STOCK MARKETS — Barrick, other gold stocks hit by royalty

Renewed threats of a federal royalty on hardrock mines in the U.S. hurt the shares of some gold producers with operations south of the border during the week ended March 16.

Hardest hit was American Barrick Resources, which found itself at the centre of U.S. Interior Secretary Bruce Babbitt’s crusade to ensure that a significant portion of gold mining profits find their way into federal coffers.

Trading more than 6.3 million shares, Barrick — traditionally a brokerage house favorite — lost $2.13 to $19.63 as Babbitt vowed to tie up the company’s application for patents on the rich Goldstrike property until legislation on royalty charges could be imposed.

And while the U.S. government and mining officials continued to debate the impact of an up-to-12.5% gross royalty on gold production from public lands, several other bullion producers listed on the Toronto Stock Exchange saw the value of their shares slip.

Among the losing issues were Franco-Nevada Mining, down $1.13 to $36.25; Rayrock Yellowknife Resources, off 13 cents to $10.88; and Viceroy Resources, down 13 cents to $6.50. Horsham Corp, Barrick’s major shareholder, lost 75 cents to $12.63.

Barrick recovered somewhat today (March 17), adding 13 cents to $19.75, and Franco-Nevada picked up 13 cents to $36.38.

Babbitt believes a royalty would have a minimal impact on employment and earnings in the industry, but a study completed in 1991 (when the royalty was first proposed) estimated that an 8% grab on 22 of the largest gold mines in the U.S. would increase average total costs by about US$30 per oz. and close marginal operations.

Rayrock’s Dee mine, for instance, would be forced to close if the royalty is imposed, says Vice-President David Hutton.

But the controversy in the U.S. was not the only “downer” for shareholders of Canadian gold mining companies during our report period. Placer Dome announced today that the Porgera joint venture — in which it has a 22.7% stake — will sell a 15% equity interest in the rich Porgera gold mine to the government of Papua New Guinea, in exchange for US$136 million. Porgera is Placer’s lowest-cost producer, and the forced sale will knock about 35,000 oz. off Placer’s share of production in 1993. Placer added 13 cents to $17.13 on the week but dropped back down to $17 today.

Lac Minerals also felt the sting of disappointment when an arbitrator ruled that the gold miner’s proposed $70-million purchase of the Lisheen lead-zinc deposit in Ireland cannot legally go ahead. Trading 2.3 million, Lac added 63 cents to $9 before shedding 13 cents today.

A US$2 jump in the gold price to US$328.75 per oz. managed to offset the week’s bad news somewhat, with the TSE’s gold and silver index posting a gain of eight points on the week. Royal Oak Mines once again stood out as a star performer, touching a new high of $3.45 before settling at $3.30 for a 35 cents gain.

Gold closed unchanged at US$328.75 in London today.

In New York, fears of inflation and political rumblings in Russia dragged down the market, but the TSE 300 composite index managed to withstand the bearish pressure to close with a 5-point gain. Today, the TSE 300 lost 15.8 points to 3,541 as 48.2 million shares changed hands.

After a healthy run-up the previous week, Minera Rayrock continued to advance, adding 7 cents to $2. The company has resumed drilling on its Sierra Valenzuela property in northern Chile, where grades of 1.5% to 2% copper were intersected over widths of 20-60 metres earlier this year. Minera added another 19 cents today.

Some of the diamond explorers also continued to fly high. The pick of the week was Caledonia Mining which touched a high of 95 cents after announcing plans to look for alluvial diamond targets in the Northwest Territories. Caledonia closed at 87 cents for a gain of 17 cents, then dropped 9 cents today.

Observers close to the Lac de Gras play say that if the 70-80 holes drilled there this spring do not turn up more macrodiamonds, the whole play will fall apart outside the ground held by Dia Met Minerals. Dia Met added $2 to $43.75, while SouthernEra Resources — also planning a spring drill program — tacked on 25 cents to $5.13. Aber Resources slipped 7 cents to $2.48.