MINING MARKETS & INVESTMENT NEWS — EASTERN MARKETS — Gold remains a haven amid global uncertainty — Nickel dives to 11-year low as base metal majors slump

Market anxiety continued to reign during the Sept. 30-Oct. 6 report period as the economic crisis gripping Asia and Russia threatened to take hold in Latin America. The Group of Seven most-industrialized countries and the International Monetary Fund spent the week preparing to inject as much as US$30 billion into Brazil and US$5.7 billion into Argentina in order to allow those countries to meet their short-term obligations. The IMF has already lent Indonesia, South Korea, Thailand and Russia some US$140 billion.

While there are suspicions that the IMF may sell as much as 5 million oz. gold to help fund its bail-out packages, the yellow metal nonetheless gained strength during the week, rising a further US$4.75 to US$298.85 per oz. on the London morning fix of Oct. 7. Silver and platinum did not fare as well, dropping 26 cents to US$5.13 per oz. and $3 to US$346 per oz., respectively.

With the rise in gold prices, the TSE’s gold and precious minerals sub-index jumped 7.1% to 6,927.96 points during the report period, helping to buffer the fall in the TSE 300 composite index, which sunk 6.3% to 5,398.12 points.

Canada’s major gold miners continued their dramatic month-long climb: Barrick was up $2.50 to $32.50; Placer Dome rose $2.45 to $23.45; Kinross Gold was up 14 cents to hit $4.84; Prime Resources Group jumped $2 to $14.75; TVX Gold climbed 12 cents to $4; and Cambior rose 9 cents to $9.19. The royalty twins also continued to surge, with Franco-Nevada Mining up 65 cents to $32.40 and Euro-Nevada Mining jumping $1.50 to $26.

Royal Oak Mines kept the bankruptcy-protection wolves at bay for another week with the announcement that its new Kemess South gold-copper mine in north-central British Columbia had reached commercial production. At presstime, Royal Oak was trading at $1.24, up 13 cents from the previous report period.

In the U.S., the golds also outperformed most stocks: Newmont Mining soared US$5.06 to US$28.06; Homestake Mining rose US$1.88 to US$13.69; Battle Mountain Gold was up 25 cents to US$6.19; and Anglogold jumped 94 cents to US$27.75.

Things were not so rosy with the base metals. Nickel dived 10 cents to an 11-year low of just US$1.73 per lb. and there was no sign that the bottom had yet been reached. Apart from the overall weak demand for nickel in Asia, this week’s drop was precipitated by two events: an announcement from Russian giant Noril’sk Nickel that it would be using icebreakers this winter to avoid last February’s delivery problems; and news that Falconbridge subsidiary Falcondo had returned to full production mode in the Dominican Republic after operations were interrupted there by Hurricane Georges.

Canada’s nickel producers were hit hard by the price drop: Falconbridge was down 90 cents to $14.75; Inco sunk 90 cents to $14.80; and Sherritt International — already stung by Fidel Castro’s comments that nickel mining in Cuba may have to be scaled back — dropped 49 cents to $3.

With copper off 2 cents to US72 cents per lb., lead down a penny to US23 cents per lb. and zinc holding steady at a moribund US44 cents, Canada’s other base metals producers also saw declines: Noranda was off $1.75 to $20.45; Teck’s B shares were down 65 cents to $13; and Rio Algom slid 20 cents to $19.25.

Things were no better in the uranium business, with spot prices dropping to US$9.70 per lb. U3O8 during the report period, down from above US$12 per lb. U3O8 at the beginning of the year. Cameco, which traded in the mid-$40s in January, ended the report period at $26.50, down $1.25 for the week.