STOCK MARKETS — Great Bre-X belly-flop sinks entire gold market

Widespread carnage among TSE golds; base metals also take a bashing The report period ended April 1 was no joke at the Toronto Stock Exchange, where the Bre-X Minerals bomb of the previous week turned nuclear and obliterated the share prices of every company associated with gold exploration in Kalimantan, Indonesia.

Once-mighty Bre-X lost 75% of its value, falling to $3.85 from $15.50 after reaching a low of $2.25 following statements by the company and New York-listed Freeport McMoRan Copper & Gold which indicated serious doubt about the size and minability of what had only recently been considered the mother of all gold deposits. Almost 16 million Bre-X shares were traded during the report period.

Although trading in Bre-X was halted for portions of the period, the 45 minutes following 3 p.m. E.S.T. on Thursday, March 27, were sufficient to beat the price down by an astonishing $13.

Bre-X’s parent company, Bresea Resources, dropped 78%, closing down $5.31 at $1.54, and Minorca Resources, which holds a 7% indirect interest in part of the Busang project, was down 64%, falling to $1.65 from $4.60.

The list of the other big losers in TSE trading reads like a Who’s Who of Indonesian mining interests. Scorpion Minerals lost more than half its stock value, plunging to $3.45 from $7.25 despite having just received its long-awaited contracts of work from the Indonesian government.

Montreal-listed Tandem Resources and Diadem Resources, which share Kalimantan exploration projects with Bresea, saw their shares drop by 41% and 38%, respectively. Tandem plummeted to 80 cents from $1.35 , while Diadem fell to $2.75 from $4.45.

Among the other heavily traded Kalimantan project operators this week were: International Pursuit, down $1.30 to $3; Vancouver-listed Indomin Resources, down $2.25 to $3.85; and Borneo Gold, also on the VSE, down $2 to $3.10.

Junior golds that have never set foot in Indonesia were also dragged down by the Bre-X bust. Corriente Resources, which has gold properties scattered across South America, lost $1.60 in heavy trading to close at $16. Golden Rule Resources, whose affiliate, Hixon Gold Resources, is working in Ghana, lost $2.95 to close at $7.20.

Even the more senior gold producers were caught up in the selling spree.

Barrick Gold lost $1.90 to close at $33.10; Placer Dome fell $1.35 to $24.75; Cameco closed down $2.50 at $52.90; and Teck lost $1.35, falling to $30.50.

The TSE 300 composite index closed down 243.39 points (4%) at 5,900.37, primarily as a result of a hike in the U.S. Federal Reserve’s discount rate, and, of course, Bre-X.

The gold and precious metals sub-group shed a whopping 857.62 points (8%), finishing the period at 9,587.91. The bulk of the damage was done before Good Friday.

The price of gold on the London bullion market rose $3.90 over the report period, closing at US$350.70 per oz. on April 2. Uncharacteristically, the platinum price lost almost as much as was gained by gold, closing at US$368.75, down $3.25. Silver lost 12 cents, falling to US$4.98.

The American dollar surged during the report period, yet the loony held its ground, closing out April 1 at the same value it had on March 26: US72.77 cents.

The TSE’s metals and minerals sub-group dropped 217.25 points (3.9%), closing at 5,360.41, proving it was a bad week for mining issues overall. Nickel leader Inco was down $1.90 to $45.65, while rival Falconbridge lost $1.40, falling to $29.05. Noranda shares also dropped, losing $1.50 to close at $30.60.

At least one mineral commodity was unaffected by the Kalimantan situation: Potash Corp. closed up $2.70, at $106.85.


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