Toronto Stock Exchange Nov 23 Debt and rate concerns in forefront

The markets swiftly discounted the Progressive Conservative majority victory in the Canadian election with a 66-pt gain in two sessions during our review week and before the election. The gains failed to continue after the election, as the index quickly slipped 6.66 pts followed by another dip today of 12.63 pts to close at 3,246.11 pts.

Following concerns over the prospects of a rejection of free trade with the U.S. if a minority government was elected, the markets are once again eyeing those old concerns — the U.S. debt load and the prospects of higher interest rates. The reality of increasing national debt and the dearth of simple solutions in dealing with growing mounds of debt, have once again thrown a damp cloth on trading activity.

Gold was listless at $419.25 on the second London fix. The tired trading was also reflected in gold equities which continued heading south in a slide that has moved the gold and silver index just 100 pts above its 1988 low. The index slipped 50.43 pts today to close at 5,533.13 pts. For the week, the gold index is off more than 200 pts.

The continuing slump in golds is taking its toll on the stock markets with many issues reaching new lows on a weekly basis. One company which has been a prominent force in this country as an explorer and developer is Canamax Resources. However, even much liked Canamax has been unable to gain shareholder support, as traders moved the issue to a new low of $5.13 today.

Golden North Resources was also easier trading at $3.30, off 15 . Golden North and Corona Corp. were rebuffed by securities regulators who concluded that a sale of assets between both companies was not fairly priced. As a result, the deal was not allowed to close.

Newhawk Gold Mines is also suffering, dipping to $3.65. The company which is one of the prominent players in the booming Sulphurets area of British Columbia, is being hurt by less-than-expected results from its gold property. A production decision is still to be made on that project.

Senior golds were generally resilient, maintaining current values. LAC Minerals was steady at $12.13 whereas Placer Dome Gold closed unchanged at $15.75. Echo Bay Mines is involved with a deal which will see the company include its Manhattan mine and mill in the joint venture which controls the big Round Mountain gold mine in Nevada. Round Mountain will produce more than 300,000 oz of gold in 1989. Echo Bay was easier at $17.88.

The story with base metals issues was much brighter. In fact, this group is enjoying an unprecedented boom due to record high commodity prices. Share prices however, have yet to really take off as a result of investor concerns that the commodities rally will be short lived.

Metals and Minerals added 26 pts today to close up at 2,848.34 pts. For the week that’s up 69.56 pts or 2.5%. Cominco Ltd. advanced to $21.75. Cominco is one of the world’s largest zinc producers and stands to reap huge rewards at current prices. Zinc traded up to 74 (US) per lb on the London Metals Exchange today. Mineral Resources International, which operates the Nanisivik zinc-lead mine in the Arctic, was steady at $4.10. At these prices, Nanisivik becomes a cash cow.

Falconbridge Ltd. traded more than 240,000 shares today to close lower at $22.13. Inco Ltd. was stronger at $36.13. In our Nov 14th issue, we noted the $10(US) special dividend and the belief that its true value is not being reflected in Inco’s share price. Obviously we were not alone in that assessment as the price is up more than $1 since that time. With nickel prices so strong, there is growing support to the thinking that once ex- dividend, the share price will not fall by the amount of the dividend.

Gibraltar Mines reacted to stronger copper prices which soared to $1.55 on the LME today. Gibraltar was up 25 to $10. Audrey Resources, a small copper-zinc producer in Quebec, failed to get much play from the improved prices, slipping to $2.63 from $2.75.