Toronto Stock Exchange (November 25, 1991)

Dark visions of how a sloth-like economic recovery will affect corporate earnings sent share prices in New York and Toronto tumbling downward during the week ended Nov. 19.

Recognizing that stocks are overvalued given the current economic climate, investors bailed out of the market and sent the Dow Jones Industrial Average down 120.31 points, to its fifth worst one-day drop in U.S. history. The jitters that rocked the New York blue chips also affected Toronto’s composite 300 index which gave up 2% over the report period. However, low interest rates combined with this week’s US$6.15 per oz. advance in the price of gold to soften the impact on the resource-oriented Toronto market. Today, Nov. 20, the 300 index closed down 13.6 points at 3501.72 after 30.6 million shares valued at $347.3 million changed hands. Gold closed at US$362.60 per oz. in London.

According to Yorkton Securities analyst Paul Esquivel, the correction in New York marks the end of a speculative cycle that drove the Dow Jones to record highs. “We are getting back to more fundamental reasoning,” said Esquivel, who claimed that at 2930 the Dow Jones is closer to where it should be. Ironically as some experts were anticipating a replay of the October, 1987, stock market crash, American Barrick Resources (TSE) Chairman Peter Munk was netting $50 million by selling the last of two million shares obtained under option. Driven by the gold price rally, Barrick stock was also hitting a new high for the year of $29.38. Today, Nov. 20, the Toronto company said it is raising $113 million via a public offering of four million shares at $28.25 to investors in Canada and Europe.

Meanwhile, the improved gold price picture made LAC Minerals the week’s volume leader with over three million shares changing hands and put Placer Dome and Royal Oak Mines on the active list. LAC and Placer Dome were both unchanged, while Royal Oak added 23 cents to close at $1.15. Franco-Nevada Mining, the Toronto company that holds royalties on American Barrick’s Goldstrike mine, added $1.38 during the report period to close at $21.50. Hemlo Gold added 50 cents to end the week at $11.

Predictably, as future nickel prices are tied to economic growth, Inco plunged by $3.25 on 2.6 million shares to end the week at $35.25. At US$3.23 per lb. this week, nickel is trading at just below Inco’s US$3.30 per lb. break-even price. The Toronto nickel miner is looking for prices to rally to US$4 to generate what Chairman Donald Phillips calls an acceptable level of profitability.

As investors await more news from the Shining Tree copper-nickel play, shares of Inco’s 40.9% owned Fort Knox Gold, slipped below $1 to close at 96 cents. Royal Oak and Queenston Mining are among Toronto listings with holdings in the vicinity of the Fort Knox discovery.

Consolidated Brinco and Hillsborough Resources have revised the terms of a proposed merger deal designed to double production at the Quinsam coal mine on Vancouver Island to one million tons annually. Brinco shareholders are now being offered one share in the merged company for each 1.625 common shares held.

International Corona added 50 cents to $6.88 his week even though the Vancouver gold miner reported a 9-month loss of $6.1 million, compared to a profit of $27.3 million last year.