Toronto Stock Exchange Rate fears depress composite below 3,200 pts

Another selloff hammered the Toronto Stock Exchange today, clipping 44.71 pts from the composite index which closed at 3,178.49 pts. Sparked by interest rate fears and a general perception that the bear- market rally is over, investors are getting defensive again by moving into cash.

The damage was evident in all the mineral sectors. The metals and minerals index lost 39 pts to 2,675 pts whereas gold and silver slipped another 47.61 pts to 6,352.26 pts. What has many baffled is that both these sectors are currently enjoying strong commodity prices capable of generating good earnings for most producers.

Another sign of the current malaise infecting traders was the decline in the gold and silver index — despite a rise in bullion prices to $454(US) per oz on the second London fix today.

One of the few gold equities to buck the downtrend was Franco- Nevada, which popped up to $10.25 before settling back to $10. Franco, which holds a lucrative royalty interest in the Carlin area of Nevada, has had the asset up for sale since last year. Merrill Lynch is the company’s agent. Talk is that a deal could be concluded shortly. Last year, Franco was looking for $250 million, primarily in shares.

American Barrick Resources, which is one of the largest players in Carlin, was steady at $24.25. Lac Minerals added a few cents to $13.88 on news of strong exploration results from its Ortiz gold properties in New Mexico. A potential heap leach operation is shaping up here.

Placer-Dome Inc., which stands to pick up more than $500 million this year from the sale of a block of Falconbridge stock, was weaker at $15.63. Another beneficiary of the Falconbridge deal is staid, inactive McIntyre Mines, a Placer affiliate. McIntyre holds a lot of that Placer Falconbridge stock which is up for sale. The issue picked up $1.50 this week to $47.50.

Falconbridge Inc., which could go through a change of control, depending on the Placer sale, was marginally better at $22. Nickel competitor Inco Ltd., dipped to $33.63 on strong volume worth $10.7 million today. Inco stands to reap its best profit ever this year, due to record nickel prices. A profit of $500 million or more than $5 per share is very real in 1988.

Writing of operational disasters over the past few weeks, one which stands to potentially become the granddaddy of the decade is Seabright Resources. Purchased for almost $100 million by Western Mining Corp. last year, we now learn that Seabright’s reserves could be cut in half. Talk is that Western is considering suing Seabright’s former management. Once again, we bring to our readers attention two simple, yet powerful words — due diligence — the rigorous application of which is known to prevent such monstrous investment decisions. Mercifully, we can’t see the damage in terms of share price as Western purchased 100% of Seabright and took it off the board.

Getting back to the markets, another sign of the over-all weakness is the number of issues reaching new 52-week lows. Issues making this unenviable list this week include Eastmaque Gold, at $4.60 and Equinox Resources, which dipped to $2.30. Sonora Gold was also off, reaching a low of $4.20. Another issue, Yorbeau Resources which is active in Quebec, tumbled to 43 cents .

On a positive note, Granges Exploration is coming back, trading at $5 today. The issue was hard hit following news of problems at the new Tartan Lake gold mine in Manitoba. However, exploration results from other projects appear to be offsetting some of the Tartan damage. In the booming Mishibishu Lake area west of Wawa, Ont., Granges and partner MacMillan Energy doubled reserves to 1.1 million tons grading 0.16 oz gold per ton. Combined with the development of a new 70,000-oz-per-year gold mine next door (Muscocho, Flanagan McAdam), and a major investment in the camp by Hemlo Gold, developments appear to be taking off.