Toronto Stock Exchange Market rally marked by abating recession

An eight-day rally has added another 95 pts to the tse composite index which moved past the 3,300-pt mark to 3,334.09 pts today. Just two months ago, the market had built a solid base at 3,000 pts which reflected a long period of directionless trading. The current advance is being seen by some as a bull rally in a bear market and by others as the first leg of a major post- Oct 19 upward correction.

The advances come on few hard economic developments, but rather, appear to be a function of investor perception that at 3,000 pts, a bottom had developed. Also, the forecast of lower interest rates and the buying activity of cashed-up institutions are seen as two key factors behind the rally.

Today, the index advanced 30.45 pts. The gold and silver index was quiet, adding a modest 60.51 pts to 6,575.64 pts. Bullion, which has been sluggish since it tumbled from the $475(US)-per-oz level last month, traded at $436.50 at the second London fix.

Golds support base at $435 suggests that a bottom might be developing, according to Martin Murenbeeld, editor of The Gold Monitor, a weekly gold price forecast report. Murenbeeld notes that the next important day for gold bugs is March 11. The U.S. price inflation figures for February will be released on this date.

Two of the largest movers for the week continue to be not gold miners, but nickel miners. Nickel, which is displaying superb fundamentals — in terms of supply- demand — is trading at $5.80(US) per lb on the London Metals Exchange. As a result, the highly leveraged players such as Inco Ltd. and Falconbridge Ltd. stand to make huge profits in 1988. Even if nickel declined to the $3.50 range, such a price would still make both Inco and Falconbridge extremely profitable.

No surprise then that Inco advanced to a new high of $29.75. Volume was a pleasing 455,000 shares valued at $13.5 million. Falconbridge was also strong, picking up 50 cents to $23 on trading valued at more than $14.7 million for the day.

The other nickel miner which few people know about is Hudson Bay Mining and Smelting. Granted that the company’s Namew Lake nickel mine will come on stream this summer, the mine — blessed by high grade and low mining costs — will yield a bonanza for HudBay at current prices. The issue, which was $8 last week, advanced smartly to $8.88.

Senior golds were relatively quiet. American Barrick Resources, which announced new reserve figures of more than 13 million oz of gold for all its North American properties, added $1.63 for the week to $27.38. The warrant, which offers the most inexpensive way to play Carlin (the richest gold field outside of South Africa’s fabled Witwatersrand), was also better at $8.88. Barrick has most of its reserves in the Carlin area of Nevada.

Placer Dome Inc. picked up 13 cents today to close at $16.13. The company expects to produce more than one million oz of gold next year. Rio Algom was another big winner; up almost $4 this week to close at $23.

An environmental battle is shaping up in South Dakota which, if won by the anti-mining faction, will be detrimental to all open pit operations there. Unlike Nevada, (where open pits are believed to actually improve the natural landscape) the possibility exists that South Dakota’s already onerous mining royalty rate will be increased to compensate a land reclamation fund, according to The Bunting Bi-Weekly research report. Canadian companies which could be hurt include Coin Lake Gold Mines. The issue was unchanged at $2.

Westfield Minerals is cashing in on its 50% interest in a parcel of claims in the Mishibishu Lake area, Ont. Muscocho Explorations and Flanagan McAdam Resources are paying $1.5 million cash and 100,000 shares each to Westfield. The former was steady at $2.40. Muscocho traded at $3.30 — up 30 cents for the week.