1993 A LOOK BACK — Precious metals rise, while base metals

Although gold saw its share of ups and downs in 1993, the general upward trend in the price has helped many small producers return to near-profitable levels.

Unlike gold, base metal prices began the year at respectable levels, but slowly slipped as the year progressed. At todays prices, almost all base metal producers around the world cannot even cover the cash costs of production.

Gold hit a low of US$326 per oz. in March, peaking at US$406 at the end of July and backing off to US$344 in mid-September. The early stages of the rally seem to have been fueled by a rise in the price of gold equities, much of which was led by strong institutional and commodity-fund buying. Many sources attributed this rally to a combination of anticipated rising inflation and interest rates in the U.S., and increased demand for gold in the Far East.

Some analysts say that the sudden price drop in September suggests that there were no sound technical arguments for the earlier price increase. Since early autumn, the yellow metal has been slowly creeping its way back up and at presstime had reached US$377.15. Price forecasts for 1994 are in the US$375-400 range.

Silver and platinum prices more or less mirrored the performance of gold. Silver started the year at US$3.70 per oz., reached a low of US$3.56 in early March and peaked at US$5.38 in August.

Platinum was trading at US$358 per oz. in January, dropped to US$337 in late February, and reached a high for the year of US$422 in early August. Nickel started off the year trading at about US$2.82 per lb. and steadily decreased until bottoming out at US$1.86 in late September. The prices have now firmed to between US$2.10-2.20, largely in response to recently announced cutbacks in 1994 production by Inco (TSE) of 60 million lb.

Further cutbacks by other producers could drive the prices even higher in 1994.

Copper crashed to US72 per lb. in late October after starting the year off at more than US$1.10. Prices at year-end moved slightly higher to the mid-US70 range. At these prices, some copper producers are still profitable, but large quantities of low-cost copper cathode from several new solvent extraction-electrowinning facilities will probably have a negative impact on future prices.

After hitting a low of US39 per lb. in August, zinc prices have rebounded to about US42 in recent weeks. This price level is considerably lower than the US50 peak in early February.

The price has been stabilized by concentrate producer cutbacks. In September, Noranda (TSE) announced that it expected 1993 concentrate output to be about 480,000 tonnes, a 16% decline from 1992.

Even with further cutbacks, the price is unlikely to rise unless there are subsequent smelter closures.

Lead prices were relatively stable in 1993, opening the year at US20 per lb. and reaching a low of only US17 at mid-year. During the last two years, Western world mine production of lead concentrate has dropped sharply. This drop has helped to stabilize inventories and firm up prices. Further cutbacks at many zinc operations where lead is produced as a by-product should further help to shore up prices.

At presstime, closing prices per lb. for the major base metals were nickel, US$2.42; lead, US22; copper, US82; and zinc US44.