Senior gold producers respond to Newmont Mining purchase

Newmont Mining believes the worst is over for gold and to prove it, North America’s biggest gold producer spent US$126 million during the week ended May 5 to buy 375,000 oz. of the yellow metal.

The Newmont move is regarded as a significant vote of confidence by mining analysts who predict that a drop in supply combined with rising demand for jewelry will eventually drive the gold price out of its recent doldrums. Senior gold issues, including American Barrick Resources, Franco-Nevada and Placer Dome, responded with a surge that drove Toronto’s gold-silver index up by 282 points during the report period to 4579.60.

Today, May 6, Barrick built on recent gains, by shooting up 88 cents to $28.88. Franco-Nevada climbed 75 cents to $24.75, while Placer edged up 13 cents to $12.63. While Royal Oak Mines managed only a 1 cents gain in its share price, the volume today was an impressive 1.2 million shares. But if a gold price rally is imminent, there wasn’t much sign of it as the metal closed at US$336.70 per oz. today in London, after rising by US$1.95 during the report period. Some of the lesser lights in the gold sector didn’t fare quite so well. Falconbridge Gold hit a new low of $1.70 before recovering to close at $2. Warrants of Quebec gold miner Agnico-Eagle Mines also bottomed at 17 cents, while the shares rose 5 cents to $4.50. On the broad market, share prices remained listless as investors waited for more signals on an economy that seems to be recovering at a snail’s pace if it is recovering at all. While the New York Dow Jones Industrial Average of blue chip stocks has shot to record highs, the TSE Composite 300 has been lagging behind its U.S. counterpart. Today, the 300 index closed down 3.23 points at 3361.30 after 30.4 million shares valued at $275 million had changed hands.

Controversy surrounding Claude Resources’ Seabee gold mine in Saskatchewan intensified this week, after the company announced a significant reduction in the amount of proven and probable reserves.

Officials at Claude weren’t prepared to discuss the situation when The Northern Miner reached them by telephone. But it now appears that Pacific Rim investors who sank $22 million into the project will be unable to recoup their investment. As negotiations continue, the common shares of Claude fell 4 cents to 30 cents. The preferred shares are trading at 50 cents, compared with a high of $6.63.

Ironically, in a week when Kerr Addison Mines President Yves Fortier was telling reporters that Kerr wouldn’t be prepared to sell its interest in Anderson Exploration because of its low trading price, Anderson emerged on the active list. The oil and gas company was the volume leader May 5 when a block of 1.2 million shares crossed by Peters & Co. Ltd. at $9.12 a share. Anderson rose 62 cents to $9.25. Kerr Addison owns 6.2 million shares. Down 13 cents today, Kerr Addison reported a first-quarter loss of $1.4 million or 8 cents per share compared to a profit of $5.4 million or 31 cents per share in the first three months of 1991.

In other activity, Redstone Resources posted a new high for the year of $4.20 (its low is $1.80). A 40%-owned affiliate of Franco-Nevada Mining, Redstone owns royalties in the ferronickel operations of Falconbridge in the Dominican Republic.