Toronto Stock Exchange Metal stocks up as Noranda tightens purse

Base metal stocks continued to benefit from the prospect of lower interest rates and the likelihood of a peaceful solution to the Gulf crisis during the week ended Dec. 11. The big producers including Noranda, Metall Mining, Inco and Cominco moved into positive territory as the Bank of Montreal announced that it was dropping its prime lending rate by 0.25% points to 13%. Today, Dec. 12, as the metals and minerals index gained 36.72 points, shares of Noranda added 37 cents before closing at $17. Inco and Metall both added 25 cents, while Cominco was a winner adding 13 cents to close at $22.63.

However, the brass at Noranda figures that interest won’t drop low enough in 1991 to stop the company’s $3.9-billion debt load from increasing unless Noranda tightens its purse strings.

If cost-cutting measures don’t work, analysts believe core assets like Hemlo Gold will be up for sale. Speculation has it that the cash-strapped Bronfman family that controls Noranda would gladly take $15-20 a share of Hemlo if offered. Shares of the low-cost gold producer closed down 25 cents at $9.75.

The president of Hemlo Gold’s 38% owned affiliate Central Crude denies that there is any connection between his choosing to raise $7 million via sources outside of the Noranda group and speculation regarding Hemlo Gold. Central Crude dropped 10 cents from its share price today and closed at $3.80.

Noranda’s decision to tighten the purse strings comes as Audrey Resources is looking for a company with deep pockets to finance development of new ore at the Mobrun polymetallic mine.

Partner Minnova’s reluctance to step up to the plate until it has reviewed a mine feasibility study may be proof of Noranda’s unofficial view that the eventual net smelter return is “a bit thin” for an outlay of as much as $90 million. With a decision pending, Audrey was even at $3.40, while Minnova remained stalled at $15.75.

As the composite 300 index posted its fourth increase on the trot to end the week up 13.3 points at 3252.54, gold didn’t fare quite so well. Reflecting a drop in crude oil prices and an easing of tensions in the Middle East, the yellow metal sank to US$370.90 in London, down US$6 from last week.

Already under pressure from the depressed oil picture, a number of gold stocks took it on the chin. Franco-Nevada was the biggest casualty. It gave up more than $3 during the reporting period to end the week at $14.25. American Barrick Resources also took a beating. It gave up 25 cents. Down 13 cents today, Echo Bay is back on the Shearson Lehman buy list. The stock has been oversold on speculation relating to a writeoff on Echo Bay’s investment in the Robinson gold/copper property in Nevada, says analyst John Phizackerley.

According to Shearson, the predominant factor about gold’s performance over the past two weeks is that any strength has been induced in New York, only to be met by profit-taking sales out of the physical centres in the Far East and the Middle East.

Shares of LAC moved up 13 cents as the company contemplates results from exploration near its Bousquet No. 2 mine in Quebec. LAC is rumored to have obtained some encouraging intersections on near ground held by Agnico-Eagle Mines. But Agnico gave up 12 cents today.

News that Robert Friedland’s new company South American Goldfields has agreed to buy the joint venture property interests and other physical assets of Homestake International Minerals in Guyana has resulted in an improved share price. Shares of South American Gold ended the week up 8 cents at 91 cents.

Unemployment statistics drove the price of platinum down US$7.90 to US$8.50 lower at US$413.40 an oz. The prospect of a recession is construed as bad news for platinum because of its use in automobile manufacturing and jewelry.

No word has come yet from Northgate Exploration, even today at $1.30, about the fate of the Colomac gold project in the Northwest Territories.