Barrick-Homestake merger shakes gold market

Spicing up an otherwise bland week, Barrick Gold, on June 25, announced its intention to purchase American rival Homestake Mining in a paper deal worth US$2.3 billion.

The all-share, friendly offer caused a flurry in trading, pushing Barrick down $1.90 on a volume of 17.4 million shares. Barrick, which is now poised to become the world’s second-largest gold producer, finished the June 20-26 report period at $23.60.

The news gave rise to mixed showings by Canada’s two other major gold producers, with Placer Dome slipping 20 to $16.30 on a volume of 8.9 million shares and Kinross Gold rising 2 to $1.42 on a 10.2 million shares. Kinross had the second-highest trading volume in eastern markets, with Placer assuming third spot.

Franco-Nevada Mining, which draws the largest source of its income from royalties in Barrick’s Goldstrike property in Nevada, plunged 88 before the weekend, only to rebound 45 afterwards to end the week at $19.50. Volumes were relatively light, with 2.6 million shares crossing the floor.

Mid-tier producers fared better: Goldcorp jumped 78 to $17.33; Meridian Gold climbed 65 to $13.40; and Agnico-Eagle Mines edged ahead a penny to $12.95. All three have long been viewed as possible takeover targets.

Overall, the gold and precious metals sub-index plunged 266.32 points to finish the period at 4,705.90. The loss overshadowed a surprisingly strong showing by the yellow metal, which rose $3.60 to a London morning fix of US$276.00 per oz. on June 27. Silver, platinum and palladium all lost ground.

The base metals echoed their precious cousins, with the metals and minerals sub-group losing 5.8% of its value. The biggest losers were: Cominco, off $1.87 at $28.60; Inco, down $1.46 at $25.64; Teck B-series, which fell $1.05 at $12.75; Falconbridge, 83 lower at $16.67; and Noranda, off 31 at $16.60.

As for the physical metals, nickel slipped 7 to a London morning fix of US$2.84 per lb. on June 27. Lead, copper and zinc remained unchanged.

Among juniors, Tenke Mining rose 8 to 78 despite the withdrawal of New-York listed Rio Tinto from its Vicuna gold project in northwestern Argentina. Rio had the right to earn a 51% interest in exchange for US$10 million in exploration funding. A recent first round of drilling cut wide swaths of copper-silver mineralization, and Tenke is now said to be soliciting other majors for a possible joint venture.

Montreal-listed Majescor Resources jumped 6 to 55 on news that it had convinced Australia’s BHP to fund its Portage project, in the Otish Mountains of central Quebec. In return, BHP receives a 56% interest on the start of commercial production.