Toronto Stock Exchange Low inflation scenario batters gold issues

Today’s 10.7-pt jump moved the index to 3669.46 pts, not far off the high of 3696.14 pts. The good news about inflation for the majority of investors, was obviously very bad news for the battered gold sector which took another drubbing. In fact, each day’s list of new lows is packed with junior gold issues too numerous to mention in this column.

Gold bullion slipped to $371.90 on London’s second fix. With a surging U.S. dollar combined with the low inflation scenario, some analysts see gold dipping to $360 before building a base.

Gold’s decline was mirrored in the gold and silver index which gave up 39.35 pts to close at 5308.85 pts. Metals and minerals managed a small 3-pt gain to 3461.45 pts. Today’s volume was a healthy 27.7 million shares.

Agnico-Eagle Mines plans to introduce a poison pill to its shareholders for approval at its upcoming annual meeting. The Eagle traded at $9.75, off 25 cents today. Hemlo Gold Mines remained unchanged at $13.13.

Senior gold proxies such as American Barrick Resources and Echo Bay Mines were both easier. Barrick closed at $24.13 whereas Echo Bay was off 13 cents to $16 on volume of 176,000 shares.

LAC Minerals and Corona Corp. are hoping to hear the results of an appeal hearing from the Supreme Court of Canada before the end of June. However, the retirement of a judge might force the appeal to be re-heard. The appeal concerns the ownership of the Page-Williams gold mine, Canada’s largest. LAC was softer at $11.25 whereas Corona’s A shares gave up a quarter to $7.75.

Base metals mining companies continue to trade at absurdly low price-earnings multiples of less than five times. Although most of the majors reported record first- quarter earnings and expect similar results this quarter, investors remain gun shy. Many players believe the days of hig h commodity prices are coming to an end. However, John Lydall at First Marathon Securities feels the fundamentals for nickel, copper and zinc are still looking good.

Minnova Inc. is one base metal miner which is making little money. With dismal first quarter earnings, the issue continued near its low of $18.50.

Both Falconbridge Ltd. and Inco Ltd. managed to hold their ground. Falconbridge dipped marginally to $32.25 whereas Inco remained unchanged at $37.63 on volume of 247,000 shares. Noranda Inc. was another big trader as more than 200,000 shares were traded leaving the issue unchanged at $23.

Talk is that Jascan Resources is close to resolving its dispute with partner Atlantic Goldfields, a COATS-listed issue. Both are cash rich. If they can get their differences cleared up, they will get back to the business of doing deals — the kind that made them plenty of money in the past. Jascan was firm at 44 cents .

New Golden Sceptre Minerals has entered the stable of companies controlled by mining executive Patrick Sheridan. This is his second TSE-listed company. (The first was Madeleine Mines). Sheridan’s plans for Sceptre, which has cash of about $5 million, remain unknown. The issue was steady at 21 cents .

Rayrock Yellowknife Resources is being recommended by several analysts as a buy. The issue was unchanged at $7.63. Several new gold mines and an exciting copper play in Chile are keys to Rayrock’s earnings growth in the next few years.

Granges Exploration managed to recover to $3.20 after dipping to a low of $2.50 earlier in the week. Australian company MIM Holdings will become Grange’s largest shareholder after injecting up to $50 million in a private placement.

Eastmaque Gold is watching Minven closely. The U.S.-based company has a 20% stake in Eastmaque, and by looking at Minven’s past record, will likely try to increase its interest in the future. Eastmaque, which is producing gold from two projects, was off a dime at $2.80.

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