Toronto Stock Exchange Traders unimpressed with budget deficit

A four-day winning streak on the tse during our review week was snapped by a 43.86-pt loss yesterday. Today, the composite index perked up, adding 11.35 pts to close at 2,922.67 pts. The generally sluggish performance is indicative of the market’s `wait and see’ attitude towards the 18 days of talks in Washington on just what might be done about the U.S. budget deficit. Word is that an agreement will be reached this week for a $30 billion (US) cut — far below that expected by many economists and analysts.

The key to such cuts, however, will be just what blend of options the government uses. Cuts in spending and tax hikes are the only fiscal tools available. The latter, if employed in good measure, could have dire implications for the U.S. economy. Fears are that a massive tax hike could spark that much- forecasted recession which is yet to materialize.

Both precious and base metal prices remained firm. The second London gold fix was $463.70 (US) per oz, up $4 over our review week. Base metals such as copper and nickel, also showed some lustre, keeping pace with last week’s strong price surges. Copper and nickel stayed sharp at $1.15 (US) per lb and $2.59 respectively.

The tse gold index was off marginally by 11.46 pts to 6,457.05. All three metals will be real winners if the recession scenario, touted by almost everyone after the October crash, is not realized. The firm gold price suggests there is a growing inflationary sentiment in investment land.

Gold proxies such as American Barrick Resources were steady. Barrick was off a quarter to $22.88. Placer Dome Inc was unchanged at $16.13. Lac Minerals, which just two weeks ago was called a buy in this column at $8.50, was looking good at $11.75.

The company recently pulled off a neat debt-equity swap in Chile. By paying off some of that country’s outstanding foreign debt, Lac received equity in that country. In this case, the equity was an 85% interest in a producing zinc mine with good potential for expansion.

A bullish address was delivered by Inco Ltd chairman Donald Phillips to analysts in Toronto this week. The company, which is probably the lowest-cost nickel miner in the world, is making good money today at $2.60-per-lb nickel prices. However, the stock is not acting with much enthusiasm, as it continued at $21.80.

Denison Mines A shares continued unchanged at $5. The company’s affiliate Quintette Coal, is on the verge of shuting down its $3.5 billion mega coal project in B.C. if Japanese coal buyers don’t get reasonable over pricing. Denison wrote-off its Quintette investment last year.

Moneta Porcupine Mines was a beneficiary of some of the hype coming from Destiny Resources in Vancouver. The latter company, which owns some claims next door to Moneta in the Michaud Twp. area of Ontario, soared to a high of $5 on big volume. Destiny and partner Noranda cut two good sections of gold mineralization on its property. Moneta, which closed up 20 cents to $1.82, is also getting encouraging values on its property.

Other exploration plays include the high grade polymetallic discovery made by Westfield Minerals in Manitoba. The company has cut strong gold, silver and zinc values in several holes east of Flin Flon. However, plenty of work remains before reserves can be confidently blocked out. That caveat also goes for the Destiny project. The issue was firm at $2.45 — up 70 cents on for week.

Westfield’s parent however, is still showing disappointing results, despite the current boom in gold and base metal prices. The gold- copper producer showed a meagre profit, before extraordinary item, of $251,000 or 1 cents per share for the nine-month period ended Sept. 30. Add a tax gain, and that profit moved up to $1.35 million. The issue was trading at $6.75.