Bullion Bonds

Sunshine's silver standard

Although the nation does not seem ready to return to the gold standard, the soaring prices of precious metals are encouraging one company to have a go at using silver in lieu of money. Sunshine Mining Co., owner of the country's largest silver mine, the Sunshine in the Coeur d'Alene mining district of Idaho, plans to raise $50 million to expand mining operations by issuing silver-backed bonds. In the 19th century bonds were redeemable in gold, but American companies have not offered securities supported by precious metals since 1933.

Sunshine's 15-year bonds will be sold in $1,000 denominations next March, through underwriters Drexel Burnham Lambert, Inc. The company can redeem them in cash or bulk on. The amount of silver backing the bonds will be related to the spot-market price of the metal on the day of issue. But if, for example, each bond has 20 oz. of silver behind it, when it is redeemed the holder will receive $1,000 or the value of 20 oz. of silver, whichever is greater. The advantage to Sunshine, which recently escaped a bloody takeover attempt by the silver-coveting Hunt brothers of Dallas, is that bond buyers are expected to accept a lower rate of interest because of the bonds' silver lining. Other potential borrowers are closely watching the issue, since its success could mean cheap money for asset-rich gold-mining and even oil companies.

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