STOCK MARKETS — Looming federal budget overhangs jittery

Fears over what the upcoming federal budget holds in store kept investors on the sidelines and led the Toronto Stock Exchange to post a modest loss for the 5-day report period ended Feb. 21. The composite 300 index fell 8.69 points to close at 4,101.85.

Many market-watchers are worried that government deficit targets will not be met, which could signal trouble for money and equity markets. This same concern was recently expressed in New York, where Moody’s Investors Service announced that it had put both Canada’s dollar and foreign currency debt ratings under review for possible downgrading.

Moody’s threat led the Bank of Canada to raise the bank rate by 21 basis points to 8.38%. Earlier in the week, it was feared the rate would be jolted to 8.5%, triggering a rise in the prime rate.

The Canadian dollar was virtually unchanged on the week, closing at US71.35 cents

One of the victims of the federal budget is flow-through shares, which are rumored to have fallen out of favor with the government; a study carried out last fall found that the shares did little to encourage exploration activity and that they were often merely tax-driven investments.

Gold bullion moved up on the week, with the London afternoon fix on Feb. 22 set at US$379.20 per oz., up US$2.60.

Rising bullion prices helped most senior gold producers post gains on the week, with Barrick Gold jumping 63 cents to $30.38. Placer Dome also added 63 cents, to close at $27.88, and Hemlo Gold Mines tacked on 13 cents to $11.75. The only senior to buck the upward trend was Echo Bay Mines, which lost 25 cents to $12.50. The company announced that gold output in 1995 is expected to remain flat, at a level within about 5% of the 817,900 oz. produced in 1994. The company also expects production costs to increase up to US$20 per oz. as a result of lower grades and more difficult ore characteristics. Investors responded favorably to the latest drill results from the Voisey Bay nickel-copper project in northern Labrador. Shares of project operator Diamond Fields Resources (TSE) soared to a new 52-week high of $17.88 before settling in to close at $17.63, up $2.88 on the week.

One of the better intersections was hole 95-10, which yielded 3.64% nickel, 2.07% copper and 0.14% cobalt over 113.5 metres.

Encouraging drill news from the Murgor Resources gold property in northwestern Quebec helped the share prices of area player Freewest Resources Canada move higher. Freewest gained 14 cents to $1.18 on a volume of more than 2.4 million shares.

Also active in the area is Montreal-listed Orient Resources, which wasn’t so lucky, losing 2 cents to close at 33 cents.

At presstime, both Freewest and Orient had moved higher, trading at $1.31 and 38 cents, respectively.

Despite posting improved earnings of $4.4 million in 1994, compared with $3.2 million in 1993, Richmont Mines fell 25 cents to $3.40. Gold production increased to 36,404 oz. in 1994 from 28,384 oz. in 1993.

Impending news of the official launch of gold production at the Contact Lake mine in northern Saskatchewan gave Cameco a big boost, with the shares tacking on $1.25 to $32.25.

A change of management did little to help the price of Anvil Range Mining shares, which dropped 25 cents to close at $5. Former federal energy minister William McKnight had replaced Robert Granger as chairman.

Anvil Range was set up last year to revive the Faro zinc mine in the Yukon. The company is expected to have the former Curragh Resources property up and running by the fourth quarter.

Barro Blanco, the Columbian subsidiary of Northfield Resources, reports that it has acquired two gold mining concessions in the Andean Mountains of southern Columbia. One of the concessions, El Diamante, has been producing gold on a small scale for 30 years.