STOCK MARKETS — Market falls on fears of bank rate rise

Fears of a rise in the Bank of Canada rate and a subsequent 75-100-point increase in the chartered bank prime lending rate took their toll on Canadian markets during the week ended May 10.

In response to these concerns, the Toronto Stock Exchange composite 300 index dropped considerably before the announcement that the Bank of Canada rate would increase by 34 basis points to 6.61%, the highest rate in a year. On the week, the 300 index was down 79 points at 4,189.92.

With the rise in the bank rate, the Canadian dollar managed a gain of just under a half-cent to close at US72.56 cents.

The two key subgroups showed mixed results: Mines and metals posted a loss of 48.5 points to finish at 3,472.69, and the gold and silver subgroup edged ahead seven points to 9,511.61.

The London afternoon gold fix for May 11 was US$380.50 per oz., up US$4.85 on the week.

Senior gold producers, on the whole, followed the price of the yellow metal and made slight gains on the week. American Barrick closed at $32, up 88 cents; Placer Dome also jumped 88 cents, to close at $29; Lac Minerals edged upward by 13 cents to close at $11.50; and Hemlo Gold Mines rose 38 cents to close at $12.63.

Junior gold producers also followed the gold price. An active trader, Kinross Gold, jumped 88 cents to close at $6.67. The company is joining forces with Teck to explore concessions within El Callao, an area in Venezuela’s Bolivar state. Teck remained unchanged at $22.75.

Market participants seemed curiously unimpressed with the first-quarter results of Cambior. The company reported a 36% increase in revenues and a 22% increase in gold production over the same period last year. The stock edged downward by 13 cents to close at $17.63.

With respect to base metals, copper was stronger, hitting a 13-month high of US97.55 cents per lb. amid indications that American and European economies are growing faster than anticipated. In conjunction with the increased demand, the rise in price was also attributable to a sharp decline in the copper stocks held in London Metals Exchange warehouses.

Despite the gain in the commodity price, most copper producers edged downward on the week. Cominco lost 50 cents to finish at $20.75; Rio Algom lost 13 cents to close at $23.38; Metall Mining remained unchanged at $11.50; and Inco lost 88 cents to end the week at $32.63.

Other news from Inco includes a report that there was an accident at one of the company’s two flash furnaces at its smelter operations in Sudbury. The cause of the accident, the extent of the damage and the length of time the furnace will be out of operation were being evaluated at presstime. The company, however, expects the shutdown to be temporary.

Competition was fierce for the rights to negotiate a deal for acquiring the Faro lead-zinc mine in the Yukon from bankrupt Curragh. Two companies — privately owned Anvil Range Mining and TSE-listed Jordex Resources — have been negotiating, and it seems the former is the frontrunner. Jordex shares lost 23 cents to close at $1.02.

SouthernEra Resources, Dentonia Resources and Horseshoe Gold Mining were in the news this week as the three diamond exploration companies announced they will merge to form a new company, NorthernEra Diamonds. SouthernEra and Horseshoe were unchanged at $6.38 and $6.50, respectively, while Dentonia closed down 25 cents to finish at $6.63.

Partners Dia Met Minerals and BHP Minerals Canada are proceeding with a feasibility study on the joint-venture ground in the Northwest Territories. It is expected the basic engineering and bankable feasibility study will be completed later this year. Despite the news, Dia Met lost 63 cents to close at $27.88.

After resuming trading on April 29 at 27 cents, shares of international Platinum continued to climb, gaining 16 cents to close at 44 cents. Western Quebec Mines has defined high-grade, near-surface reserves on the McKenzie Break gold project near Val d’Or, Que. The news did not, however, have much effect on the stock price; the shares lost a nickel to close at $2.75.