Toronto Stock Exchange June Trading tests nerve of gold investors

The month of June has been a stormy time indeed for precious metal investors who have been forced to endure a punishing test of the $440 (US) per oz price level. During the week, bullion prices plummeted to a low of $437 before recovering today to $440-$441 in sloppy directionless trading. Once again, a strengthing U.S. dollar and sluggish inflation are the culprits for the weakness in gold. However, as stated in this column over the past three weeks, the $440 level is displaying remarkable resistance and a strong support base appears to be building here. This all suggests that the current downward correction in gold equities could be offering some excellent buying opportunites.

For the day, the tse composite index was relatively unchanged; up 1.53 pts to 3,692.52 pts. The gold and silver index showed some recovery to 7,588.73 pts — up 79.77 pts for the day.

The bellweather golds were relatively unchanged, reflecting the sideways performance of bullion. Campbell Red Lake Mines was steady at $32.63 as was Echo Bay Mines which closed at $45.75. On the base metals front, most issues were holding on to recent gains. Inco Ltd, the western world’s largest producer of nickel, was firm at $23.50. However, a sizeable short position of 209,400 shares emerged this week.

The gold mining acquisition of the week is the sale by Sherritt Gordon Mines of its controlling interest in SherrGold Inc to Agassiz Resources for $32 million cash. SherrGold, which owns the producing MacLellan mine in Manitoba, was unchanged at $6. Agassiz which has traded at $4.50, was halted at the close for release of the news.

Murray Pezim’s Galveston Resources, which plans to merge with privately-owned Blackbird Resources, was trading at $5. Blackbird is controlled by a group of Royex Gold Mining directors. The company’s main asset is a boric acid deposit in California’s Death Valley. The deposit is expected to be producing by year-end. Novamin Gold has announced a $6 million underground program for its Rundle gold property south of Timmins, Ont. The issue closed at $3.60.

While most gold issues were slipping, Kam-Kotia Mines was quietly advancing to $3.20 — up 40 cents for the week. Kam-Kotia controls Dickenson Mines, a major gold producer. Audrey Resources has announced official production at its Mobrun polymetallic deposit in Quebec. The stock was unchanged at $4.60.

Easier issues included Highland Crow Resources which dipped to $7.88. Not too long ago, the issue was trading at its high of $14.88. The company is busy building reserves at the old Pickle Crow mine property near Pickle Lake, Ont. Scintilore Explorations was also a loser, closing at $2.75. The company has started a legal proceeding against the two prospectors who staked the original Hemlo gold discovery claims.

Sullivan Mines, which is the subject of a takeover bid from a Montreal-based junior company, was quiet at $6.50. An offer has been made for 51% of the issued shares at $6.62 per share. However, the offer will only succeed if Cambior Inc, which holds a 31% stake in Sullivan agrees to sell. Few think Cambior will sell, as Sullivan is a gold asset and that’s the business Cambior was created to participate in.

Encouraging results continue to come from the Vedron Mines property in Timmins, Ont. The results are obviously of interest to partner Belmoral Mines which plans to merge with Vedron. Belmoral and Vedron closed at $6.50 and $3.50 respectively. A large short position has also popped up in Nova Beaucage Mines. During the week, the shorts sold 63,000 shares of the company which was marginally weaker at 57 cents . Nova Beaucage holds a 35% interest in the Elder mine property near Rouyn, Que. A production decision is expected on the project next year.