STOCK MARKETS — Gold, diamond issues hold up under market

Gold and diamond stocks managed to hold their own amid the volatility that gripped North American financial markets during the week ended Oct. 6.

Spurred on by major buyers looking for a safe investment amid the turmoil, gold added US$2.50 to US$350.25 per oz. in New York. The gold and silver index charged to a high of 8096 before dropping back to 5470. News of a new kimberlite find in the Lac de Gras area of the Northwest Territories was the spark that ignited diamond stocks early in the report period.

Gold producers turned in a mixed performance, with Placer Dome touching a new high of $15 and American Barrick Resources slipping 13 cents to $37.50. Since recording a 52-week low of 4248 points in May, the gold and silver index has climbed by about 30%, making it the best-performing group on The Toronto Stock Exchange. During roughly the same period, gold is up only 4.3% from its low of US$335 per oz.

“These factors have to make us cautious from a market standpoint. At US$350 per oz., few of the senior companies will report any significant earnings and for many companies revenues are declining sharply as forward sales programs at higher prices are closed out,” warns John Lydall at First Marathon Securities.

Barrick, up 25 cents to $37.75 today (Oct. 7), has created a new 10-year, 1-million-oz. hedge facility at US$450 per oz. for its gold production to the turn of the century.

On Oct. 1, Aber Resources and SouthernEra Resources, along with VSE-listed Commonwealth Gold, announced the discovery of a kimberlite intrusion just south of the diamond-bearing Point Lake pipe. After posting one single-day advance of 18 cents, Aber finished the week 3 cents lower at $2.02 on 1.5 million shares, while SouthernEra managed a gain of 3 cents to $1.80. Today, the partners lost 7 cents and 5 cents respectively.

Sources close to the play say Aber intersected about 250 ft. of kimberlite before hitting wall rock.

Other active diamond stocks included Pure Gold Resources, down 1 cents to 12 cents on 4.6 million shares, and Westfort Petroleums, down 2 cents to 9 cents. The same bad economic news that spooked the broad market put a dent in base metal stocks, taking some of them to new 52-week lows. The metals and minerals index slipped 135 points, losing another 46 points today. Investors concerned about the prospects for nickel shaved $2.25 off the shares of Inco during the week ended Oct. 6. After touching a new low of $27.38, the giant nickel producer recovered slightly, finishing the week at $27.88.

Although Inco says it will cut 40 million lb. of nickel from its planned production, analysts argue this move will not be enough to boost nickel prices, which fell below $3 per lb. during the report period. Nickel opened today at US$3.01.

Zinc, also suffering record inventory levels, opened at 54 cents per lb., down 4 cents from last week.

Also touching a new low was Arimetco International. One of the top traders, Arimetco lost 60 cents to $3.25. The company has had startup problems at its Yerrington mine in Nevada.

Although Noranda stands to benefit from the recent dip in the Canadian dollar, the resource company shed 88 cents to finish the week at $18.50. For every 1 cents decline in the value of the dollar against U.S. currency, Noranda’s 1992 earnings jump by $21 million. Noranda lost another 25 cents today.

After announcing the sale of a 25% interest in its Andacollo gold project in Chile, Dayton Mining slipped a nickel to $2.80. A Malaysian Crown company has agreed to pay Dayton $11.3 million in cash, $11.3 million from the project’s cash flow and provide a $20-million line of credit to construct the gold mine. BP Canada finished the week down 50 cents to $14.25. The oil and gas producer reached an agreement to sell its 61.1% interest in the Selbaie zinc mine in northwestern Quebec to Billiton Metals Canada for a rumored $50 million.