Toronto Stock Exchange Interest rate fears trigger declining trend

A five-day losing streak, fueled by tumbling resource share prices, has trimmed another 100 pts from the tse composite index. Urged on by ever-weakening gold prices — which gave up another $10 during the week to $465(US) per oz — the gold and silver index has dived to 6,368.36 pts. Last week, the index was lolling above 6,900 pts.

The steepening decline in the 300 composite, which was reversed today by a marginal 7.52-pt gain to 3,076.69 pts, effectively wipes out the initial gains made during the first week of the New Year.

Surprisingly, gold bullion failed to respond to a report from the U.S. which said that durable goods demand last December climbed by 6.7% — a sign that the U.S. economy continues to expand at a rapid rate. The general interpretation by bears is that the fear of inflation will reinforce the U.S. Federal Resource Board’s resolve for tightening the money supply via higher interest rates.

The threat of restrictive monetary policy, and the higher rates which underlie such policy, make high-yielding debt instruments more attractive than non-income- generating bullion.

Casualties in the gold sector were many. Agnico-Eagle Mines, a solid producer of gold from Quebec, slipped below the $20 mark. The issue could be had for $18.75 today. Echo Bay Mines gave up 50 cents to close at $24.13. For the week, the issue is off a whopping $3.37.

What more can possibly be written about Nevada’s magnificent Carlin? Just last week Newmont Gold announced the best ever Carlin drill hole (see last week’s front page). Today, another hole from the deep Post deposit clocked in at 1,040 ft grading 0.48 oz gold per ton. Included in the section is a remarkable 470 ft grading 0.93 oz. Carlin, which has surpassed Hemlo in terms of gold reserves, is emerging as the largest goldfield outside of South Africa.

However, the general apathy and suspicion which has permeated the equity markets following Black Monday, is not easily assuaged by fabulous drill holes. American Barrick Resources, which is poised to become a million-oz-per-year producer, only managed a modest rise to $25.13. The Barrick warrants, which probably offer the best way to play Carlin, were also better at $8.13. Franco-Nevada, which holds lucrative royalties on Barrick’s Post and Goldstrike deposits, was un changed at $7.88.

Base metals prices, which are continuing firm, are providing little joy to holders of Falconbridge Ltd., which lost a $1.60 to close at $19.88. Several weeks ago, we noted movement in New Quebec Raglan Mines which controls a large reserve of high grade nickel in Quebec’s remote Ungava region. The company is controlled by Falconbridge. We speculated that Falconbridge must be reevaluating those rich reserves in light of the strong price of nickel. This week, the appointment of a mining engineer to head up a team which is evaluating the company’s Ungava properties, reinforces our belief. Raglan was quiet at $2.50.

News that Westmin Resources plans to bring the Big Missouri gold deposit to production, did little to inspire investors. Westmin was steady at $9. Pioneer Metals, which controls vse-listed Silbak Premier Mines, the holder of a 40% stake in the Big Missouri, was better at $9.38. In fact, Pioneer was one of the few golds to advance today.

Onitap Resources was stronger at 54 cents on news that Orex Resources will fund underground exploration on Onitap’s Goldboro property in Nova Scotia. Neptune Resources, which has big plans for a large-tonnage, low grade gold deposit in the N.W.T., is still on the hunt for financing. Capital costs for the project add up to more than $80 million. Neptune was easier at $4.