Toronto Stock Exchange Barrick, Newmont talks spark Franco-Nevada

Talk of a possible merger involving Newmont Mining and American Barrick Resources provided a much needed shot in the arm to a long suffering gold sector during the week ended May 28.

Accompanied by a US$5 increase in the price of gold this week, the proposal has got analysts talking positively about the future impact the two companies’ combined production would have on the sector as a whole.

Together, they say, Newmont and Barrick could outstrip the yearly output of South Africa’s Freegold, the world’s largest producer, and force other North American companies like Placer Dome and Corona to follow suit.

Shares of Barrick reacted sharply to the announcement. They gained $1.51 within 48 hours to close at $23.75. Pierre Lassonde, vice-president at Beutel Goodman, a Toronto investment banker, said the proposal is also very positive for Euro-Nevada and sister company Franco-Nevada which own royalties on the Carlin trend where most of the Newmont and Barrick operations are based.

Lassonde is also president of Euro-Nevada which slipped slightly after adding $1 when the proposal was announced. Franco-Nevada added $3.25 as investors considered the implications of the proposal for it.

Ironically, Newmont and Barrick are proposing to marry their assets at a time when other gold issues are suffering from the metal’s resistance to a sustained rally. Today Placer Dome ended the week down 50 cents at $14.38 after hitting a new low of $13.63 earlier in the reporting period. Also bottoming this week were Agnico-Eagle Mines, affiliate Goldex Mines, Golden Knight and Rockford Minerals.

A sharp 1-day increase in the price of gold briefly pushed share volumes upward. But although the yellow metal closed at US$361.50 in London today, May 29, investors failed to keep the momentum going. The gold-silver index ended the week down 15.15 points at 4916.13. By contrast the composite 300 index advanced 5.62 points today to 3498.40 as 28.5 million shares worth $386.9 million changed hands.

Active stocks this week included Thunderwood Resources which gave up four cents today before closing at $1.30. Thunderwood and partner Greenstone Resources recently intersected massive sulphides at their Scott Lake joint venture at Chibougamau, Que.

Powered by exploration results at its Myra Falls property near Campbell River, B.C., Westmin Resources shot up by $1.63 to end the week at $6. A recent stepout drill hole intersected 74 ft. of massive sulphides averaging 2.8% copper and 20.4% zinc per ton on the property.

In other news, Arimetco International Chairman Ron Shipes was impressing analysts in Toronto this week with his grasp of solvent extraction which his company is using to produce cathode copper at mines in Nevada and Arizona.

But some in the audience were wondering whether Arimetco can make money while using solvent extraction to become a major player in the U.S. copper industry, especially as the cost of sulphuric acid is so high. A marketing agreement with Billiton Minerals has sparked interest in the shares, which were unchanged today at $3.63.

Hope Brook Gold has elected to suspend operations at its Newfoundland gold mine for the second time within two years in an effort to resolve environment control problems which have plagued the operation. If gold prices stay at recent levels, the mine may not reopen, says John Auston, senior vice-president of mining at BP Canada, which owns 75% of Hope Brook.

Trading of Audrey Resources shares was halted briefly May 24 to allow the company to clarify reports in La Presse that Billiton Resources Canada would pay $100 million for Audrey’s Mobrun mine in Quebec and 50% stake in nearby ore reserves. Audrey was unchanged at $3.55.