Toronto Stock Exchange High rates to blame for dull trading

Recent central bank moves to combat inflation by increasing the prime rates to record levels, are the main reasons behind the poor market activity during the past month.

Gold bullion is also being adversely affected by the high rates. Prices on the second London fix today fell another dollar to $383 (US) per oz. The gold and silver index reflected the general nervousness with bullion, giving up 42.93 pts or 0.75% to close at 5703.82 pts.

Metals and minerals were also weaker, slipping 5 pts to 3253.77 pts. Both zinc and copper prices took it on the chin from rising inventories. However, at current prices, both metals are selling at far above their 1988 average prices, thereby ensuring superb profits for producers.

Despite the good earnings being generated, base metals producers suffered from the general malaise. Inco Ltd. declined to $33.13 from $33.50. Falconbridge Ltd was 25 cents softer at $29.25. The world’s largest zinc miner, Cominco Ltd., remained unchanged at $26.

Mineral Resources International was firm at $5.25, but still well-off its high of $6.38. MRI operates the Nanisivik zinc-lead mine on Baffin Island in the N.W.T.

American Barrick Resources bucked the downtrend in golds, gaining 38 cents to $25.75. The company is poised to breach the one- million-oz-per-year production mark in the early 1990s. Placer Dome Inc. was easier at $15.63. Echo Bay Mines, the third component of this Canadian triumvirate of senior gold producers, was also weaker at $17.50.

The highly capitalized senior producers are about the only type of gold issues investors are buying today. The junior sector remains depressed.

No better barometer of the junior gold exploration sector can be found than MVP Capital. The investment fund, which holds equity interests in a large portfolio of exploration companies which few people want today, traded at a new low of 52 cents .

Granges Exploration was also in new low territory with a trade of $2.80 before closing at $2.85. MIM Holdings, a large Australian company, is planning a $50-million equity investment in Granges.

Jascan Resources has entered the takeover field, with a bid for control of its partner Atlantic Goldfields. Atlantic, like Jascan, is cash rich with about $9 million in the till. The takeover bid is both defensive and hostile. Atlantic is taking a swipe at Jascan by making market and private purchases of Jascan stock in a bid to take control of the company. The takeover bids will likely be a messy affair. Jascan was down to 45 cents .

Gold producer Blackdome Mining Corp., which has plenty of cash but depleting reserves, traded to a new low of $3.85. The company operates the profitable Blackdome mine in B.C.

Canamax Resources perked up after taking a beating following the resignation of its founder and first President John Hansuld last month. The issue traded up to $4 before slipping to $3.85.

Granduc Mines was also on the new low list after closing at $2.60. The low reflects disappointment with the company’s Sulphurets gold property in B.C. Both reserves and grades have been downgraded.

Agnico-Eagle Mines was also near its low, closing at $11.63. The company operates a gold mine near Joutel, Que. In the Arctic, Neptune Resources is planning to build a large open pit gold mine with a hefty price tag of $140 million. Investors are obviously concerned with the technical risk and are avoiding the issue. Neptune dipped to a new low of $1.70.

Minnova Inc. was unchanged at $22 whereas Teck Corp. A shares traded firm at $19.13. Pegasus Gold, which is one of the few gold producers with a shareholders rights plan or poison pill, was easier at $13.50.

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