Toronto Stock Exchange Gold sustains recent gains in price runup

Some heavy buying from the National Commercial Bank in Jedda helped to drive gold to its highest level since late January, during the week ended June 11. While the inevitable increase in the price of precious metals stocks reflected renewed confidence in gold, analysts say they are waiting to see what happens next on the gold front before drawing any conclusions.

After gaining US$11 per oz. throughout the week, gold closed at US$372 today, June 12, in London. However, as investors are waiting for more figures to indicate how inflationary the anticipated economic recovery will be, trading activity on Toronto’s 300 composite index was relatively listless. Today, the index gave up 14.13 points to close at 3558.12 on a volume of 41.2 million shares. (The high volume was attributed to heavy trading in Ranger Oil.)

When asked if the spike in gold was just a temporary blip or the start of a new bull market, Peter Cavelti, president of Cavelti Capital Management Ltd. in Toronto, said it would be unwise to call it either one or the other. “We need more evidence,” said Cavelti, who manages five gold mutual funds.

“Gold has been trading in a very narrow range between US$345 and US$410 for a very long time,” he said. “While the downside appears to be firm, producers have been putting a lid on the metal by selling forward every time gold probes its upside.” Nevertheless, Cavelti expects gold to rise to $400-410 within the next six months.

Such a move would be welcomed by American Barrick Resources, which is still talking to Newmont Mining about a possible merger. After gaining $1.38 this week, Barrick gave up 25 cents today to close at $25.13. Shares of Placer Dome and Agnico-Eagle Mines were unchanged, while LAC Minerals advanced by 13 cents to close at $9.

Pegasus Gold, down 25 cents today, expects to raise $44 million by issuing new shares with warrants attached. The company has reached an agreement with Burns Fry Canada Ltd., Richardson Greenshields of Canada and Bunting Warburg Inc., on the sale of three million units priced at $15.50 each.

Meanwhile, rumors continue to surface on the state of negotiations involving Audrey Resources and possible purchasers of the company’s Mobrun polymetallic mine near Rouyn-Noranda, Que. Insiders say Audrey is about to announce the sale of its assets to Billiton Resources Canada Inc., as part of a $150-million deal requiring the Royal Dutch Shell subsidiary to purchase Minnova’s interest in the mine. However, an Audrey spokesman called the prediction premature. “There are a lot of rumors going around,” she said. Audrey finished the week up 15 cents at $3.45.

As platinum corrected itself from last week’s steep drop, Madeleine Mines saw some activity before ending the week on even ground at $5.13. News that demand for silver in 1990 exceeded supplies for the first time in 13 years was the reason for a 21-cent increase in the price of United Keno Hill.

Timmins Nickel was also active after purchasing Belmoral Mines’ 36.5% interest in gold exploration company Vedron. As a result, Timmins Nickel now owns 38% of Vedron’s equity plus all of the company’s $5.8 million debt. In return for the interest, Timmins Nickel is paying Belmoral $270,000 to discharge $400,000 worth of promissory notes. Down three cents today, Timmins ended the week at 85 cents.

Meanwhile, St. Genevieve Resources Chairman Pierre Gauthier was in a buoyant mood after his company sold 4.35 million shares of Societe Miniere Louvem to Noranda for $6.50 a share. Shares of Louvem, now a 52% owned Noranda subsidiary, traded today down five cents at $4.60 while St. Genevieve (which owns 21% of Louvem) was even at 90 cents.

Galactic Resources dropped five cents today, after Toronto investment banker DCC Equities said it is discussing the possibility of going public by merging its resource assets with those of 51.6% owned Galactic. Breakwater Resources is temporarily suspending operations at its Estrades precious metals-zinc-copper mine in Quebec due to low metal prices. The issue finished the week down one cent. at 52 cents.