Toronto Stock Exchange (September 16, 1991)

Precious metal stocks hit as gold price drops

A big drop in the price of gold during the week ended September 10 put more pressure on North American precious metal stocks and lowered confidence in an already lacklustre market.

Gold fell to a 2-year low of US$342 an oz. in New York on a rumor that the Soviet Union was shipping US$4 billion worth of bullion for resale in the West. While gold recovered when the rumor proved incorrect, closing today Sept. 11, at US$345.25 in London, the rebound couldn’t prevent the gold silver index from giving up a whopping 149 points. Gold’s performance this week appears to support the Bank Credit Analyst’s contention that strong support between US$345 and US$355 is weakening.

Before the Soviet rumor affected western markets, the Montreal-based publication said a drop below US$345 would kill the prospects for a major rally and shift the risks of a major slide to the next major support level between US$280 and US$300 an oz.

Precious metal stocks, which the Bank Credit Analyst says are overvalued and particularly vulnerable if gold prices languish or decline, were hit hard by the price fall. American Barrick was the biggest loser. It fell by $1.25 today to close at $24.50. Placer Dome hit a new low of $12.13 after falling 38 cents and LAC was down 38 cents to $8.50.

Among other gold stocks, Freewest Resources hit a new low for the year of $2.50 compared to its high of $4.90. St. Genevieve Resources fell to 54 cents, a low for the year, before edging up three cents today to 57 cents. Meanwhile, as investors wait for the U.S. Federal Reserve Board to lower interest rates, Toronto’s composite 300 index posted its third successive decline. The index fell by 18.41 points as 25.1 million shares worth $271.2 million changed hands.

Toronto-based Inco Ltd. gave up 25 cents as a correction imposed by softer nickel prices continued to depress the stock. In response to the weak markets, Inco is cutting back production by about 10 million lb. and suspending operation at the Creighton No. 3 mine in Sudbury, Ont. Royal Oak Mines, the week’s second most active issue, behind Inco, added four cents today to close at 84 cents.

Shares of Audrey Resources were equally unresponsive to

an agreement with partner Minnova, which allows it to restructure a $14.6 million debt load and seek out a buyer for its Mobrun mine asset near Rouyn-Noranda, Que. Down five cents today, Audrey closed at $2. Minnova was unchanged at $17.

Shares of Thunderwood Resources and Greenstone Resources were largely unchanged following the latest results from their Scott Lake base metal joint venture west of Chibougamau, Que. Thunderwood was down four cents to 76 cents and Greenstone was unchanged at $2.05.