STOCK MARKETS — Resource investors flee to bonds as TSE falters (September 04, 1995)

The lack of interest from institutional investors, coupled with a stronger Canadian dollar, left the Toronto market quiet as the TSE 300 composite posted a marginal loss. For the 5-day report period ended Aug. 29, the TSE 300 composite shed 49.82 points, dropping to 4,551.86.

Earlier in the week, the Bank of Canada dropped its call rate for overnight loans, a move also precipitated by a strengthening dollar and a rise in the bond markets. Later, the Bank dropped its key lending rate for the fourth week in row, cutting the rate by 11 basis points to 6.59%. The stronger dollar and a lower Bank of Canada rate prompted most major banks to chop their prime lending rate by 0.25% to 8%.

All of the action was a result of a stronger dollar, which reached its highest level against the U.S. greenback since February, 1994. The Loony rose because of increased demand from foreign investors. The consensus is that the sovereigntist movement in Quebec has stalled, with polls showing a “no” vote victory. In addition, foreign investors think the federal government is making some headway in reducing the national debt and that this may indicate a future upturn in the economy. Whatever the reasons, the dollar jumped by more than US1 cents, closing at US73.12 cents.

Led by a drop in the price of gold bullion, the TSE gold and precious metals sub-index moved slightly lower, to 10,655.15 points, posting a loss of 171.33 points or 1.6%. The London morning gold fix for Aug. 30 was US$381.90 per oz., off US$1.55.

Gold stocks were fractionally lower, following the price of the yellow metal. Barrick Gold, the most active of the gold issues, closed at $34.38 and Hemlo Gold finished at $13.25; both lost 63 cents on the week. TVX Gold at $9.63, Goldcorp at $13.63, and Kinross at $11.25 were all unchanged. Placer Dome lost 25 cents on a volume of 2.5 million shares to finish Tuesday at $36. International newsmaker Cambior appears to have calmed investors’ nerves over the recent cyanide spill at the Omai gold mine in Guyana. Shares of Cambior lost 25 cents to end the report period at $14.38.

The metals and minerals sub-index was also lower, having dropped 192.45 points (or 3.8%) to 5,046.89. Investors were ready to take their profits after last week’s run by the large base metal miners, and the week’s currency markets brought worries about the effect of a higher dollar on exporters.

Inco, the market’s darling last week, gave back $2 to close at $48.63 with 2.6 million shares traded. Noranda backed up $1.25 to $28.50; Cominco lost the same amount to close at $27.50; and Teck B-series shares slid 87 cents to $26.75.

Nickel-sensitive issues Falconbridge and Sherritt held on to more of their earlier gains, with Falconbridge off 38 cents to $29.75 and Sherritt down 12 cents to $16.50. Nickel prices have fallen about 3% from last week’s highs.

News of an agreement that will see Amalgamated Cangold acquire a gold licence in Kazakhstan helped the company hit a new 52-week high. Cangold, through an amalgamation with a private company, will acquire two licences, covering more than 25,000 sq. km. The company’s shares jumped $1.20 to close at a new 52-week high of $4.05.

An agreement to acquire two concessions in Burkina Faso helped High River Gold Mines post a healthy gain. High River will spend US$1 million to acquire the Tamberi and Kolokuame concessions which will be subject to a 30% net profits interest. High River shares tacked on 50 cents to close at a new 52-week high of $3.35.

Despite positive drill results indicating that Platinova A/S has extended the strike length of known mineralization to 10 km on its Peary Land zinc project, the stock lost ground. Both the common shares and special shares dropped 65 cents to close at $1.95 and $1.90, respectively.

Heavily traded junior resource stocks included: St. Genevieve Resources, up 4 cents to 54 cents; Asia Pacific Resources, up 15 cents to $4; and Cliff Resources, up 1 cents to 5 cents.