Broad market hammered by Nortel forecasts

The Toronto Stock Exchange 300 index nosedived 674.8 points during the Feb. 14-20 report period to finish the week at 8,326.68. The 7.6% loss was triggered by a massive sell-off in Nortel shares after management reduced by half its earnings and revenue forecasts for 2001.

Resource stocks offered a safe haven to battered investors, with the gold and precious-minerals sub-index jumping 103.36 points to 3,985.31 points and the metals-and-minerals subindex climbing 90.85 points to 4,165.16.

Gold, devalued by $3.60 on London metals markets, was fixed at US$257.30 per oz. on the morning of Feb. 21. Nevertheless, Barrick Gold gained 45 to $22.20, Placer Dome ascended 49 to $12.75, and Franco-Nevada Mining climbed 60 to $$16.13.

Also up was Kinross Gold, which rose 8 to 76 despite having incurred a $126.1-million loss in 2000. Similar to the previous year, when losses totalled $240.7 million, writedowns took a heavy toll. Average total production costs of US$304 per oz. provided no offset.

Diamond miner SouthernEra Resources edged ahead 41 to $3.11, for a 2-week gain of 56. A bulk-sampling program at the advanced Messina platinum group metals deposit, in which SouthernEra owns a 70.4% stake, has confirmed headgrades and recovery rates used in the feasibility study. The test employed a simplified grinding circuit, which should reduce predicted capital and operating costs.

Nickel prices sank 12 to US$2.85 per lb. However, Inco vaulted $1.29 to $27.11 and Falconbridge jumped 66 to $18.15. On Feb. 19, Inco reported that a recent fire at its Copper Cliff smelter in Sudbury would significantly reduce the division’s copper output in 2001. A day later, Falconbridge came to an agreement with striking workers to resume production at its Sudbury division.

Aur Resources reported a loss of US$15 million for 2000, compared with earnings of US$1.1 million a year earlier. On a brighter note, revenue rose 16% to US$89.5 million, and 2001 copper production should top a record 216 million lbs. as a result of the buyout of the Quebrada Blanca mine from Teck and Cominco. Aur ended the period at $2.14, up 11.

Cameco fell 38 to $29.12 after the company announced a rare $87-million loss in 2000, caused by historically weak uranium prices. Still, the stock has been on a steady march upwards since mid-summer, when it traded in the upper teens. Ongoing concerns over high fossil-fuel costs, as well as electricity shortages in California, are, for the first time in years, improving sentiment towards nuclear-power generation in North America.

Ivanhoe Mines, which cranked out 13,350 tonnes copper cathode in 2000, jumped 22 to $1.57, adding to 19 gained in the previous period. The company has released a slew of good news of late, including the discovery of high-grade gold-silver mineralization in South Korea and the expansion of a copper-gold porphyry system in Mongolia.