer Dome was up 40 to $13.15; Franco-Nevada Mining advanced 45 to hit $16; Kinross Gold was up 10 to $2.47; and TVX Gold edged down 3 to $1.13.

Debt-weary gold producer Cambior unloaded its wholly owned Bouchard-Hebert and Langlois zinc-copper mines in Quebec for just US$48 million to zinc miner Breakwater Resources. The sale price — US$120 million below book value — is roughly three times the operations’ annual cash flow. Cambior fell 25 to $1.30 on the news while Breakwater advanced 80 to $3.40.

Although copper and zinc prices held steady during the period, Canada’s major base metal producers took back some of their share price declines incurred since New Year’s: Noranda was up $1.05 to $15.80; Rio Algom, a rumoured takeover target, gained 25 to $17.75; Teck‘s B shares were up $1.20 to $10.95; Cominco was up $3.70 to $24; and Boliden rose 12 to $2.43.

Nickel, up 10 to US$4.68 per lb., continues to enjoy strong underlying fundamentals of growing demand and shrinking inventories. Inco, due to begin union contract negotiations at the Ontario division on April 4, rebounded $4.80 to $26.60; Falconbridge gained $3.10 to $21.35; and Sherritt International popped up 10 to $3.65.

Among the juniors, gold miner Richmont Mines announced it would buy back up to 75,000 common shares (or 5%) of the company on the open market. During the previous 12-month period, Richmont bought back 197,000 shares at an average price of $1.97 each, and the company ended 1999 with no debt and $12.5 million in cash. Over the week, Richmont fell 17 to $1.80.

Quebec City-based industrial miner Mazarin Mining shot up 38 to 85 on little concrete news. The company did state, however, that it “may conclude various transactions” relating to its industrial-mineral assets.

Another strong gainer was Eden Roc Mineral, which closed up 75 to $1.87, recently completed a 10-for-1 share consolidation and converted a US$3-million debt to NM Rothschild & Sons (Australia) into a 36.5% stake in Eden Roc.