Toronto Stock Exchange Traders spooked by signs of economic

Gold bullion slipped to $383.85 on the second London fix, a decline of which was reflected in the gold and silver index, off 11.34 pts at 5642.31 pts. Metals and minerals reacted negatively to the growing perception that the economy is slowing down. Investors sold off copper, nickel and zinc shares which depressed the index by 17.78 pts to close at 3346.96 pts.

Most senior gold issues remained unchanged, reflecting the general lethargy in the gold market. LAC Minerals managed a small gain to $12.75 whereas Placer Dome Inc. gave up a few cents to $15.63.

Hemlo Gold Mines, Canada’s lowest-cost gold producer, was steady at $13.50. Echo Bay Mines, another senior producer, was also unchanged at $17.13.

Despite the fact that gold issues have experienced a major downturn since the beginning of 1988, analysts at James Capel in London conclude that the majority of the senior gold mining companies are still trading at exorbitant price earnings multiples which are discounting unrealistic gold prices.

One former stellar performer that is feeling the heat from nervous investors is Agnico-Eagle Mines. Once the darling of the institutional set, the issue is hurting from poor gold and silver prices. The Eagle fell to another new low of $10.75 today. Dumagami Mines, which owns a major new mine in Quebec, was also easier at $12.25. Dumagami’s largest shareholder is Agnico-Eagle.

An exciting comeback story is in the making at Galactic Resources. Once maligned for problems at its Summitville mine in the U.S., the company has a winner on its hands in its 48% interest in the new Ridgeway gold mine in South Carolina. Operated by BP, the mine’s first quarter exceeded all operating parameters and is looking at producing in excess of 170,000 oz of very low cost gold this year (see front page story). The issue, which is still near its low, perked up to $4.15. We also note that several major mining analysts are beginning to give the positive nod to Galactic once again.

Signals that the economy is beginning to slow down took some more steam out of the engines of the base metals producers. Spurred by booming commodity prices, which in turn were fueled by strong demand from industry, base metal companies have generated record earnings of late. However, investors remain unconvinced that the boom will last and are getting defensive.

Inco Ltd. slipped to $36.38 while Falconbridge Ltd. gave up a quarter to $30.75. Together, the two companies control almost half of the world’s nickel market. Both also had record profits in 1988 and will likely make bundles of money this year.

Cominco Ltd., soon to be the world’s largest zinc producer, advanced to $25.88. Rio Algom, which attributed a big profit increase last year to copper prices, was steady at $24.50. The company has an interest in Highland Valley Copper in British Columbia.

Declining reserves and high costs are the bane of any mining company. At Blackdome Mining Corp.’s operation in British Columbia, the former is taking its toll on share prices, which dipped to a new low of $3.30 before recovering a dime to $3.40.

Bachelor Lake Gold Mines is suffering from the latter at its mine in Quebec. With costs around $390 (US) per oz, the mine is generating plenty of red ink. The issue was off a nickel at $1.10.

A large block of Pronto Explorations’ flow-through shares — 1.9 million shares to be exact — were picked up by an unknown buyer this week. The move helped move that issue to 38 cents , up almost 20 cents in two weeks.

Silver miners Equity Silver and United Keno Hill managed to rebound from new lows this week to close at $4.35 and $3.60 respectively.

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