Cut in Bank of Canada rate falls on deaf ears

Hoping to boost investor confidence, the Bank of Canada shed 75 basis points from its key lending rate on Oct. 23, bringing it to a 40-year low. But so far, the decision appears to have backfired: the Toronto Stock Exchange finished the Oct. 17-23 report period down 122.65 points at 6,904.24 points.

Gold, in free fall ever since the U.S. began attacking Afghanistan, sank another $5.50 over the five trading days to arrive at a London morning fix of US$276.15 per oz. on Oct. 24. Silver, platinum and palladium all lost ground too.

Canada’s gold majors followed suit: Barrick Gold sank $1.85 to $24.30 on a volume of 8.4 million shares; Placer Dome plummeted $2.05 to $16.85 as 9.7 million shares crossed the floor; Franco-Nevada Mining eased back 70 to $21.80; and Kinross Gold slipped a nickel to $1.38. The losses combined to erase 324.68 points, or 6.3% of value, off the gold and precious metals sub-group.

Goldcorp slipped 65 to $17.20 despite announcing stellar production results. The gold miner cranked out 134,907 oz. from its Red Lake and Wharf mines during the third quarter, bringing the 9-month production figure to 469,000 oz. Cash costs over the longer period averaged US$86 per oz., leaving plently of margin against current gold prices. In celebration, shareholders will receive a special dividend of 10 per share on Oct. 31 and quarterly dividends of 5 per share thereafter.

Iamgold, too, had good news: the partly owned Sadiola open-pit operation produced 390,227 oz. in the first nine months of the year at a total cash cost of US$144 per oz. Sadiola remains on target to meet its 2001 target of 522,000 oz. at a similar cost. However, like Goldcorp, Iamgold shares slipped in conjunction with gold prices, dropping 9 to $3.24.

Among the other mid-tier producers, Agnico-Eagle Mines fell 65 to finish at $14.85, Meridian Gold dropped 55 to end at $14.25, and Glamis Gold eased back 10 to $5.10.

Nickel prices may have shed another 28 per lb., but Inco staved off the market blues by rising 65 to $22.70. The nickel producer earned US$33 million on revenue of US$434 million in the third quarter, with a US$28-million gain on a shrinking Canadian dollar providing the driving force.

Noranda fell 17 to $14.33 as it announced a third-quarter loss of $60 million on revenue of $1.46 billion. Depressed metal prices were almost entirely to blame, with smaller production volumes in some metals playing a minor role.

Also down were: Falconbridge, off 20 at $14.70; Teck Cominco, falling 36 at $10.05; and Breakwater Resources, shy 4 at 19. Among the gainers were Boliden, up 3 to 25, and Sherritt International, which added a nickel to $4.04.

In U.S. trading, gold stocks had a uniformly bleak week in sympathy with declining gold prices: Newmont Mining fell US77 to US$21.14; AngloGold was down 92 to US$15.51; Gold Fields fell 9 to US$4.54; Homestake Mining dropped 66 to US$8.14; Ashanti Goldfields eased down 2 to US$3.28; and Compania de Minas Buenaventura fell 29 to US$19.61. Following the same downward trend was Stillwater Mining, the biggest platinum miner in America, which fell $1.49 to US$20.84.

After reporting a US$100.4-million third-quarter loss, Phelps Dodge announced plans to scale-back production, lay off 1,440 workers, and scrap its quarterly dividend. The company declined 31 on the week to US$28.99.

The rest of the U.S.-traded base metal miners also suffered: Freeport-McMoRan Copper & Gold‘s B shares fell 28 to US$10.50; BHP Billiton sank 75 to US$9.10; Rio Tinto slid $4.80 to US$65.50; Anglo American fell 24 to US$13.21; and Southern Peru Copper dropped 46 to US$8.84. The exception was WMC, which soared $3.25 to US$18.85 on speculation that the diversified nickel miner may soon be taken over.