STOCK MARKETS — Toronto gold index volatile as bullion

Gold continued to rally during the week ended May 18, adding US$15 to US$375.25 per oz. in New York and pushing the Toronto Stock Exchange’s gold and silver index up 6.6% to a new 52-week high of 8717.

But today, May 19, the yellow metal went on a roller-coaster ride, breaking through US$380 before sliding back to the US$375 level in New York. A wave of profit-taking knocked more than 500 points off the overheated gold index. The broad market fared no better as Ontario Premier Bob Rae announced the biggest tax hike in Ontario’s history. After picking up 30 points on the week, the TSE 300 index fell 15.6 points today as more than 83 million shares changed hands.

The number of voices calling for a long-term bullion rally are growing. And it seems every gold bug has an opinion as to why the yellow metal may have broken out of its 13-year bear market: inflationary jitters, unrest in Bosnia and other parts of the world, growing demand in China and India, dwindling mine supply, the position of the moon relative to Venus . . . the list goes on and on.

For our report period, speculation that Germany’s central bank would lower interest rates emerged as the gold-booster of the week. A decline in interest rates is considered an inflationary signal and gold, in turn, is often used as a hedge against inflation.

Although the TSE gold and silver index started shooting skyward months ago when gold was languishing at the US$330 per oz. level, the bullion rally has provided an added boost to blue-chip golds such as American Barrick Resources, up $2.50 to $30.13 on the week, Lac Minerals, up $2.13 to $12.75, and Placer Dome, up $1.75 to $23.63. Barrick closed down $1.88 today at $28.25.

But the repercussions of a potentially long-lived rally are also being felt by investors in the junior and medium-sized gold sector. Campbell Resources, which produced 70,222 oz. at its Joe Mann mine in 1992, took the top trading spot during our report period, jumping 57 cents to $1.26 on a volume of more than 12.5 million shares. It lost 18 cents to $1.08 today.

Northgate Exploration, up 75 cents to $1.85, just arranged a deal with an underwriting syndicate to sell its 34.5% stake in Campbell for proceeds of $29.4 million. The 34.5 million shares will be sold at 85 cents each. Also riding high is Muscocho Explorations, whose continued existence may well depend on better gold prices. The junior owns the Magino and Magnacon mines near Wawa, Ont., production at which is on hold.

Trading 8.6 million shares, Muscocho more than doubled to 42 cents and added another 3 cents today.

Central Crude, which has a 40% interest in the nearby Eagle River deposit, added 27 cents to 96 cents. Before depressed gold prices forced Crude and partner Hemlo Gold Mines to abandon mining plans for Eagle River, Crude signed a letter of intent to buy Muscocho’s Magnacon mill.

Hemlo added $2.13 to $13.

With the purchase of 834,374 shares of VSE-listed Labyrinth Resource and plans to make an aggressive exploration foray into Latin America, Bema Gold added 54 cents to $1.89.

Other gold-related juniors touching new 52-week highs during the report period include: Aurizon Mines, up 19 cents to 73 cents; Hycroft Resources and Development, up 75 cents to $2.25; Golden Rule Resources, up 35 cents to $1.35; Queenstake Resources, up 60 cents to $4.15; and Wheaton River Minerals, up 21 cents to 65 cents.

Despite being charged under the Ontario Water Resources and Environmental Protection Acts for a causeway failure at its Cochenour-Willans mine near Red Lake, Ont., Wilanour Resources added 15 cents to 65 cents.

But the junior rally extends beyond the gold sector. Reacting to favorable comments in Robert Bishop’s Gold Mining Stock Report, would-be heavy mineral producer Tiomin Resources (Montreal Exchange) jumped 78 cents to $2.96. “A world-scale deposit, a blue-chip board and a relatively untold story will likely produce a market winner during the remainder of 1993,” Bishop remarked.

And, of course, the diamond stocks remain active. Dia Met Minerals, which has replaced Minnova on the TSE’s 300 index, added $1 to $52.88. Today, it added another $3.38 to $56.50. Dia Met expects to release results from its bulk-sampling program in Northwest Territories in late May or early June.