Toronto Stock Exchange — Merger plan makes Corona volume leader

Gold issues took a beating during the week ended March 17, as concern over the situation in South Africa helped drive the price of the yellow metal down US$9 per oz. to US$340, its lowest level since June, 1986.

Reflecting the gold-silver index’s 255-point slide during the report period, a number of issues, including Amax Gold, Claude Resources, Falconbridge Gold and Teck B, hit bottom.

Analysts attribute gold’s malaise to tension in South Africa, where President F.W. de Klerk won a majority vote for his apartheid reforms, and to distress selling by an Eastern European central bank. Some predict that gold could test the US$320 level in the coming weeks, while others believe the metal will bounce back.

As the de Klerk victory reduces the likelihood of platinum supply disruptions, platinum prices also fell by US$9.35

this week on the spot market

to US$353.90 per oz. Today, March 18, in London, gold steadied while Toronto’s composite 300 index posted its first gain in five sessions. The index moved up 12.02 points to 3451.86 with 31 million shares valued at $280 million changing hands.

Ironically, gold’s free fall occurred while Homestake Mining indicated its intention to merge with International Corona under a $470-million share exchange deal. Homestake needs new ore to replace production from its 114-year-old South Dakota mine, and has has been courting Corona for about a year. The two gold miners seem to complement one another because Corona needs Homestake’s cash to pay down debt and develop its Eskay Creek gold deposit in British Columbia.

News of the proposal pushed Corona far ahead of its rivals as the week’s most active issue. Trading on a whopping 11.6 million shares, Corona advanced by $1.38 to today’s close of $5. LAC Minerals, which ranked second on the volume standings, traded 1.5 million shares. It fell 25 cents to $7.25. Shares of Claude Resources bottomed at 75 cents this week after the company said it would continue to suspend dividend payments on its preferred shares. Even today at 95 cents, Claude is withholding payment after suffering production delays and cost overruns at its high-grade Seabee gold mine in Saskatchewan.

After operating for four years on the brink of insolvency, there was relief in sight for McFinley Red Lake Mines; Placer Dome signed a letter of intent to earn 60% of McFinley’s Bateman Twp. gold project. To exercise the option, Placer Dome must spend $2 million. But closing is subject to approval by Winnipeg contractor Dominion Bridge, which is still waiting to be paid for building a 100-ton-per-day mill on the Bateman property. McFinley was trading today at 23 cents.

In the base metal sector, where blue chips Noranda and Inco faced rising interest rates and negative market sentiment, there were some interesting developments.

Minnova proposed this week to develop three Arctic base metal deposits, including the Izok Lake zinc-copper property in a joint venture with Metall Mining. While Minnova is set to recoup the US$20 million spent to acquire the properties from Falconbridge, estimated capital costs of around US$300 million may explain the apparent lack of enthusiasm in the market. Minnova and Metall were both unchanged today at $16.75 and $12.50, respectively. Noranda added 25 cents after a Dow Jones news service story said that the company expects to break even this year, while continuing to pay dividends “through good times and bad.” Inco also bounced back with a 50 cents spike today after falling $2.13 in the report period.

Toronto-based nickel refiner and fertilizer producer Sherritt Gordon was up 13 cents to $8.88 after declaring 1991 net earnings of $1.2 million or 4 cents a share. In 1990, Sherritt Gordon lost $32.4 million.