Toronto Stock Exchange Fall below $400, weak gold prices spark

The deteriorating gold situation gained steam today, Jan. 3, as bullion prices collapsed below the critical US$400-mark to US$395 per oz. on the second London fix.

After reaching a high of $418 just weeks ago, gold appears to be struggling to build a new base. The whipsaw trading activ ity was reflected in the gold and silver index which lost 2.37% or 172.63 points to close at 7106.96 points.

Despite the weakness in precious metals, overall trading activity saw a small 5.1-point gain as the TSE composite index closed at 4009.47 points. Volume was firm at 24.5 million shares today.

Some of the larger losses in the gold sector were racked up by the senior issues, companies that gained the most during the rally. American Barrick Resources slipped to $17.88. Talk that the Goldstrike open pit could be affected by water inflows in the near future is not true, Barrick says. Last week, Pay Dirt, a U.S. mining journal, said major water inflows could begin shortly at the Nevada development.

Other easier issues included LAC Minerals at $13.50 and Echo Bay Mines, which gave up 50 cents to $21.13. The amazingly resilient Franco-Nevada couldn’t buck the downtrend, closing at $18.50, off 50 cents from its new high of $19 reached earlier in the week.

Pamour managed to hold on to $4 after weathering a bout of bad financial news from affiliate ERG Resources. ERG owes more than $100 million to a variety of creditors, Pamour included. Control of the company is on the auction block.

Today’s highflyers were both from the Jim Gill stable of mining companies. Aur Resources, Gill’s flagship, surged to a new high of $14.38 on volume of more than 245,000 shares today. Aur is the discoverer of the big base metals deposit in Louvicourt Twp., Que. Louvem, which claims a 50% interest in the deposit (a claim being disputed by Aur in court), was also strong trading up to $9.63.

Traders initially said that rumors of an out-of-court settlement between Aur and Louvem triggered the buying spree. However, by day’s end, that speculation appeared to be untrue. What is true is that deep drilling is in progress at the site.

The other Gill-controlled company that set new highs was Thunderwood Resources. Thunderwood was active, closing above $2. The company has interests in several advanced stage gold deposits in Quebec which could be producing by year-end. Feasibility on the Gold Hawk property is likely to begin shortly.

On the other end of the spectrum, bad news befell companies in the Muscocho group, headed by Terry Flanagan and Jack McAdam. Echo Bay Mine’s investment in the companies has soured to the tune of a $20-million writedown. Also, equity in the companies was swapped for a direct stake in two gold mines, which are being operated by Echo Bay.

Investors dumped shares of both Muscocho Explorations and Flanagan McAdam Resources which closed at new lows of $1.48 and $1.46 respectively.

Base metals issues remained firm today. The metals and minerals index recorded a good gain of 0.75% or 25.57 points to 3452.9 points. Although most commodities retreated during the week, with zinc the big loser, most issues appeared to stall the downtrend in their share prices. Inco eased to $31.88 as did Minnova, which dipped to $18.13.

Zinc-copper producer Metall Mining was unchanged at $12.38. Timmins Nickel, which has a 51% stake in the Redstone nickel mine near Timmins, Ont., tumbled to a new low of $1. The issue came out last summer at $1.75 and traded to a high of $2.39 before embarking on its decline.

Trimin Resources managed to chalk up a gain to $2.60. The company and partner Cameco have boosted reserves at their Hanson Lake zinc-copper deposit by more than 40% to 10.8 million tons. Cameco says a mine could be running by 1992. Full feasibility is in progress. The find makes Trimin one of the handful of junior success stories in 1989 and one to watch this year.