Toronto Stock Exchange Volatile price swings in trendless week

The herd mentality took the market over the precipice Oct 19, Black Monday, and it very well could move it right back up again in the next few months. During our review week, signs that investors are trying to anticipate market bottom in preparation for that much anticipated upswing, were evident. Two large sell-offs were followed by a three day rally which added 154 pts to the tse 300 composite index. The buying, especially on Tuesday, came in eager bursts as orders surged just before the close. Today, the market picked up a modest 13 pts to close at 3,063.63 pts.

However, such nervousness is extremely difficult to anticipate, and as we said last week, investors must be prepared for vigorous whipsaw activity. Gold bullion remained strong, trading at $485(US) per oz. However, the tse gold index remained flat, giving up 31 pts to 7,655.11 pts. Investors are remaining cautious about plunging back into gold equities so soon after the October shakeout which saw the majority plummet in value by 40%-50%.

American Barrick Resources, which is poised to become the first Canadian company to produce more than one million oz of gold per year from North America, opened up at $28 before closing down at $27.25. Placer Dome Inc, another giant gold miner, was also marginally weaker at $20.38. Lac Minerals was steady at $13.50. This week, the Supreme Court of Canada reserved judgement on Lac’s request to take its Hemlo appeal to the top court in the land. The Supreme Court is expected to make its ruling within weeks. If Lac does get another chance to contest the Hemlo issue, look to see a modest price rise.

Western Goldfields Inc, which operates a heap leach mine in Nevada, made an astute investment several weeks ago. The company purchased an 18.6% interest in Delaware Resources. Delaware has a stake in the SNIP deposit which hosts about 800,000 gross oz of gold (see front page story). Western was quiet at $7. Nickel miners have plenty to cheer about this week. The base metal soared on world commodity markets to a high of $3.28(US) per lb. Driven by good demand and shrinking inventory, nickel is enjoying an unprecedented boom time, unseen in the 1980s. Inco Ltd, which is the world’s largest producer of nickel, was stronger at $24.38. Falconbridge Ltd was also better, trading at $21.50. Volume was a healthy 624,565 shares for a value of $13.67 million.

Good exploration results were released from the Fork Lakes project in Saskatchewan. Golden Rule Resources, which was a tse highflyer last fall when the discovery was first announced, was easier at $4.05.

Beleaguered Getty Resources got a much needed jolt of confidence following the purchase by Total Erickson of an 11.5% interest in Getty. Getty, which was easier at $7.88 today, holds a 49% interest in the Tundra gold deposit in the Arctic. The deposit could be in production by the early 1990s.

Neptune Resources also has big plans for the Arctic. The company has a bold plan to mine and produce 175,000 oz of gold from an open pit heap leach operation beginning in 1989. However, a small 15,000 ton vat test generated problems during the summer months. The company plans to mine 10,000 tons per day all year, which, as experienced open pit operators know, can result in numerous problems during winter months. Nevertheless, if Neptune can pull it off, it will be the mining success story of the year. Neptune was quiet at $4.50.