Toronto Stock Exchange Rate concerns ignored asrally reaches new

Interest rate fears took a back seat to investor desires to squeeze out more profit from the summer rally. During the week, the composite reached a new high before settling back to 3,454.9 pts — down 10.47 pts for the day. A strong U.S. dollar, supported by higher U.S. interest rates, is forcing western European countries and Japan to raise rates in order to defend their own currencies. The overall strategy is intended to act as a wet blanket over a roaring economy thereby stifling inflation.

The plan can also kill enthusiasm for equities — an expensive lesson we all learned on October 19th. Despite the concerns, investors are taking advantage of trading opportunities being provided by the current rally.

A casualty of the soaring U.S. dollar and dampened inflation expectations is gold bullion. The precious metal gave up another dollar to $436.80 (US) per oz on the second London fix. (Last week we incorrectly placed the second fix at $443. It was actually $10 lower.)

Despite the weakness in bullion, the gold and silver index registered a 104-pt gain to 6,700.56 pts. However, the jump is illusory as most of the gain represents the index’s heavy weighting in Placer Dome which is being traded aggressively.

Placer made a healthy gain to $17.13 — up 50 cents today. The market is responding to Placer’s sale of a 24.7% interest in Falconbridge Ltd. to the company itself. The deal will give Placer more than $550 million which tops up the company’s cash reserves to more than $900 million. Company officials have plenty of cash with which to build mines and make acquisitions. The latter, we are told, will be mainly in North America. Also, the big gold miner is currently the number one institutional favorite, according to one mining analyst. Today’s volume was an extremely liquid 853,000 shares.

Falconbridge, which will be paying a total of almost $1 billion to make itself independent, plans to get most of that cash from banks. Many analysts are concerned about the heavy debt load, which in an economic downturn, could excessively burden the company. The issue was steady at $27.25, down 63 cents for the day.

Analysts are eagerly awaiting the second quarter earnings of Inco Ltd., which are expected by month- end. The issue continued its winning ways, trading to a new high of $42.13 before settling back to $41.50.

Echo Bay Mines was unchanged following an $85 million share issue. The cash will be used for corporate purposes. Agnico Eagle Mines was also steady at $17.88. Lac Minerals traded more than 192,000 shares to close at $14.63, up 63 cents .

Golden Knight Resources popped $1.63 in two days of trading. Despite a note from president John May (also of Teck Corp.), that no material changes have been made by the company to warrant such a rise, the issue traded more than 10 0,000 shares today. Knight has a 40% stake in the big Golden Pond gold mine being built by Inco Gold in Quebec. There is no takeover seen here as Teck has the junior locked up.

An option deal between Jonpol Explorations and affiliate T & H Resources with Lac Minerals did little to bolster either junior issue (see front page story). Jonpol dipped to $2.64 whereas T & H was easier at $2.55.

Wilanour Resources, which advanced to $4.90 last week, slipped back to $4.30 by today’s close. The company has a stake in a large gold program near Red Lake, Ont.

Corona Corp., the result of amalgamation of all the companies in the Royex Gold group, began trading on the exchange this week. The issue promptly added 40 cents to $10. Claude Resources made a partial recovery to $4. Last week the issue was hurt by news that Placer Dome had terminated an option agreement on Claude’s Seabee gold project. The termination was not due to technical reasons, Claude says.