STOCK MARKETS — Minnova and Kerr move on Metall’s purchase

Base metal prices joined North American stock markets in a slide during the week ended July 28, with fears of a prolonged downturn in the U.S. closing in on investors.

Hardest hit were nickel and copper, which fell 5 cents and 3 cents to US$3.37 per lb. and US$1.14 per lb., respectively.

But the temporary setback for base metals did not prevent two producers, Metall Mining and Minnova, from announcing a marriage that will take the Izok Lake copper-zinc deposit in the Northwest Territories one step closer to production.

Metall President Klaus Zeitler said that by purchasing a 50.4% interest in Minnova from Kerr Addison Mines for $136.6 million, Metall will secure control of what he expects to be “one of the biggest mines in Canada” when it enters production in 1997.

In the meantime, Metall will be faced with developing the appropriate infrastructure to service Izok Lake. Costs to construct a port facility on the Coronation Gulf could run into the hundreds of millions of dollars. Perhaps daunted by this challenge, shareholders pushed Metall down 12 cents to $13.50 on the week. Kerr Addison, about to become a cash-rich Noranda subsidiary, fared better, jumping 75 cents to $15.50. Minnova, despite reporting sharply lower second-quarter earnings of $28.4 million compared with $39.9 million in 1991, edged up 50 cents to $16.75.

The gold and base metal producer also agreed to fulfill its royalty obligations on the Ansil copper mine in Quebec. Under a net proceeds royalty agreement signed in the 1980s, Ansil Resources (CDN) will receive a $4-million cheque from Minnova. A similar dispute between Minnova and Opawica Mines has yet to be resolved.

Among the base metal producers reporting second-quarter results, Rio Algom and Cominco stood out as strong performers. Benefiting from higher zinc prices, Cominco managed to more than double its net income from $7.3 million in the second quarter of 1991 to $18.1 million. Cominco shed 25 cents to $22.50, while Rio edged up 13 cents to $17.13

At the opposite end of the earnings spectrum was Inco, which suffered a US$1.5 million loss for the quarter compared to earnings of US$30.3 million in 1991. The nickel producer received only US$3.48 per lb.for its nickel during the quarter as supplies from the Soviet Union flooded the market. Inco lost a dollar to close at $35.88.

Junior Black Hawk Mining, also hammered by a weak nickel price, recently touched a new 52-week low of 25 cents.

On the gold front, American Barrick Resources, after creeping up to $34.88, shed 63 cents to close at $34.25. Having just raised proceeds of US$136.3 million through the sale of preferred shares, Echo Bay Mines lost 25 cents to $7.38.

Shifting relations between labor and business in South Africa resulted in a similarly volatile week for platinum. Platinum soared to US$381.80 per oz. when negotiations to avert a lengthy strike in the country stalled, only to fall when Nelson Mandela assured business leaders the strike, scheduled for Aug. 3, would only last 2 days. Platinum opened at US$374 today, down US$3.90 over the week.

Down one penny to 27 cents, NovaGold Resources says it has received environmental permits to proceed with a copper mining and processing facility at its Murray Brook mine in New Brunswick. Using bio-leach technology and recycled food cans to process the ore, NovaGold expects to make a $3 million net profit from the operation.

Among the diamond stocks, Aber Resources managed to recover some recently lost ground with the release of results from its base metal High Lake property in the Northwest Territories. After gaining 15 cents, the diamond and base metal explorer added another 11 cents cents today to close at $1.93.