Toronto Stock Exchange Firming dollar and confidence bolster

Spurred by improved U.S. trade deficit figures and a growing belief that the U.S. dollar has bottomed out, a degree of confidence crept back into the markets this week — albeit on miniscule volume.

The rally, if we can call it that, began last week and helped push the composite index to 3,130.62 pts. That’s up by 81.17 pts for the week and firmly above the 3,000-pt mark which was penetrated just two weeks ago. Gold bullion also showed considerable support at the $440 (US)-per-oz level. Today, the composite index gave up 6.17 pts.

The second London fix was $445.60 — up $5 for the week. The renewed confidence and the creation of a base for gold at $440, helped the senior resource stocks recover most of the steep losses realized earlier in the month when gold crashed from the $475-level. The gold and silver index was better, gaining 30.82 pts to close at 6,213.96 pts.

However, the buying remains directed at highly capitalized and liquid companies which make up most of the senior Canadian gold and base metal mining companies. The junior low-cap companies continue to languish in a sea of disinterest. During these times of caution, investors are not interested in drill holes. They’re looking for cash flow and earnings per share — criteria which effectively leaves out about 90% of the junior sector. Effort should be made to watch those juniors with quality plays capable of emerging into producers — the second tier golds for example. These will be the first to react to buying when investor interest returns.

The next big day for gold bugs is Feb 26, according to Martin Murenbeeld, a gold analsyt. On this day, U.S. consumer price data for January will be released. An inflationary story will be bullish for gold whereas a deflationary interpretation could hammer gold back to the low $400-range.

Showing strength this week was American Barrick Resources which added $3 during the week to close at $25.63. Another rumour out today is that Newmont Gold, Barrick’s neighbour at Carlin in Nevada, has completed another monster hole which could surpass the 470 ft grading 0.93 oz gold per ton announced just two weeks ago. After what has unfolded at Carlin during the past year, that would come as no surprise to anyone.

Placer Dome Inc. was also stronger, closing at $15.25. Shareholders of Pamour Inc. got a nice surprise this week. Controlling shareholder Giant Resources, is offering $10 per share for all the remaining Pamour common not already owned by Giant. Pamour quickly reacted to the offer, smartly advancing by $3.25 to $9.75.

Base metal miners chalked up the best gains of the week. Inco Ltd., which is making big bucks from $3.50(US) nickel, added a healthy $4.50 to close at $27.50. Volume was worth an impressive $18.5 million today. Falconbridge Ltd., which is also strongly exposed to copper, was better at $20.88. With tight supplies for nickel and demand continuing firm, 1988 is shaping up as a boom year for these two companies.

With platinum prices actually traded below gold prices, platinum explorers are looking for other opportunites. La Fosse which is active in Quebec’s Schefferville area, has purchased a large tract of land hosting iron ore reserves. The issue continued unchanged at $1.70.

A new board of big shooters at Black Hawk Mining makes this company worth watching. Robert Buchan of dcc Equities, Rocco Marcello of Davidson Partners and Stephen Dattels, an ex-American Barrick officer, have moved in and plan to reactivate the company. Black Hawk was quiet at 80 cents .

Northgate Exploration must truly love the Chibougamau, Que., camp. After selling its Chibougamau assets to Western Mining Corp. for $160 million cash, Northgate has used part of the proceeds to pick up an interest in Campbell Resources. Campbell, which was stronger at $2.25, operates several gold-copper mines in the camp.