STOCK MARKETS — Gold price plunge drives market lower

Ouch! Gold bullion dropped like a stone following the Labour Day holiday weekend, losing US$14.40 per oz. on Sept. 7 and triggering a big selloff in the gold equities. The bullion meltdown and subsequent decline in the equities were blamed for an overall market slide on that day of 101.88 points for the Toronto Stock Exchange 300 composite index. The TSE gold and silver index lost nearly 10% of its value, falling 903.66 points to 8,198.38 points.

From the overall market standpoint, the question lingers whether this might signal the end of the current Toronto bull market. Pundits, naturally, are split on the question.

More market observers might have been convinced by Sept. 8. By noon that day, the TSE 300 had plummeted another 80 points.

From our perspective, however, we worry more about the behavior of gold. Is this it in terms of a bull market? Two significant price declines have walloped the market since gold hit what had seemed a magic $410 mark. Turns out it might have been black magic.

So the gold equities — senior and junior — took a thumping, post-Labour Day. American Barrick Resources lost $2.75, closing at $29.12 (for the report week it lost $4.62); Hemlo Gold lost $1.87 to close at $11.12; Pegasus Gold shed $4.37 to $23.87; and Echo Bay lost $2.12 to close $12.25. Franco Nevada, meanwhile, closed down $5.50 at $67.25; Placer Dome dropped $2.87 to close at $24; Lac Minerals lost $1.25 to close at $10.37; Agnico Eagle lost $1.87 to close at $14.25; and Cambior lost $1.75 closing at $15.87. Among the smaller issues, Richmont Mines lost a full 80 centsclosing at $4,while Aurizon, with its newly recommissioned Sleeping Giant mine, lost 18 centsto close at 87.

On Sept. 8, the gold stocks continued to slide. For example, Franco lost another $2.75, closing the day at $64.50 while Placer lost another 50 centsand Barrick fell another 75.

The news was no better in the diamond stocks. Dia Met lost ground through the week to close on Sept. 8 at $43, a $2.50 slide. Aber slid 10 centsto $3.05 and SouthernEra shed 75 centsto $5.50.

Some investors might have expected SouthernEra to hold steady with the news that Kennecott was going underground at the DHK diamond ground. With the current foul mood of the market, however, even SouthernEra couldn’t fight the trend.

On a brighter note, news of a second find in the Bathurst camp — Key Anacon announced interesting results a couple of weeks ago — has again enlivened the New Brunswick mining sector. Brunswick Mining & Smelting, a Noranda subsidiary, announced a discovery of about eight million tonnes of Bathurst-grade lead-zinc.

There is speculation, unconfirmed, that next on the agenda is underground exploration. The deposit is known as the Halfmile Lake find (see separate story). It seems quite the coincidence that, only weeks apart, new deposits are trumpeted at the same time the mining folk down in Bathurst bust open the champagne on the 40th anniversary of the magnificent Brunswick find. Out in the wider world, uranium producer Cameco, already with one foot in the door of the developing nation of Kazakhstan, has taken another step. It has announced an arrangement with a Kazakhstan company. Under a 10-year agreement Cameco and partner Uranerz Exploration & Mining will share their expertise in Kazakhstan’s uranium facilities.

The pair of companies will invest $3 million. In return, Cameco and Uranerz get to market some of the former Soviet state’s uranium. They will also co-operate in developing future uranium reserves.

Cameco’s first venture in the central Asian country was the Kumtor gold deposit near Kyrgyztan. A feasibility study is under way there. While Cameco was announcing its deal, embattled Curragh Resources let it be known that it did not fancy the final wording of a financing it had tentatively arranged with Korea Zinc and Samsung.

Said Curragh chief Clifford Frame: “The offer does not meet the investment criteria contained in the original conditional agreement.” He added that advanced discussions are in progress with other investors.