STOCK MARKETS — TSE 300 makes gains as profit-taking ensues

Strength in the TSE 300 composite index accumulated in the early part of the report week ended July 18, as the leading index broke through the 4,700-point level, setting a record for the fourth consecutive week, at 4,710.31. Profit-taking followed, as the composite rolled back to close at 4,667.42, up 17.59 on the week.

Signs that the Canadian economy is picking up, drove the trend-setting Bank of Canada rate higher, by 20 basis points to 6.78%. The larger-than-expected increase was initiated to prevent any possible rise in inflation. Recent figures show that the Canadian manufacturing sector is performing well and that consumer spending is on the rise south of the border. The inflation fears were therefore justified.

Despite the rise in the Bank of Canada rate, the Canadian dollar was under strong selling pressure, having dropped US0.4 cents to close at US73.48 cents. The narrowing spread between U.S. and Canadian money market yields was cited as a possible cause of the selloff, as was uncertainty concerning the Quebec sovereignty issue.

The metals and minerals sub-index, together with its gold-and-precious-metals couterpart, continued to ride the rising trend that began a few weeks earlier.

The precious metals sub-index was up for the second week in a row, rising by almost 1% to 11,116.31 points. Prices followed suit, with the London morning gold fix for July 19 set at US$389.25 per oz., up US$3.40. The fix for platinum showed a strong gain, adding US$6.25 to end at US$440.25, while the silver fix closed at US$5.34, up US18 cents.

Most senior gold producers managed to eke out meager gains. Barrick Gold posted second-quarter results which showed that revenue and net income for the first six months had risen by 42% and 19%, respectively, compared with the previous 6-month period. Barrick shares hit a new 52-week high of $37.25 before edging back to end at $36.63, up 38 cents on the week. Also up was Echo Bay Mines, which added 25 cents to $13.13, whereas Hemlo Gold Mines dropped 13 cents to close at $15.13. Placer Dome remained unchanged at $38.75.

Gold royalty companies Euro-Nevada Mining and Franco-Nevada Mining continued to post sizable gains. The former hit a new 52-week high of $48.25 before slipping back to $47.75, up $1.25 on the week, while the latter added $3.75 to close at $79.25.

The metals and minerals sub-index rose by more than 4% this week, almost 10% over the past two weeks, closing at 5,123.11 points. Base metal prices, on the other hand, ended the week lower, largely due to declines in nickel and copper prices.

Still, senior base metal producers continued to climb, with many hitting new 52-week highs. For the second week in a row, Inco hit a new 52-week high of $47.75. Shares of the nickel giant ended at $47.25, up $1.75. Inco’s largest single shareholder, Diamond Fields Resources, followed the senior’s lead, jumping $4.63 to $70.63.

Other base metal producers that ended higher included; Cominco, up $1 to $26.75; Falconbridge, up 50 cents to $28.75; Rio Algom, up $1 to $29.25; and Noranda, up $1.13 to $29.63. On the downside, Inmet Mining announced it will suspend operations this fall at its 80%-owned Copper Range subsidiary. Inmet shares closed down 13 cents to end at $11.25.

The proposed takeover of Eldorado by Glamis Gold appears unlikely to proceed, following the withdrawal of Glamis’s application. As a result, investors favored Glamis sending its shares higher, up 13 cents to $10.63. Eldorado shares closed down 25 cents to $5.25.

Shares of Montreal-listed Bresea Resources vaulted $4.50, following news that the company’s Alberta-listed affiliate, Bre-X Minerals, drilled rich intersections in the Southeast zone at its Busang gold project in Indonesia. One of the better intersections averaged 0.09 oz. gold per ton over 695 ft. Shares of Bresea closed at $11.83.