STOCK MARKETS — TSE manages small gain despite inflationary

Although the key Bank of Canada rate rose and the Canadian dollar dropped, the Toronto Stock Exchange managed to post a meagre gain for the 5-day report period ended Aug. 16. The composite 300 index edged upwards by 14 points to end the period at 4,202.79, indicating that the dog days of summer have arrived.

The Bank of Canada rate rose for the first time in seven weeks in response to concerns that the U.S. Federal Reserve Board would raise American rates. In fact, the Reserve Board increased American rates by 50 points while the Bank of Canada rate rose by 23 points to 5.93%. Fears of inflation in both countries were responsible for the increases.

Inflation fears and interest rate hikes took their toll on the Canadian dollar which ended the week down almost half a cent to US72.42 cents. Both factors are seen as being harmful to the fragile growth apparent in the Canadian economy.

Precious metals continued to remain listless, posting only slight losses over the week. Gold bullion drifted downward, with the London afternoon gold fix at presstime on Aug. 17 set at US$377.20 per oz., off US10 cents from a week ago. Platinum and silver showed little change and base metal prices were also relatively flat.

The gold and precious metals subgroup, along with the mines and metals subgroup, mimicked the TSE 300 composite index, off only marginally. The gold and precious metals subgroup lost 107.99 points to finish at 9092.93, while mines and metals lost 77.25 points to 3,825.26.

The battle for control of Lac Minerals appears to have slackened somewhat as the various companies play the wait-and-see game. The only development this week followed Lac’s rejection of the second bid from junior gold producer Royal Oak Mines. Royal Oak filed an application with the Ontario Securities Commission, asking that body to prohibit Lac from using its shareholder rights protection plan (the so-called “poison pill”). Royal Oak rival American Barrick Resources has also appealed to the commission to ban the use of Lac’s poison pill.

Shares of these two contenders were off marginally. Royal Oak was down 13 cents to $5.50 and Barrick shares lost 25 cents at $30.38. Lac shares were also off 25 cents, to $14.

TVX Gold, which along with Kinross Gold expressed an interest in making a bid for Lac, closed at $7.50, down 38 cents. Kinross remained unchanged at $5.38. Other senior gold producers were mixed on the week, with Placer Dome down 25 cents to $27.13 and Echo Bay Mines off 13 cents to $15.13. However, Hemlo Gold Mines gained 13 cents to close at $12.88.

St Andrew Goldfields continues to slide, dropping 12 cents to 77 cents. The company has temporarily suspended production at its Stock mine, near Timmins, Ont., while an extensive underground exploration is carried out. Junior gold explorer Pangea Goldfields began trading this week on the TSE. The company, which is carrying out exploration in Canada, Tanzania and Peru, has $8 million in cash and no debt. Pangea shares closed the week at $3. Diamond stocks were still reeling from last week’s announcement by Kennecott Canada that it was stopping work on the Tli Kwi Cho kimberlite project in the Northwest Territories. Most companies continued to move lower in active trading. Aber Resources was the big loser, shedding $1.13 to close at $9. SouthernEra Resources was off 45 cents to $2.90, Ashton Mining Canada lost 6 cents to close at $1.70 and Adex Mining, one of last week’s big movers, closed at 34 cents, down 8 cents.

Despite news that it had just signed a deal to earn an interest in a diamond property in Brazil, Pure Gold Resources lost 4 cents to 24 cents. Under the agreement, Pure Gold can earn 25% of Southern Pacific Development’s 80% interest in the 9,000-hectare Colonel Murta project in Minas Gerais state. In the mid-1800s, this area was the world’s largest supplier of diamonds. Shares in Dia Met Minerals were mixed, with the class A shares gaining $2.75 to $17.75, while the class B shares shed 50 cents to close at $18.50. One diamond stock to buck the trend was KWG Resources, which added 15 cents to $3.85. The company recently recovered 22 microdiamonds from a sample collected from the Troika kimberlite in northwestern Quebec.