Toronto Stock Exchange Modest rebound during week of declines

A modest rebound was recorded today on the Toronto Stock Exchange, following a week long slide which clipped another 90 pts off the composite index during our review week. At the close, the tse composite gained 28.55 pts to 2,872.4 pts, primarily on bargain hunter buying. In fact, such rebounds are occurring on a weekly basis following the Oct 19 crash, quickly to be followed by rapid selloffs just days later — a pattern typical of youthful bear markets trending downwards.

The advance is most probably temporary, as investors grasped at conflicting rumors and policy statements coming from the White House concerning the devastated U.S. dollar. Again this week, the buck traded at record lows in West German mark and Japanese yen terms. In an unprecedented move, U.S. president Ronald Reagan commented that the government did not want to see further declines. The comment was clearly a rebuttal of new Commerce Secretary William Verity, who was quoted as saying the markets should determine the level of the dollar. “I happen to be a believer in markets,” Verity said.

Such a dollar crisis, and the subsequent rise in real interest rates by the Fed in support of the weakening buck, triggered October’s market collapse.

Gold, remarkably, was steady at $459(US) per oz. Remarkable in that global markets were said to have swallowed up almost 100 tons of bullion in just a few days last week without little more than a hiccup. Rumors from Washington say that the U.S. government and other central banks sold the bullion from treasury to generate cash reserve with which to support the sliding dollar. If that was the case, then gold’s modest $10 decline should be considered rather bullish.

The gold index climbed 129.07 pts to close at 5,931.54 pts. Of 728 mining issues which traded today, 295 advanced whereas 220 declined. The remainder were unchanged.

The Horsham Corp, the largest shareholder of gold miner American Barrick Resources, says that the current market collapse is being deemed “advantageous” from the company’s viewpoint. Horsham is acquisition oriented, and with plenty of cash available one suspects officers are busy evaluating the assets of most large tse-listed concerns in their search to sniff out takeover targets. Horsham was steady at $4.75.

Barrick, which is busy adding reserves to its already mind-boggling reserve base of 5.3 million oz of gold, traded at $19.50. Mining legal suits are in vogue this season. Agnico-Eagle Mines was a loser this week, giving up another $1.50 today to $21.50. The company has been hit with a lawsuit from Noranda Inc claiming that Agnico dupped the big miner when it purchased Noranda’s 20% stake in Dumagami Mines. The latter company is sitting on a sizeable gold deposit in Quebec (see details in front page story).

Platinum prices crashed to lows of $450 (US) per oz before crawling back to $480 today. That’s a long way off from the $600 range last year which sparked a platinum exploration rush in Canada. Madeleine Mines, which is working a low grade nickel-copper deposit north of Thunder Bay, Ont., with platinum group metal credits, was weaker at $5.75. The company has talked of production sometime in 1988, primarily as a platinum open pit mine.

La Fosse Platinum, which is involved with regional scale platinum exploration work in Quebec’s Labrador Trough area, tumbled to a low of $1.75 — a long way off its high of $5.50.

Base metal prices such as nickel and copper are going through the roof. Copper surged to a new high of $1.10(US) per lb in near panic buying on commodities markets. The buying binge is being fuelled by chronic inventory shortages. Unfortunately, Inco Ltd. and Falconbridge Ltd., which are major producers of both nickel and copper, remained unchanged at $$20 and $19.50 respectively — both victims of the prevailing market sentiment to remain liquid.

On the exploration scene, Claude Resources announced a new gold discovery north of La Ronge, Sask. Although very early, the initial results look intriguing. Claude was quiet at $4. Duration Mines is talking of gold production next year from the Theresa mine near Longlac, Ont. However, considerable work is required to prove up reserves. The issue was strong at $1.10.