STOCK MARKETS — Senior gold stocks rally despite listless eastern markets

Last week’s strong gains were somewhat tempered, as Toronto’s major index paused to take a breath, posting a small gain. During the 5-day reporting week ended May 30, the TSE 300 composite index added 9.16 points to close at 4,436.79. Trading activity was lower, in part because of the slower U.S. market activity due to the holiday Monday.

The dollar mirrored the listless performance of the composite index and continued its 2-week downward trend, dropping almost a quarter of a cent against the U.S. green back. The Canadian dollar closed at US73.06 cents.

The trend-setting Bank of Canada rate was also stuck in the doldrums and drifted down 6 basis points to close at 7.64%.

Precious metals prices were mixed, with gold and platinum posting moderate gains while silver ended lower. The London morning gold fix for May 30 was US$384.25, up US$1.35. The platinum fix was up US$2.35 on the week, closing at US$434.10, while the silver fix shed US10 cents to close at US$5.30. The gold and precious metals subgroup took its cue from the increase in the spot price of gold and tacked on 3.6% to end the week at 10,401.

Base metals prices were also mixed, with lead and copper remaining unchanged while nickel and zinc closed marginally lower. The metals and minerals subgroup was flat and managed a nominal gain of 3.8% to close at 4,308.97.

The rally in the gold market continued this week with most senior and intermediate-tiered producers showing gains. Placer Dome was the largest volume trader among senior gold companies, with 467,000 shares changing hands. Placer shares added $1.25 to close at $34.50. Other winners included Barrick Gold, ahead $1.25 to $34.50, and Hemlo Gold Mines gaining 25 cents to $16. Bucking the upward trend was Echo Bay Mines, which lost 25 cents to close at $12.38.

Other producers continued their climb, with several issues breaking old barriers and hitting new 52-week highs. Kinross hit a new high of $10.13 before rolling back to end at $9.75, up 38 cents on the week. TVX Gold also hit a new high of $10.88 before sliding back to end at $10.50, up 38 cents on the week.

Speculation regarding potential suitors for Diamond Fields Resources has whipped the market into a frenzy, fueling a meteoric rise in the company’s share price. At presstime, Diamond Fields shares were trading in the $73 range, up $15 from the previous week.

Many market participants are wondering just how high the stock will rise and how much senior companies are willing to pay for an interest in the deposit. The “rumor mill” has been working overtime, and speculation is growing on the street that the rumors are being generated to drive the stock price above the $70 level. Only time will tell what price the majors are willing to pay to acquire a minority interest in the Voisey Bay find.

Teck, with its 10% equity interest in Diamond Fields, also experienced a rise in share price. Teck’s series B shares rose $2.63 to close at $27.

Shares of companies reportedly interested in acquiring a stake in the deposit were less active than Diamond Fields. Inco remained unchanged over the week, closing at $35.25, while Falconbridge added 50 cents to end at $22.75.

Drill intersections from the Red Lake gold mine helped moved shares of Goldcorp to higher ground. The company continues to intersect ore-grade mineralization in two recently discovered zones, as well as in the downdip extension of the Main zone. In addition, a near surface target is being drilled from underground and surface locations. Over 1.2 million Goldcorp shares traded this week, with the stock adding $2.13 to close at $16.75.

Preferred shares of Denison Mines are continuing to rise. The 9.5% series added 72 cents to close at $3.30, while the 9.75% series gained 80 cents to close at $3.30.

A recent decision to re-activate the Eagle River gold mine near Wawa, Ontario, was good news for shareholders of River Gold Mines and Western Quebec Mines. At its annual meeting, River Gold announced it had reached an agreement to use a nearby mill, and development of the vein-type deposit will start shortly. Shares of River Gold tacked on 40 cents to end at $2.70, while Western Quebec shares added 35 cents to close at $3.20.