Toronto Stock Exchange Gold breaks $400-mark as rally gains steam

The equities rally, the only highlight of any kind in a generally dull market, ended the week with a 1.75% gain. The weekly gain would have been much higher but for another bout of profit-taking on Nov 22 which clipped 1.54% from the gold and silver index.

In fact, mining companies themselves are not showing much faith in the rally by deciding to rush through new share offerings priced near their new 52-week highs. LAC Minerals in particular took a beating on Nov 22 after announcing a big $294-million issue at $14 per unit. The stock immediately sold off to close at $12.88 on volume of almost two million shares.

Overall trading activity has continued to trend down as most sectors weakened on poor economic forecasts. Trading today (Nov 22) saw another 13.06 points clipped from the composite index which closed at 3920.5 points. The metals and minerals index was also easier, losing 10.24 points to end at 3351.96 points.

The base metals boom appears to be ending as shares of major and junior base metals companies languish. An economic downturn will reduce demand for most metals, analysts say. The result of such forecasts is being reflected in easing commodity and equity prices.

LAC is not the only big gold miner looking to cash in on the gold rally. American Barrick Resources was the first to announce a “bought deal” to raise $110 million. Barrick’s shares are being issued at $36.75 each. The issue closed today at $37.25. Many expect Echo Bay Mines which, unlike the other two companies, has no cash to come out with its own issue. Echo Bay was also easier at $22.75, off a quarter.

Placer Dome and Corona Corp. also slipped today to $21.88 and $10.50 respectively. Corona traded a whopping 2.4 million shares today and more than six million shares during the week.

The big news of the week concerns Aur Resources, which was essentially unchanged at $13.13. Lance Tigert, a Noranda Inc. officer, told The Northern Miner’s Peter Kennedy that the company would not support the start of an underground program at the Louvicourt base metals find in Quebec until the Aur-Louvem court suit is settled. If such a threat is carried out, then the project could be hurt by a significant delay. Under the terms of their deal, Louvem is supposed to become the project operator when the underground phase begins.

Louvem and parent company St. Genevieve Resources were both firm at $9.88 and $2.27 respectively. Noranda is a major shareholder of the latter two companies and has been a big buyer of late in Louvem’s shares.

Private investor Jacques Forget and his company Invesfor, which holds a 6% interest in Dumagami Mines, has sent out a letter urging shareholders of Dumagami to reject Agnico-Eagle Mine’s merger proposal. Forget says the offer of 1.7 Agnico shares for each Dumagami share is too low. Agnico was firm at $10.75.

Pine Point Mines issued a release saying that it has no explanation behind the rise in the company’s share price. Pine Point traded to a new high today of $41.50 before settling back to $40.50. The company is controlled by Cominco Ltd.

Brunswick Mining and Smelting, the Noranda-controlled affiliate, slipped to $11.38. The company says drilling north of its No 12 mine has found another sulphide zone. Noranda Inc. was steady at $24.13.

Inco Ltd. continued to slide, closing at $33.88. Although the company sees nickel prices staying firm in 1990, investors remain spooked by the looming recession and continued unloading base metals stocks.

Goldex Mines held on to recent gains to close at $4.10. The company says it has made a new gold discovery on ground held by ME- listed Ormico in Quebec. Goldex is controlled by Agnico-Eagle.

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