Toronto Stock Exchange Gold equities dragged by tumbling bullion

Investors continued to beat on gold equities, dumping shares of companies in all catagories. The index responded to a $4 decline in the price of bullion, which opened at $422.60 on the second London fix. Selling resulted in a loss of 79.91 pts on the gold and silver index, which closed at 5,586.92 pts. Metals and minerals continued to flirt with the 3,000-pt mark, closing 12.42 pts higher at 2,992.47 pts.

Majors such as Placer Dome Inc gave up ground, closing at $16.13. American Barrick Resources was also weaker, ending the day off 37 to $20.38. Hemlo Gold, one of the lowest cost Canadian miners, is trading well below the $12-mark, closing at $11.75. During times of uncertainty with gold prices, Hemlo’s low operating costs make it one of the best defensive gold equities on the market.

Technical and other mining problems are bad enough. During a bear market, they become magnified which places an additional burden on already weak share prices. One issue suffering from both is Agnico-Eagle Mines. The issue continued to freefall, tumbling to a new low of $12. The company, which operates one mine near Joutel, Que., is hurting from operating problems which resulted in the first quarterly loss in more than 10 years.

Another issue, but much more speculative, which got hammered this week, is Newfields Minerals. More than 2 million shares traded hands this week, moving the issue to a new low of 92 before recovering back to $1.09 today. Newfields is active in the Kirkland Lake, Ont., camp with a major underground program.

Other golds which traded lower included LAC Minerals at $12.13 and Canamax Resources, which was easier at $4.95. Golden North Resources, which is controlled by Corona Corp., was also hurt by the selloff, closing at $2.50 — off 70 today. A previous deal between both companies was scuttled by regulatory authorities. Corona, which was steady at $7.88, says that inter-company proposals are being assessed.

Total Energold dipped to a new low of $2.75. The company has shut down its B.C. gold operation to allow for exploration, which could take more than 18 months to complete. The decline reflects the fact that Total now has no gold production income. The company’s main asset is a stake in the big Tundra gold deposit in the N.W.T. That project is several years away from production.

Investors obviously were not scared off by the Caisse de Depot et Placement du Quebec, the big pension fund which is taking Inco Ltd. to court. The Caisse is fighting Inco’s proposed poison pill plan which requires shareholder approval.

After a brief sell-off, Inco came back to close at $39.13, essentially unchanged after the Caisse challenge. Inco is proposing a $10(US) per share special dividend.

Other base metals miners continued to react to robust metal prices. Mineral Resources International was stronger at $4.70 — up 30 for the week. MRI operates the Nanisivik zinc-lead mine in the N.W.T.

Cominco Ltd., which is one of the largest zinc producers in the world, was steady at $22.88. The company plans to have its giant Red Dog zinc mine in Alaska operating by the early 1990s.

Falconbridge Ltd., which is spinning off its gold subsidiary as a special dividend to shareholders, also made gains to close at $23.63.

Inco is not the only one facing a court challenge from shareholders. Rio Algom and Teck Corp., which plan to merge Lornex, their B.C. mining company, into a subsidiary of Rio, are being taken to court by a Lornex shareholder who claims that the deal cannot go through without minority shareholder approval. Rio and Teck both plan to oppose the claim. Teck A shares were firm at $18 whereas Rio remained at $21.75.