STOCK MARKETS — Gold prices drop, but stage comeback

Gold bullion took what seemed a decisive tumble during our report week, dropping US$6 to US$370.10 per oz. However, at presstime (which is one day later than the closing prices in our stock tables) bullion had regained some lost ground, rising to a London second fix on Dec. 1 of US$373.10 per oz.

Most of the senior gold equities were relatively quiet, losing some ground because of the decline in bullion prices. For example, American Barrick was off a dollar to just a shade over $35. Agnico Eagle lost 63 cents to close at $17.88. Both Euro Nevada and Franco Nevada lost 38 cents, with Euro dropping to $44.50 and Franco to $88.75. Lac Minerals held fairly steady, losing only 13 cents to close at $10.75, while Placer Dome was off more than $2 to close at $30.75.

Gold bulls are easy enough to find nowadays. But gold bears are another matter. However, David James, an analyst with Richardson Greenshields, is definitely not bullish. In his Nov. 8 report, he says “a retreat in prices back to the $340s (U.S. dollars) by year-end would not be surprising.” He does not agree with the argument that investors should be buying gold because of its “enhanced return over cash/short-term money instruments.” What with recent interest rate cuts in the U.S. and Germany, this, apparently, is the latest justification for buying the yellow metal. James also cites such unbullish factors as a firm U.S. dollar, the lack of inflationary pressures, and a relatively peaceful world. “Not a particularly favorable environment for a bull gold market,” he concludes.

Meanwhile, the rumor mill churned vigorously this week, as did several stocks, because of a supposedly super-rich core drilled in the Shining Tree area of northern Ontario. No assays have been publicly reported. The intersection comes from ground held by a private company run by Carl Forbes, a promoter. Publicly traded companies that have been acquiring neighboring ground or cutting deals with the private company were actively trading this past week.

For example, CDN-listed Strike Minerals (see “Unlisted trading” table on page 10) hit a high of $1.32 before coming off to 55 cents-60 cents. Before all this speculation began, Goldhunter, an Alberta-listed stock with Peter Purcell at the helm, traded listlessly around 22 cents until the Shining Tree rumors hit. It then bounced to a high of 66 cents before dropping 32 cents in a single day (Nov. 29). It closed our report week at 38 cents.

Findore (CDN) holds ground near the rumored discovery claim. It traded 1.2 million shares, hitting a high of 85 cents.

According to Forbes, who spoke with The Northern Miner by phone, the assay from the hole was so “incredible” he is having it re-evaluated by consultant Jim Tilsley. Core from a second hole is being assayed by Swastika Labs. There are, it should be noted, plenty of skeptics watching this play and awaiting confirmed drill results.

Unrelated to the Shining Tree area, Greater Lenora moved up 14 cents to close at $1.55.

On the base metal side, Cominco staged a $1 runup to $18.75, while Inco lost 25 cents to close at $32. Inco’s steady rise of late can be traced to its production cutbacks and, just maybe, an anticipated turn in the nickel market itself. Analysts’ reports are sprinkled with this turnaround sentiment. For example, First Marathon’s John Lydall calls nickel the “best-looking market from the fundamental standpoint,” which, considering how ill zinc, aluminum and copper markets are, may not be saying much. More than a month ago, he advised “speculative positions” to buy Inco. In his report for November, he concludes: “We think that an important turning point may be at hand, particularly in the nickel market.”

Patrick Mars at S.G. Warburg is more skeptical, forecasting a US$1-per-share loss for Inco next year. He nevertheless opines that the “share price is close to offering long-term attractions” and thinks perhaps 1995 will be Inco’s turnaround year.