Toronto Stock Exchange Renewed confidence moves index over 3,200

The leg of a rally appears to be developing, as equity markets enjoyed one of there best weeks in months. The prospect that interest rates are set to slide lower is a catalyst. Also, the combination of cash-rich institutions and perceptions that market bottoms may have been tested is helping stimulate the depressed equity markets.

A clear market direction still remains clouded by concerns that the activity may only represent a bull rally in a bear market. Today, the tse composite index added another 15.22 pts to close at 3,228.15 pts. During our review week, the composite index added more than 68 pts and is testing the post- Oct 19 highs reached in mid- December, 1987.

Gold bugs got a confidence booster when value hunter T. Boone Pickens announced his offer to acquire Homestake Mining for $1.9 billion(US). That news helped move bullion up $8 to $432 per oz on the first London fix — a much needed recovery after gold’s precipitous tumble to $424 earlier.

That price rise and a bullish talk this week by American Barrick Resources chairman and founder Peter Munk, helped move Barrick’s common to $25.75; up 25 cents today. Placer Dome Inc., which reported stong earnings of more than $200 million for the year, was firm at $14.50.

The volume leaders for the week continue to be the base metal miners. Inco Ltd. was in the limelight, trading a whopping 567,900 shares today for a value of $16.5 million. The issue surged to $29.13, just a fraction below its 1988 high of $29.50.

The strong climb comes on news of pandemonium on the London Metals Exchange which saw nickel explode to $6.89(US) per lb. In January, 1987, the metal was trading below $2 per lb. With immense earnings ready to be reaped this year, it comes as little wonder that institutions are gobbling up Inco shares. Competitor Falconbridge Ltd., which is also exposed to considerable copper production, was up 38 cents to $21.38.

New Quebec Raglan Mines, the Falconbridge affiliate, is probably the only pure nickel speculation on the market. Controlling one of the highest grade nickel sulphide deposits in the world — in Quebec’s remote Ungava area — the current nickel price must have Falconbridge executives looking at the property’s economics once again. Raglan was stronger at $2.85.

Still on the subject of nickel (and why not, it’s been in the dumps for more years than one cares to remember), another company stands to reap huge rewards from the metal. Hudson Bay Mining and Smelting, better known for its Flin Flon, Man., copper and zinc mines, is bringing its high grade Namew Lake nickel mine into production this summer.

HudBay will be mining ore grading 2.44% nickel per ton; almost double that mined by Inco in Sudbury. At 22 million lb per year and at a record low operating cost per lb, the mine at current prices, will generate buckets of cash flow for the company. HudBay, which was profitable in 1987 without Namew, was quiet at $8.

Madeleine Mines got a shot in the arm from strengthening platinum prices. The issue made an impressive gain to $4.85 today. Just two weeks ago, the issue was languishing at $3.35. The company controls a large tonnage, low grade deposit north of Thunder Bay, Ont.

Control of Hayes Resources is going to dcc Equities and American Barrick Resources, two of the original investors in the comapny. Hayes has purchased the gold division of Sherritt Gordon Mines, which includes the MacLellan gold mine in Manitoba. Hayes was steady and unchanged at $1.70.

When a company trades at less than its net asset value, takeover specialists are known to get shivers up their spines and lose sleep in nervous anticipation. Northgate Exploration, which is topped up with cash, is such a company. The issue traded today at $7.25 — up 38 cents .

With a net asset value of $10.40 per share, analyst Mark Wood with Kleinwort Grieveson Securities notes that Northgate is not “bullet proof.”

News that Neptune Resources has received a positive feasibilty study for its Colomac gold project in the Arctic did little to spur buying of the issue. The stock was quiet at $3.70. Capital costs are estimated at $121 million. Nevertheless, this project is worth watching very closely, simply because if it works, the potential 200,000-oz-per-year gold mine will generate significant cash flow for the operator. Look for a major company to step in to help finance this mega-project.