Toronto Stock Exchange Soaring bullion prices whipsaw gold index

Gold came back with a vengeance today, Jan. 24., as investors unloaded bonds and equities and sought the refuge of bullion. The trading added more than $8 to the price of an oz. of gold which was set at US$420.75 on the second London fix.

Gold markets flourish in an environment of economic uncertainty and stagnate during periods of stability and growth. The situation today — ethnic upheaval in Russia, imploding communist rule in Eastern Europe, creeping inflation and evidence of a slowing economy — is bullish for gold.

What’s good for gold is usually bad news for every other economic sector. That market perception was harshly demonstrated today with a 51.22-point drop in the composite index, which closed at 3,761.46 points. Just a couple of weeks ago, the composite was flirting with the 4,000-point mark.

Despite the strength in gold bullion prices, gold mining equities were traded nervously all day. The gold and silver index was hurt by a late sell-off and only managed a small 27.22-point gain to 7,819.74 points. Earlier in the day, the index was up by more than 200 points. Today’s volatility was reflected in LAC Minerals, which traded a volume-leading 2.9 million shares to close down an 1/8 at $15.25. Earlier in the day, during the initial rally, LAC soared to a new high of $15 7/8 before being hit by profit- taking.

Other major gold mining shares that were aggressively traded included Corona’s A shares, which were also easier, slipping to $10.50 on volume of more than 760,000 shares. American Barrick Resources managed to add 25 cents to $20.25.

The rally in base metals, which made that sector the star performer in 1989, is definitely over. Zinc, copper and nickel have all declined from their highs to US57 cents , US98 cents and US$2.65 per lb. respectively. The disinterest in base metals plays was clearly reflected in the metals and minerals index, which gave up another 22.12 points to 3,068.44 points.

Surprisingly, most investors have failed to realize that the current commodity prices are still well above the average prices in 1986 and 1987, the reby ensuring healthy cash flows to most major mining companies.

Inco was steady at $26 5/8. Earlier in the week, the issue declined to a low of $26. Although nickel revenues are still strong, the company is beginning to feel the burden of its $1.2-billion debt load. Most of that debt was incurred last year when Inco paid out a special US$10 dividend.

Aur Resources was quiet at $12 1/8. The stock has been hurt by Louvem Mining’s efforts to get a court injunction to stop exploration on Aur’s Louvicourt base metals project in Quebec. Louvem was also stable, closing at $8.25.

Teck appears to be playing poker with the holders of a large block of Pine Point Mines shares. Teck already indirectly controls the company, when it received an offer from a brokerage firm in Toronto to buy the Pine Point shares. The news sent Pine Point to a high of $45.50. Teck balked and the shares closed lower today at $41.75. Teck might reconsider at a lower price. Cominco, which is controlled by Teck and has more than 50% of Pine Point, was better at $24.25.

Tightly held Greenstone Resources made headway on news of a big drill hole completed by Bitech Energy on the Tache Lake property in Quebec. Owned 50% by Greenstone, the property coughed up a 204-ft. intersection averaging about 4% zinc with much higher sections included in the wider core. The issue advanced to $5 7/8.

South Dakota is quickly becoming anathema to exploration geologists. The state is considering a 2-year moratorium on mine development. Goldstake Explorations might be affected by the proposal, which could hurt its gold tailings project in that state. The issue was unchanged at $1.40.

Agnico-Eagle Mines held on to earlier gains to close at $11.50. The company’s Telbel mine near Joutel, Que., will benefit from the higher gold price.

Looking at the other end of the country in the Eskay Creek area of British Columbia, Stikine Resources and partner Calpine have eight drill rigs working on their property. A new reserve estimate being prepared by Roscoe, Postle, Toronto-based consultants, will likely be delayed until the end of February, sources say. Stikine was unchanged at $36.25.