Precious metals producers sputter as prices sag

Gold prices fell back into the low US$260s in London during the Feb. 28-March 6 report period following a mid-February rally that saw prices shoot up from US$256 to US$268 per oz.

There was a dearth of news from Canada’s gold majors, except for Franco-Nevada Mining‘s announcement that it will boost its annual dividend by 5 to 35. Over the week, Franco fell 27 to $27, Barrick Gold rose 23 to $25.13, Placer Dome dropped 38 to $14.42, Kinross Gold declined 7 to 82, TVX Gold fell 15 to $2.30 and Cambior was off 5 to 48.

Platinum group metals (PGMs) also retreated, with platinum falling US$27 to US$586 per oz. and palladium down US$75 to US$770 per oz. Canada’s biggest primary PGM producer, North American Palladium, has been easing off since trading above $17 earlier in the year and dropped 7 over the week to $13.98.

Silver, too, has struggled, closing down a penny to US$4.42 per oz. — a trading level not seen since the summer of 1997. Junior producer Pan American Silver lost 10 to close at $4.65 after tabling a year-end loss of US$46 million that was mostly attributable to a US$37-million writeoff on the Dukat fiasco in Russia.

It was an entirely different story with Canada’s base metal producers, which have been on a tear since mid-November 2000: Inco rose $1.60 over the week to $28.60; Falconbridge was up 35 to $17.90 as it partnered with South African miner Impala Platinum to explore for PGMs; Noranda gained 60 to $17.25; Teck‘s B shares rose 95 to $15.40; Cominco shot up $2.15 to reach $26.95; and Breakwater Resources increased 7 to $1.22.

Like Kinross and Cambior before it, Boliden became the latest mid-tier Canadian producer to join the ranks of the penny stocks, sinking 19 to 82 and, at presstime, hitting a new all-time low of 76. As part of an ongoing restructuring program, the miner intends to sell its Chilean assets to Noranda and Falconbridge for cash and project debt. If approved, the deal will see US$375 million written off Boliden’s books.

Diamond Fields International was off 3 at 80 after it reached an agreement with Trans Hex Group (parent of Trans Hex International) whereby Trans Hex will operate marine mining on two areas of Diamond Fields’ Mining Licence 111, an offshore concession off Luderitz, Namibia. Once permits are in hand, the partners expect mining to start within eight months.

Namibian Minerals fell 81 to 51 over the trading period; it had announced on Feb. 27 that it was putting several South African and Namibian subsidiary companies into liquidation and ceasing diamond mining. Insolvency laws in both South Africa and Namibia allow about six weeks for refinancing before companies have to be placed in bankruptcy. Namibian continued to trade despite requests to the TSE and Nasdaq that trading be suspended.