STOCK MARKETS — TSE buoyant as metals continue rally

A larger-than-expected drop in the Bank of Canada key rate, coupled with a rise in the Canadian dollar, helped the TSE 300 index continue its mid-summer rally.

On July 19, the TSE 300 index jumped 58.89 points to close the week at 4,190.61. Over the past two weeks, the composite index gained more than 86 points.

The Bank of Canada key rate fell to 6.11% from 6.48% on July 19. In response, the chartered banks trimmed their prime lending rates by a quarter of a point to 7.5%. The prime and bank rate cuts were largely the result of a lack of negative news from separatism-conscious Quebec and of the fact that the U.S. Federal Reserve Board has not (yet) raised American interest rates. The Canadian dollar closed the week up US58 cents to US72.70 cents. The gold and precious metals sub-index reversed the trend of the past three weeks, gaining ground and adding 205.34 points over our report period. The London afternoon gold fix on July 20 was US$387.45 per oz., up US$1.95 from a week ago.

Other precious metal prices were also up on the week, with silver gaining a dime to close at US$5.32 per oz. and platinum rising by US$6.10 to US$413.85. The senior gold producers all followed the price of the yellow metal over the week, with Placer Dome rising by 62 cents to close at $29 on a volume of just over 2 million shares. Other seniors gaining in value were: Echo Bay Mines, which gained 12 cents to $15.37; American Barrick Resources, which added 63 cents to close at $32; and Hemlo Gold Mines, which posted a 13 cents gain to $12.25.

Hemlo reported earnings for the first half of 1994 of $38.1 million, or 39 cents a share. This compares with $21.9 million, or 23 cents a share, for the same period last year. The increase is largely the result of a 20% increase in gold production, as well as a 6% higher average realized gold price. Gold royalty company Franco-Nevada Mining reported first-quarter results for the period ending June 30. Revenues increased 127% to $19.8 million from about $8.7 million. In addition, net earnings increased by 122% to 13.2 million, or 82 cents a share, from 5.9 million or 40 cents a share. Franco shares lost $1 to end the week at $68.87.

News of the long-awaited drill results from Vengold’s Kilometre 88 properties left investors somewhat disappointed. The company, which paid about $60 million for the properties, said eight holes drilled on the Tayapa Pit zone yielded a geological resource of 200,000 oz. gold equivalent. The share price dropped by $2.75 to finish at $5.50. Shares of other companies working in the area also dropped. Queenstake Resources ended at $1.50, down 45 cents. Shareholders of Lac Minerals were given food for thought at a news conference as the major responded to the hostile takeover bid made by Royal Oak Minerals. Lac Chairman Peter Allen urged shareholders to reject the offer and allow his company to pursue growth opportunities by developing additional reserves and increasing production levels. More than 7.6 million Lac shares changed hands as each share gained 25 cents to end at $13.25. Shares of Royal Oak lost 25 cents to close at $5.87.

Junior gold explorer Sudbury Contact continues to hit lofty heights, hitting a new 52-week high and trading at prices higher than those of its parent company, Agnico Eagle Mines. Shares of Sudbury Contact, which is drilling its Victoria Creek property in northeastern Ontario, closed the week at $17.13 (up $1), while Agnico finished at $16.38 (down 50 cents).

A recent ruling by the Ontario Securities Commission (OSC) had a negative effect on the share price of Asbestos Corp.. The OSC ruled that the Quebec government acted unfairly in its dealings with 200 minority shareholders. Although the OSC ruled that the shareholders were not legally entitled to the claimed amount of $170 million, it is apparent that the market thinks the issue is not yet resolved. Shares of Asbestos Corp. fell $5 to close at $22. In other legal battles, Venezuelan gold-explorer Gold Reserve was reaffirmed as the sole owner of the Brisas concession by the second Superior Civil Appellate Court of Caracas. The final pending ruling is to be made by the Supreme Court of Venezuela, wih summations and conclusions expected by July 25. Shares of Gold Reserve jumped $2.37 to close at $10.38.