MINING MARKETS & INVESTMENT NEWS – EASTERN MARKETS — TSE coasts as metal miners fall on weakened prices

The Toronto Stock Exchange 300 index lost 36.42 points over the May 20-26 report period, finishing the week at 7,625.96.

The big news of the period was gold’s plunge to US$292.60 per oz. on the morning of May 27, a drop of US$5.50 per oz. from the previous period.

Nearly all of the loss occurred on the last day, primarily because of a rise in the American dollar versus the Japanese yen and an announcement by Swiss officials of a proposal for central bank sales. The Swiss propose to sever the constitutional link between the franc and gold, thus allowing the country’s central bank to sell nearly half of its 2,600 tonnes of reserves.

Any such sale, however, would first have to receive parliamentary approval and then pass a referendum, which later reports indicated would not take place until late 1999. Those reports helped gold recover US15 cents per oz.

to finish the day at US$292.75 per oz.

When gold falls, producers follow: Barrick Gold dropped $1.95 to $28.80; Placer Dome fell $1.45 to $18.40; and Greenstone Resources deflated $50 cents to $7.30. Surprisingly, Euro-Nevada Mining and Franco-Nevada Mining, both normally sensitive to changes in the price of gold, only suffered mild losses.

Bucking the trend was Prime Resources, which rose 85 cents to $11.60. The issue climbed on news that Homestake Mining was offering to buy the 49.4% interest in the company it does not already own. The offering price is a 12.4% premium over Prime’s closing price on May 22, and assigns the company a value of $444 million. The deal would see each Prime share exchanged for 0.675 of a Homestake share.

With market watchers continuing to blame the weakness in the Asian economy, base-metal prices limped through another week. Nickel fell a further 3 cents to US$2.17 per lb., copper slipped 2 cents to US75 cents per lb. and zinc slumped 2 cents to US46 cents per lb. Only lead held steady at US25 cents per lb.

Both of Canada’s big nickel producers took hits. Inco touched a new 52-week low, dropping 95 cents to $20.85 and Falconbridge lost 15 cents to close at $17.35. The other major base metal miners also suffered: Noranda was off 50 cents to $26.75 as it unveiled a plan to nearly double capacity at its 100%-owned Refimet copper refinery in Chile; Rio Algom fell 75 cents to $22.30; Teck sagged 40 cents to $17.85; Boliden shares fell $1.05 to $8.25; and Cominco slipped 25 cents to $21.50.

Downplaying a cyanide spill at its Kumtor gold project in eastern Kyrgyzstan on May 20 evidently didn’t pay off for Cameco: the major fell $2.50 to $43.25. The most detrimental review of the incident came five days after the event, when a wire service reported that 240 people fell ill as a result of the spill. Although Cameco considers the report nonsense, noting that symptoms of cyanide poisoning appear within minutes of exposure rather than days, it says it will compensate anyone whose health has been adversely affected by the spill.