Toronto Stock Exchange (August 26, 1991)

For the second time this year, gold has failed to live up to its reputation as a sure-fire investment during periods of political upheaval. As Soviet troops rolled into Moscow during the week ended Aug. 20, gold barely surpassed the US$361 mark before tumbling back to close at a pre-coup price of US$356.

Investors hoping to reap short-term gains on the yellow metal shared the same fate as speculators who placed their bets on the eve of project Desert Storm last January. At that time, gold’s brief rally over US$400 was quickly stifled by profit-taking and producer selling.

Today, Aug. 21, the hardliners that took power only two days ago have disbanded, allowing Gorbachev to resume his position as Soviet leader, according to a Soviet broadcast. In the words of British Prime Minister John Major, the failure of the coup is proof that the process of Soviet reform is “irreversible.”

In response to the good news, the Dow Jones industrial average surged ahead 88.1 points while the TSE 300 composite index, tempered by losing gold stocks, picked up 26.8 points on a volume of 20.1 million shares. The Gold and Silver index shed 72.2 points to close at 5169.2.

American Barrick Resources, the week’s most active trader, lost 38 cents today to close at $27.38, after touching its 52-week high of $28.25 on news of Gorbachev’s downfall.

Nickel prices were unchanged at US$3.72 over the week as fears of a general strike by Soviet miners offset the effect of a 3-year contract agreement at Falconbridge’s Sudbury operations. The new contract, said to be similar to Inco’s recent settlement, awards total increases of about 26% over three years.

At LAC Minerals’ office in downtown Toronto, the champagne corks were popping as shareholders at 65% owned Bond International Gold approved a share exchange scheme making Bond a wholly owned subsidiary of LAC. The approval vaults LAC into the million-oz.-per-year club as North America’s fourth largest gold producer. LAC finished the week at $10 even for a gain of 38 cents.

Across the country in Vancouver, International Corona has changed its shareholders’ rights plan in response to pressure from investors unhappy with Dundee Bancorp’s favored treatment. Under the new arrangement, the poison pill will be triggered by any shareholder, including Dundee, owning more than 15% of the company. Corona had earnings of $3.8 million (three cents per share) in the second quarter.

But Corona’s balance sheet continues to be dragged down by its 27% owned affiliate Breakwater Resources. The zinc producer lost $12.4 million (18 cents per share) in the first half of the year, pushing its share price to a yearly low of 23 cents and prompting Corona to take a $21.9-million writedown on its Breakwater investment.

Queenston Mining was also toying with yearly lows before reports of a gold-bearing intersection at its property near Kirkland Lake, Ont., hit the streets. Although program operator Battle Mountain Canada refused to comment on recent results from the property, word is that the senior company hit a 16-ft. interval grading 0.27 oz. gold per ton.

Queenston gained three cents on the week before dropping back to close at 73 cents on Aug. 21.

Speculation would also have Flanagan McAdam Resources on the verge of a deal with Central Crude for the sale of the Magnacon mill near Wawa, Ont. Central Crude could use the mill to process gold ore from its 40% owned Eagle River deposit, where reserves stand at 2.87 million tons grading 0.25 oz. Crude shed 25 cents to close at $1.38, while Flanagan touched a low of three cents during the week.

While copper prices remained virtually unchanged at US$1 per lb. on the LME, Cambior’s U.S. division purchased Denver-based Westmont Mining, owner of the Carlota copper project in southern Arizona. Carlota hosts four oxide deposits with proven and probable reserves of 53.7 million tons grading 0.45% copper. Cambior closed the week up 63 cents to $10.25 on a volume of 238,400. Gaining a quarter on the week to $16.63, Rio Algom has arranged to purchase 1.07 million shares of El Condor Resources. The placement will give Rio an initial foothold into the Kemess gold-copper project in north-central Brit-ish Columbia.