STOCK MARKETS — Base metals among losers in lacklustre week

Gold bobbed around in the neighborhood of about US$350 per oz. during our report week (ended Sept. 28) and the gold equities more or less held their ground. Typical of the week were American Barrick, down nearly 50 cents to $30.25, and Franco Nevada, up half a buck to $68.

Obviously, the action wasn’t in the gold equities. The base metal sector, however, was moving — mostly down, unfortunately.

For example, the shares of Minera Rayrock slumped this week. A phone call to the company elicited the response that its Chilean copper project was proceeding glitch-free. So we’re left to presume the stock’s 50 cents drop to $1.80 over the report week is linked to weakness in the metal market. Indeed, copper did suffer. Mired in not only a cyclical, but also a seasonal, trough (construction activity and automobile production lag in winter months), copper prices slipped to a 6-year low of US77 cents per lb. A “pure” copper stock like Gibraltar lost only 12 cents to close at $5. Also displaying weakness in the base metals sector were Noranda, down an eighth of a cent to $20.75, and Inco, down more than 50 cents to $23.75. With copper prices at such pathetic levels, one could wonder about the sanity of some of the majors — Lac, for example, Placer Dome and Inco — bidding for a Chilean copper property (see last week’s paper). However, keep two things in mind: one, a project’s attractiveness depends very much on its position in the production cost curve and, two, the metals are cyclical, the metals are cyclical, the metals are cyclical (like all good miners experiencing the cyclical low point, we repeat this like a mantra). Cyclical low or not, Metall Mining continues its aggressive campaign toward big-league status. First came news that it was doubling its stake in Ok Tedi, a Papua New Guinean producer of a yearly 426 million lb. copper (in concentrate) and 326,218 oz. gold. The very aggressive Metall also made it clear that it is negotiating for an even larger chunk of the open-pit producer.

As well, Metall is in the midst of acquiring copper smelting and refining operations in Europe and negotiating an option on a copper smelting and refining project in Indonesia. And as if that weren’t enough, late in the day on Sept. 29 came news that its gold exploration plays were being tossed into a 50-50 venture with Poseidon Gold, an Australian company.

Along with a Turkish play, the joint-venture partners are most keen on the Troilus deposit in northern Quebec. Metall has delivered a positive feasibility on the project. To bring into production a 10,000-tonne-per-day mine yielding about 150,000 oz. per year would cost about $130 million, according to Metall’s projections.

The company is now negotating with banks and the Quebec government for infrastructure support and permitting.

Azco rebounded nicely from the blow dealt it when Magma Copper announced a couple of weeks ago that it was dropping out of the development of the Sanchez copper play in Arizona. Azco shares immediately shed about a quarter of their value. This week, investors clearly felt the stock was oversold. Azco gained 95 cents to close at $3.65.

Arimetco International, a small copper producer, continued its slide. For the week, it was down 30 cents to $1.80. At presstime, the company announced several cost-cutting measures both at its operations and at HQ in Tucson. About 20% of the staff in the corporate offices have been let go and all officers have suffered salary cuts.

Times are tough, production costs run from US65 cents to 70 cents per lb. Company founder (currently chief executive) Roy Shipes hasn’t drawn a salary for the past five months, and while he no longer handles the day-to-day business, he is trying to sever the company’s links with Breakwater Resources. This involves coming to some agreement with Dundee Bancorp over the Breakwater loans Arimetco holds.

Finally, a late press release from Wheaton River notes that two more samples from trenches along a new zone on its Golden Bear property assayed between 0.104 oz. per ton across 62.3 ft. and 0.225 oz. per ton across 59 ft. (The first inkling of such a zone is reported in a story in this issue.) Wheaton plans a winter program of drilling.