Toronto Stock Exchange Lacklustre trading underlies market selloff

Resource issues were unable to buck the sell off today, which saw the tse composite decline 47.8 pts to 3,122.57 pts. Last week’s improved U.S. trade deficit news — which generated a small jump in market activity — was already history as investors responded to growing concerns over long term interest rates.

Gold bullion remained quiet at $477.65 (US) per oz at the second London fix. During the week, gold gave up $8 on the trade deficit statistics. Until a clear signal develops as to which direction the economy will head, trading in gold and equities will continue to be hampered by extreme overreactions to indicators such as the U.S. trade deficit performance.

The gold and silver index spelled out the situation on Toronto, giving up 77.1 pts to close at 6,953.0 pts. Volume was a modest 19.3 million shares.

During these cautious times, several issues continue to show some spark. And no finer example can be found than the Cominco Ltd commodity-indexed warrants, which rocketed to $25.75 — up $2.75 for the day. At one time the warrants hit a high of $26.38.

The activity is being attributed to a short squeeze which developed after shorts tried to close out their positions. The warrant had a short position of almost 600,000. The unusual warrant, which has its value determined by the 30-day moving average of the price of copper, was trading at $6 in November. Points go to John Lydall, mining analyst at First Marathon Securites, who has been calling the Cominco warrants since November.

A big payday came to shareholders of Western Goldfields, which is the target of an $11 per share offer by none other than that benevolent mining giant from the `Land Down Under’ — Western Mining Corp. The Aussie’s plan to dish out about $100 million for Goldfields. The issue was up $2 on the week.

More dramatic news from the Carlin area of Nevada. Newmont Gold has drilled another spectacular hole of 520 ft grading 0.44 oz gold per ton. Last week, Echo Bay announced four million oz of gold at its Cove deposit, also in Nevada. Both were greeted by a collective yawn from investors, who remain wary about plunging back into equities.

American Barrick Resources, which shares a large chuck of the Post deposit, from which Newmont drilled its big hole, gave up 25 cents today to close at $25.75. Echo Bay Mines actually moved on its good news last week to $31. But the rise was brief indeed, as investors digested the information and quickly unloaded, pushing the issue back to $27.38.

One issue which managed a rise on the Carlin news was Franco Nevada, which holds a 4% net smelter royalty and a 5% net profits royalty on the Barrick Post and Goldstrike deposits. Franco added a dollar to $8. More than 20 companies have expressed an interest in purchasing the Franco royalties, but no firm deal has yet been made. The sale of the Franco interests is being handled by Merrill Lynch Canada.

Big plans were announced by Augmitto Explorations (see front page story) for a 62,000 oz per year gold mine at Rouyn, Que. The issue has been generally shunned by Canadian investors during the past three years due to a poor history under previous management. However, a new team is at the helm and considerable European financial support has been received. Augmitto hopes to be milling ore by year end. The issue gave up 20 cents to $1.63.

Base metal producers were also on the easier side. Falconbridge Ltd was off 50 cents to $20.88 whereas Inco Ltd slipped 63 cents to $26 — both in active tr ading. Strong volumes placed both issues on the most active list for yet another week.

Belmoral Mines refuses to sit still, making deals almost every week. This time its a proposal to acquire a 50% interest in Roddy Resources Bighorn heap leach mine in Arizona. Details of the offer are still unavailable. Belmoral was better at $2.99. Roddy traded at $2.50.