Toronto Stock Exchange Gold equities weaken despite strong bullion

Investors sold off gold shares today, Feb. 7, forcing the index below the 8,000-point level to 7,943.92 points, off 73.73 points on the day. The bout of profit-taking came about despite another jump in the price of gold bullion, which closed at US$423.75 on the second London fix. Most analysts see gold prices moving higher during the course of the year, with some looking for an average price of around $450 per oz. Few rallies chart a straight line and the current gold rally is no different. Marked by several volatile price swings during the past month, gold is meeting with resistance around the $420-level. An upside breakout could send shares and the gold index soaring.

Overall trading activity today was lacklustre with a 10.17-point gain in the composite index to 3,779.23 points. Metals and minerals behaved much better, adding 22.53 points to advance to 3,040.07 points at the close. Some observers feel the recent downturn in the fortunes of base metals is reaching a low.

American Barrick Resources was easier, drifting to $22.25. LAC Minerals, now a weekly volume leader, traded more than 900,000 shares to stay unchanged at $15.50. LAC is considering doubling output at its El Indio gold mine in Chile which would give the company annual gold production of one million ounces per year.

Madeleine Mines was an active trader after Kaiser-Francis Oil, an Oklahoma-based company announced a 13.4% stake in the company. Madeleine closed at $5.50.

Two of the most successful gold mining deals in years continued to trade into uncharted territory. Franco-Nevada Mining hit a new high of $22.25 before settling back to $22. Franco holds two rich royalties on American Barrick’s immense Goldstrike development. Euro-Nevada, Franco’s sister company, also traded to a new high of $11.25 before closing at $10 3/8. Euro has a royalty on Barrick’s North claims in Nevada on which another major gold find has been made.

Bema Gold had been a winner over the past month, after announcing a large gold resource of 3.2 million oz. on its property in Chile. The issue slipped to $3.55 today. Goldex Mines, a company within the Agnico-Eagle fold, was also easier, closing at $3.90. The company has a new gold find on ground in Quebec. The high, set recently, is $4.35.

Corona’s A share was stronger at $11 whereas Pamour continued its descent, trading at a new low of $2.25 before managing to scratch its way to $2.35 at the close. Pamour, and the other companies within its fold, namely ERG Resources, are in deep financial trouble following the failure of ERG’s tailings project in Timmins.

Another company that has seen better days is Denison Mines. The company, which many feel is lacking leadership since the passing of its founder Steve Roman, continues to drift aimlessly, this time to a new low of $3 for the A share. The issue closed at $3.10.

Conwest Exploration must like zinc these days. The company, which has a terrific investment track record, is offering a class A share for each 2.5 Mineral Resources International shares held by shareholders. Conwest was weaker at $13 5/8 whereas 50.5% controlled MRI bounded up to $5 1/8. MRI owns the Nanisivik zinc mine in the Arctic.

Inco also managed to come back to life, advancing to $28 3/8 on volume of more than 1.4 million shares. Nickel prices have likely bottomed at $2.76. The price is low enough to keep new projects in the ground, yet high enough to give Inco plenty of cash flow.

Cominco was also better adding 25 cents to close at $23.75. Pine Point Mines, a Cominco affiliate, has a cash hoard of almost $160 million and is looking for something to buy. Pine Point was also a winner, closing at $42.50.

Windarra Minerals drifted lower to 80 cents . The company has a 25% stake in the troubled Magnacon gold mine, now under the control of Echo Bay Mines. There is talk that Windarra wants to exercise a first right of refusal to buy Echo Bay’s interest in the mine. Echo Bay got the stake by swapping equity in Muscocho and Flanagan, McAdam for an interest in the mine. Windarra is controlled by Hemlo Gold, which likes the camp.

Stikine Resources gave up 50 cents to close at $39. The company has a 50% interest in the Eskay Creek gold deposit in British Columbia.