STOCK MARKETS — U.S. economic fears spark TSE decline

Fears that the U.S. economy may be headed for a significant downturn sent cyclical resource stocks into a tailspin, causing the TSE to post a loss during the 5-day report period ended Jan. 31. The composite 300 index dropped 63.15 points to close at 4,017.48.

Many market analysts, believing that the U.S. Federal Reserve Board is poised to raise interest rates, are predicting a slowdown in the American economy. Any such slowdown is expected to have a negative effect on metal prices and the mining sector.

Tension in Canadian financial markets eased following U.S. President Clinton’s recent announcement of a new US$47.5-billion bailout package for Mexico. News of the aid package helped the Canadian dollar reach a 3-week high of US71.06 cents — up almost four-tenths of a cent on the week. A stronger dollar allowed the Bank of Canada to reduce the bank rate by 15 basis points to 8.23%, marking the first decrease in four weeks. Responding to fears of a potential economic slowdown, both the gold-and-precious-metals and metals-and-minerals subgroups plummeted, losing 586.09 and 217.49 points respectively.

Gold bullion continued its roller-coaster ride, with the London afternoon fix on Feb. 1 set at US$376.25 per oz., down US$5.20 from a week ago. The decline in bullion prices helped senior gold producers move lower on the week, with Echo Bay Mines falling $1 to $13; Hemlo Gold Mines losing 88 cents to $11.75; and Placer Dome dropping $1.63 to close at $26.50. Barrick Gold posted record earnings and cash flow for the ninth consecutive year. The company claims that its strong production performance, combined with low operating costs and an effective gold-hedging program, have transformed it into the world’s most profitable gold producer in 1994. Despite the record earnings and cash flow, shares of the company dropped, almost reaching a new 52-week low before ending at $28.13, down $2.25. Shares of Northfield Minerals remained unchanged at 74 cents, despite news that the company had optioned a large portion of its land holdings in the Kirkland Lake area to Hemlo Gold. The latter plans to drill-test several deep gold targets on the properties, situated west of the prolific Kerr Addison mine which has produced about 11 million oz. gold during the past 50 years. In Chile, Inco’s wholly owned subsidiary, Compania Minera Mamina, has signed an agreement with Codelco, the state-owned copper company, to continue exploring the Mamina copper-porphyry deposit in northern Chile. If results are favorable, a feasibility study will be undertaken. Inco shares slipped $3.88 to $37.75.

Fourth-quarter profits of $81.4 million failed to inspire Falconbridge investors; the share price lost $2.63 to close at $21.75. The major posted a profit of $131.3 million for 1994, compared with a loss of $44.5 million a year earlier. Much of the turnaround can be attributed to higher metal prices and the low Canadian dollar.

Aur Resources’ shareholders offered some good news this week when it announced that it had repaid the outstanding bank debt of $28.4 million incurred to fund its share of development costs for the Louvicourt base metal mine in Val d’Or, Que. The company is now debt-free and retains working capital of about $12 million. Aur shares gained 30 cents to close at $4.35. Campbell Resources has acquired a stake in the Wildcat gold property in Nevada. The interest was previously held by Lac Minerals, which is now defunct. Independent consultants have completed a 45,000-ft., reverse-circulation drill program, confirming a resource estimate of 72 million tons averaging 0.016 oz. gold per ton. Campbell shares shed 2 cents on the week and ended at 87 cents.

Results from the fourth phase of drilling by Rio Narcea Gold Mines continue to confirm the presence of gold at the Valle and Boinas properties in northern Spain. In addition, a new zone of gold mineralization, termed the Boinas West, was discovered. The structure returned a 59.9-ft. intersection averaging 0.2 oz. Rio Narcea shares shed 20 cents to end at $2.10. In Nicaragua, Greenstone Resources carried out trenching over the Cerro Majoin ridge on the gold property known as La Libertad. Results indicate the Cerro Majoin vein has a strike length of at least 3,300 ft., a width of 90 ft. and an average grade of 0.07 oz. Greenstone now intends to complete a 14,750-ft. drill program to test the vein. Shares of the company remained unchanged at $1.50.