STOCK MARKETS — Higher bond yields attract investors

The Toronto Stock Exchange (TSE) took another beating this week, as nervous investors dumped their shares in favor of higher interest-bearing investments, such as bonds. This exit from the equity market helped drag the TSE lower over the 5-day report period ended Nov. 22. The composite 300 index dropped 110.77 points to close at 4,058.15.

Market analysts fear that if bond yields keep rising, investment in equity markets will continue to decline.

In the face of higher U.S. interest rates, the Bank of Canada raised the bank rate six basis points to 5.96%. This is the fourth consecutive increase in as many weeks, but the rise did little to narrow the gap between Canadian and U.S. rates.

Canada usually maintains higher rates than its neighbour to the south, so that investors will buy Canadian government debt. But the Central Bank is worried that excessive interest rates may stifle economic recovery. The higher bank rate failed to help the Canadian dollar, which fell more than half a cent to close at US72.78 cents.

Gold bullion prices moved lower on the week, with the London afternoon fix on Nov. 23 set at US$384.70 per oz., down US$1.55 from a week ago. The drop in bullion prices led to a selloff in the gold sector, with the gold and precious metals sub-index losing 649.23 points to close at 9,030.75. Senior gold producers were all lower on the week, with Echo Bay Mines off 88 cents to $14.75; Hemlo Gold Mines down 63 cents to $13.50; American Barrick Resources slipping $1.88 to $29.63; and Placer Dome — the big loser — tumbling $2 to $26.63 on a volume of nearly 3.4 million shares. Encouraging exploration results in Ecuador made TVX Gold the big trader on the week, with almost 4 million shares exchanging hands. The company has defined four main open-pit target zones that have returned values of up to 2.2 grams per tonne gold-equivalent over 144 metres. TVX plans to spend US$9 million exploring the property in 1995. Shares of the company lost $1.25 to close at $8.75.

Kinross Gold and affiliated, Vancouver-listed junior Consolidated Kassan Resources have completed a share purchase and option agreement with East African Mines Limited, a privately owned gold exploration company in Tanzania. East African Mines controls mineral rights to about 1,000 sq. km in 12 separate properties, all within the Lake Victoria Goldfields region of northwestern Tanzania. The most advanced of these is the Buckreef property, which contains an inferred resource (potentially minable by open-pit methods) of 1.125 million tonnes grading 4 grams gold per tonne.

Kinross lost 63 cents to close at $6.75, while Consolidated Kassan was $1.30-1.45, bid-ask.

Muscocho Explorations, which has interests in the past-producing Magnacon and Magino gold mines near Wawa, Ont., has been negotiating financing to bring the two projects back into production. Muscocho’s partners at Magnacon are Flanagan McAdam Resources and Windarra Minerals; its partner at Magino is McNellen Resources. Exploration programs will be required at both properties to outline sufficient reserves. Muscocho closed up 4 cents to 30 cents; Windarra added 3 cents to 20 cents; and McNellen closed unchanged at 10 cents. CDN-listed Flanagan McAdam was 15-20 cents, bid-ask.

A copper-nickel-cobalt discovery by Diamond Fields Resources in northeastern Labrador has started a major staking rush. Companies reported to have acquired ground in the area include Noranda, Inco and juniors Takla Star Resources and International Canalaska Resources.

Diamond Fields closed up $2.63 to $7.13; Noranda was off $1.63 to $22.88; Inco fell $2 to $36.25; Takla Star closed down a nickel to $1.55; and International Canalaska lost 7 cents to 38 cents.

Orco Resources and Denyvan Resources plan to amalgamate with Minorca Resources, not with William Resources as reported in our Nov. 21 issue.