Gold tumbles again as producers follow suit

Gold fell for a third consecutive week, slipping $3.45 during the Dec. 8-14 report period to a London fix of US$279.85 on the morning of Dec. 15. The Toronto Stock Exchange’s gold and precious metals sub-group responded by diving 299.77 points to 4,826.82.

Among the casualties were several major Canadian producers: Placer Dome dropped $1.60 to $15.10; Barrick Gold fell $1.40 to $25.60; and Kinross Gold slipped 12 to $2.75. Kinross announced, in the previous period, that PricewaterhouseCoopers had agreed to extend the closing date for its purchase of Royal Oak Mines’ assets in Timmins, Ont.

Royalty magnate Franco-Nevada Mining plunged $2.20 to $22.90. Also down was Cambior, off 18 at $1.78, on news that it will repay US$75 million of its US$212-million loan obligations by June 30, 2000. Any debt remaining thereafter would be subject to additional interest charges that could amount to US$2 million in extra payments. As part of the agreement, Cambior must convert its flexible-forward positions, including spot-deferred contracts and call options, into fixed-forward positions maturing over the next three years.

Volume-leader Vengold rose 11 to 30 on a stunning 31.2 million shares. The junior miner announced plans to switch to information technology — a decision no doubt linked to dismal third-quarter results on its share of production from the Lihir gold mine in Papua New Guinea.

Overall, base metal producers fared well. The TSE’s metals and minerals sub-index climbed 100.34 points to 4,106.65; copper and zinc each rose a penny to US79 and US54 per lb., respectively; nickel dropped 2 to US$3.63 per lb.; and lead held steady.

Producers were mixed, with Inco rising $1.40 to $29.70 and Falconbridge falling 55 to $23.25. Similarly, zinc producer Cominco climbed $1.15 to $28.55 while copper magnate Rio Algom fell 75 to $16.90. The latter announced that its 25%-owned Alumbrera copper-gold mine in Argentina has satisfied all conditions set out by its lenders and that associated guarantees for debt repayment have therefore ended. Rio and its partners borrowed US$660 million (US$115 million has been repaid) to develop the mine, which is expected to produce an average 178,000 tonnes copper-in-concentrate and 590,000 oz. gold annually over the next decade.

Among juniors, Pangea Goldfields slipped 3 to $3.80 but, by Dec. 15, had bounced back to the tune of 20. Another string of high-grade gold results were released from drilling at the Tulawaka project in Tanzania’s Lake Victoria Goldfield’s district, where a feasibility study is about to begin. Minority partner Northern Mining Exploration also fell over the period but failed to rise with Pangea, instead falling a further 5 to $1.46.

DiamondWorks plunged 7 to 3 on news that its president and two directors had resigned. No explanation was given, and the company remains in serious need of cash.