STOCK MARKETS — Diamond issues fall on Tenby report, Joutel

Investors in the gold and diamond market found little to cheer about in the first days of the new year as bullion tumbled to a 7-year low and diamond stocks responded to a “disappointing” news release from the

Aber-SouthernEra-Commonwealth consortium.

Although, on the whole, gold issues have held up under the pressure of falling prices, analysts believe shares of unhedged producers will weaken if the deterioration continues.

Partly because of a strengthening U.S. dollar, gold dropped more than US$5 to US$327 per oz. on Jan 4, its lowest level since 1986. Today, Jan. 6, the precious metal closed in London at US$329.60. Sales by central banks, Australian and South African producers and Middle East traders contributed to the decline.

But despite the setback, shares of market darlings American Barrick Resources and Placer Dome rose slightly during the report period and the gold index added 25 points. Barrick, which has hedged 5.5 million oz. of future production at US$415 per oz., added 50 cents to $38.88. Placer tacked on 38 cents to $14.50.

Announcing stellar third-quarter earnings of $6.2 million, compared with $1.9 million for the same period last year, Franco-Nevada Mining added 37 cents to $26.75.

With the exception of Lytton Minerals, all the heavily traded diamond stocks fell sharply. Among those hardest hit were SouthernEra Resources, down $1.40 to $3.50; Aber Resources, down 62 cents to $2.25; Pure Gold Resources, down 8 cents to 39 cents and Tyler Resources, down 12 cents to 65 cents. The market was responding to the latest results of a summer drilling program on the Aber-Commonwealth-SouthernEra group’s Tenby claims, which uncovered only six microdiamonds in seven kimberlites.

Aber added 4 cents today to $2.29, while SouthernEra lost another dime. Richardson Greenshields’ David James believes Aber’s initial targets, spotted close to the base camp, were not particularly high priority targets, but geophysical anomalies chosen before most of the geochemical information was available. Another 30 targets will be drilled during the spring program. Those seeking diamond fortunes in Africa also took a big hit after a year-end runup. United Reef Petroleums lost $1.87 to $2.88 while Sikaman Gold Resources shed 30 cents to 65 cents. T&H Resources lost 14 cents to 39 cents. United Reef rebounded today, climbing to $3.20.

Lytton, whose 85-million-odd shares are thought to be held mainly by a close-knit group of North American and European investors, managed a 4 cents gain to $2.10.

Claiming the top spot on the most active list as more than 5.6 million shares changed hands, Joutel Resources added 5 cents to 18 cents. The junior jumped another 11 cents today on a volume of 5.8 million shares.

Company spokesman Charles Page said investors with renewed interest in the junior market are taking a closer look at Joutel, which holds a number of high-quality exploration projects stretching from Quebec to Cuba. “There seems to be a new euphoria in the junior market that we haven’t seen for a while,” said Page. “People are getting reacquainted with Joutel.” Three rigs are now turning on the Douay property near Joutel, Que., as partners Soquem and ME-listed Societe d’Exploration Miniere Vior launch a $600,000 drilling program to increase gold reserves discovered last year. Vior lost 2 cents to 34 cents.

Canadian companies operating in Chile also generated some attention. In northern Chile, International Mahogany (TSE), down 6 cents to 83 cents, has resumed production at its Tuina copper mine. Princeton Mining, unchanged at $1.45, reports that it will begin drilling its copper porphyry project, also in northern Chile, on Jan 19. Minera Rayrock was unchanged at $1.20 after announcing that it will issue special warrants for gross proceeds of up to $3.7 million to finance exploration and development on its Chilean copper projects.

The copper price edged up 3 cents to US$1.06 during the report period. Also showing strength was nickel, which tacked on 18 cents to US$2.82 per lb. The long-awaited improvement in nickel prices was a boon to Inco, which added $1.38 to $29.63 in a 52-week range of $19.13-34.38. Sherritt Gordon lost 13 cents to $6.25.