Toronto Stock Exchange Market posts slight gain, interest rates

Aside from a slight drop in Canadian interest rates, the week ended May 21 offered little evidence that market conditions are about to improve.

Gold and base metal stocks, which have been under pressure lately, got little help from commodity prices. The first-quarter profits of 25 mining companies surveyed by The Globe and Mail fell by 61% to $147 million from $380.2 million last year.

If that wasn’t bad enough, Placer Dome Chairman Fraser Fell was telling analysts in Toronto that his company will attempt to expand its base metal output in regions where the costs of mining are lower and in tax regimes more favorable than they are in Canada.

When asked if Placer Dome’s international orientation was simply a hedge against over stringent environmentalists, the unflappable Fell denied that this was his company’s policy. But his message is one that does nothing to allay the concerns of Great Lakes Minerals Chairman John McBride who recently led 2,500 demonstrators to the Ontario legislature to protest against the New Democratic Party’s first budget. Worried about the potential impact of a higher provincial deficit, McBride is planning more action.

Meanwhile, Julian Baldry, base metal analyst at Nesbitt Thomson Deacon Inc. in Toronto, doesn’t anticipate much improvement in share values until investors see fundamentals to support the post-Gulf war market rally.

As the summer doldrums kick in and demand for metals drops, he expects shares of Inco, for example, to move lower. However, over the long term, he is advising clients to get out of aluminum stocks like Alcan and into Inco which was unchanged this week at US$38.

As five Canadian banks moved to follow the Bank of Montreal’s lead by cutting their prime lending rates to 9.75%, the composite 300 index pulled out of its recent slump today, May 22, to post a 0.42-point increase. Trading on a volume of 23.2 million shares worth $271 million, the index closed at 3448.05.

Precious metal stocks got little help from gold which fell US$3.50 this week to close at US$356.75 in London. Active in the precious metals sector was American Barrick Resources, which gave up 63 cents this week. After closing down 25 cents in the reporting period, Placer Dome is trading just above its annual low of $14.38. At $14.25 this week, Amax Gold is also uncomfortably close to its annual low point of $13.88.

As the stalemate over the Eskay Creek gold project in British Columbia continued, Corona A shares remained stalled at $4.25. No new discussions are scheduled between Corona and Placer Dome, which owns about 22% of the project, said Fell who revealed that “it wouldn’t make sense” for his company to hang on to its minority interest for the long term. “However, things can change,” he said.

Atlanta Gold was among active stocks this week as the issue continued to benefit from Newmont Mining’s decision to option the former company’s 3,150-acre Elmore gold-silver property in Idaho. To earn a 51% stake in the project, Newmont must spend $10 million by 1995.

While underground drilling continues to add to the reserve potential at RFC Resource Finance’s Pend Oreille lead zinc project in Washington State, the issue gave up nine cents to close at 85 cents.

Shares of Northgate Exploration bottomed at $1.13 this week, as the company prepared to hang the mothballs on the Colomac gold project of 52% owned affiliate NorthWest Gold. The Northwest Territories mine is expected to be placed on care and maintenance next month.

Although Audrey Resources advanced 13 cents this week, there was little evidence in the market that the company is any closer to selling its stake in the Mobrun polymetallic mine near Rouyn-Noranda, Que., to Billiton Minerals.

United Coin Mines, down five cents this week, is planning a rights offering under which shareholders can buy a common share at 35 cents for each share held. DCC Equities is to be issued 3.1 million rights, bringing the number of rights outstanding to 17 million.

Rea Gold of Vancouver says shareholders at the annual meeting have approved an increase in the company’s share capital through the creation of 100 million preferred shares without par value. The company applied for TSE and VSE approval for the move. Rea Gold gave up nine cents during the reporting period.