STOCK MARKETS — Gold sector outshines TSE composite index

A strengthening gold sector and stable U.S. interest rates did little to boost the Toronto Stock Exchange over the 5-day report period ended Sept. 27. The composite 300 index dropped 16.09 points to end the period at 4,360.78.

In contrast, the gold and precious metals sector moved up sharply, closing the week at 11,188.71 — a gain of 521.61 points over the period. Gold bullion also advanced, with the London afternoon gold fix on Sept. 28 set at US$396.25 per oz., up US$1.35 from a week ago.

Many analysts feel it is just a matter of time before gold breaks through the psychologically important US$400-per-oz. level, a barrier that has not been broken in well over a year.

Higher bullion prices will likely drive the gold sector towards its previous record high of 11,188.71, which was set on Jan. 17 of this year. A decision by the U.S. Federal Reserve not to raise interest rates paved the way for a 10-point drop in the Bank of Canada rate to 5.54%. Expectations are that the major banks will follow suit and trim the prime rate by a quarter of a percentage point. However, if the gap between Canadian and U.S. rates continues to narrow, additional selling pressure may be exerted on the Canadian dollar. The dollar was down almost a quarter of a cent on the week to US74.33 cents.

Rising bullion prices helped the senior producers move higher over our report period. American Barrick Resources was the big winner, adding $2.13 to $36.75; Hemlo Gold Mines was up 50 cents to $15.63; Lac Minerals tacked on 88 cents to close at $17.75; Echo Bay Mines jumped $1.25 to $18.75; and Placer Dome posted a gain of $1.75 to $34.75.

Placer’s share price was buoyed by news that the company has increased the mineral resource at its Las Cristinas gold project in Venezuela to 8.6 million from 7.7 million oz. gold. Based on previous studies, Placer estimates that 70% (or about 6 million oz.) will fall within one open pit. A feasibility study is under way on the deposit.

Another company reporting an increase in reserves was Triton Mining. Minable reserves at its Limon gold mine in Nicaragua have increased by 58% to 375,700 oz. gold. The mine produces about 24,000 oz. gold per year, and Triton plans to double production by mid-1995. The company gained 25 cents to close at $3. Having a 28% equity interest in Triton failed to boost the share price of Repadre Capital, which lost 5 cents to $3.45. In addition to owning shares, Repadre has a royalty interest in Triton’s Nicaraguan projects. Other royalty companies were mixed on the week, with Franco-Nevada Mining jumping $2.50 to $87.50, Euro-Nevada Mining remaining unchanged at $42 and Redstone Resources closing down 25 cents to $5.50.

News of positive drill results from a wholly owned subsidiary of Princeton Mining at the Ingerbelle East deposit continues to impress investors. Almost 900,000 shares changed hands as the stock hit a new high before edging off to finish at 91 cents, up 15 cents on the week.

Drill results also helped Rio Narcea, which hit a new 52-week high. The company has discovered a new zone of gold mineralization on its Boinas-El Valle property in northern Spain. Six holes were drilled in an area between the Boinas and El Valle deposits, with the best intersection assaying 0.39 oz. gold over 52.5 ft. Rio Narcea shares jumped 21 cents to close at $1.70. Two Montreal-based companies have agreed to merge and combine several of their gold and lithium properties in northern Quebec. Wrightbar Mines and Charlim Explorations said the combination would facilitate financing needed to complete additional exploration and development. Wrightbar shares remained unchanged at 32 cents, while Charlim shares added 4 cents to close at 23 cents.

Gold producer Cambior announced a $16.7-million writedown at its Valdez Creek placer operation in Alaska. The writedown, which is the result of gold mineralization grading 30% lower than estimated (at the A8 pit), had little effect on the stock price. Shares of Cambior gained 13 cents to end at $20.50.