MARKET STORY — Referendum jitters weaken gains in resource issues

Concerns about the upcoming Quebec referendum and related political uncertainty softened gains made by metals and gold stocks as the TSE 300 composite managed to post a reasonable gain. For the 5-day report period ended Sept. 12, the TSE 300 composite added 53.06 points, rising to 4613.21.

The volatility created by various polls forecasting various referendum results sent the Canadian dollar on a roller-coaster ride. The dollar, which started the week at US74.53 cents, hit US74.77 cents before falling back to US$74.24 cents, down US0.29 cents on the week.

To help calm market fears and lessen volatility in the fluctuating dollar, the Bank of Canada raised its key rate for the first time in six weeks. The trend-setting rate posted its largest single increase since the Mexican currency crisis in early March, jumping by 35 basis points to 6.88%.

Despite the economic and political concerns, the two key sub-indexes forged ahead, due in part to stronger prices of the underlying commodities and perceptions of continued economic growth.

Prices for all precious metals were stronger, with platinum posting the strongest gain. The London morning platinum fix for Sept. 12 jumped by US$13.60 to close at US$438.75 per oz. Gold and silver followed suit, as the yellow metal jumped by US$6.40 to US$385.40 per oz., while silver added US33 cents to US$5.54. The gold and precious metals sub-index surged by more than 600 points, adding 5.6% to close at 11103.96.

Both senior and junior gold producers capitalized on the rising gold price, with Placer Dome posting the largest gain, rising by $2.25 to close at $37.50. Other winners included Barrick Gold, adding $1.83 to finish at $36, and Echo Bay Mines, tacking on $1.50 to end at $15.50. Shares of Hemlo Gold Mines were up on news that the company has signed a memorandum of agreement with unionized workers at the company’s Golden Giant mine near Marathon, Ont. Shares of the gold producer added $1.25 to $13.75.

Other, more intermediate-sized producers were also reveling with the rising gold price. TVX Gold ended at $10.25, up 50 cents; Goldcorp finished at $14, up 38 cents; and Kinross closed at $11.63, up 88 cents.

The metals and minerals sub-index was also stronger, adding 4.2% to close at 5171.79. Speculation that economic growth will be more robust in the second half of 1995 appears to have rekindled interest in the sector — this, despite a lacklustre performance in the underlying commodities this week.

Nickel was the only metal in the group to add value, with the London Metal Exchange settlement price per pound rising by US2 cents to US$3.83. Copper and zinc both lost ground on the week, closing at US$1.30 (down US5 cents), and US44 cents (off US1 cents), respectively.

Undoubtedly, the star performer in the base metal category was Diamond Fields Resources, which hit a new 52-week high of $96 before rolling back to $90.83, up $8. The rise began on speculation that the company was a takeover target, and was later fueled by reports that its shares would undergo a 4-for-1 split.

Other notable gains were registered by Inco, which added $1.38 to $50, and Cominco, which jumped by $1.75 to $28.75. Cominco was spurred on by reports that the company’s Red Dog zinc mine in Alaska is 70% richer than previously announced.

Greater Lenora Resources was up 5 cents on the news that it had received expressions of interest in its Box-Athona gold project in northern Saskatchewan. It finished the report period at $3.90.

Black Swan Gold Mines was up 13 cents to 31 cents at the close of trading on Tuesday. The company had released encouraging results of sampling on its Cata Preta gold property in Brazil.