STOCK MARKETS — Drop in interest rate causes late TSE rally

The Toronto Stock Exchange suffered heavy losses during the report period ended Dec. 19, but a drop in interest rates spurred a 40-point rally on the last day, which left the TSE 300 composite index at 4,653.61, down 50.06 points, or 1.1% from the previous week.

The market endured a 6-day slide, bottoming at 4,613.35 on Dec. 18. The loss was fed by fears that U.S. interest rates, long expected to fall, would hold steady. When the U.S. Federal Reserve bank announced a quarter-point cut in rates on Dec. 19, markets on both sides of the border rebounded.

The U.S. rate cut allowed the Bank of Canada to bid down the yield on Treasury bills at its Dec. 19 auction without pulling the rug from under the loony. The 90-day yield was set at 5.814%, and the bank rate at 6.06% (16 basis points less than the previous week).

Easing interest rates in the U.S. brought currency buyers into the Canadian dollar, which had dropped 0.29 cents on Dec. 18. The loony closed at US72.58 cents on Dec. 19 and, by presstime, had risen to US73.14 cents. Over the week, the dollar was stronger against all major foreign currencies except the Swiss and French francs.

London bullion markets saw lower prices. Gold was down $1 to US$387.10 per oz. on the morning fix of Dec. 19. Platinum had a hard landing, losing $7.60 for a fix of US$405.65 per oz., and silver lost 4 cents, fixing at US$5.12 per oz.

The gold and precious metals sub-index fell sharply, losing 2.7% of its value between Dec. 13 and 19. The index closed at 10,445.84, off 291.46 points. Placer Dome was the most active issue, closing at $33.38, down $1.62. Barrick Gold slipped $1 to finish at $36. Other actively traded golds were Kinross Gold, which lost 50 cents to close at $10.75, and Royal Oak Mines, which picked up 12 cents, finishing at $5.12. Royal Oak and Goldcorp, up 50 cents to $16.25, were the only large issues on the gold index to buck the trend.

Base metal prices all moved lower. Copper took the worst hit, losing 5 cents to close Dec. 19 at US$1.30 per lb. on the London Metals Exchange. Nickel, at US$3.66, was 3 cents lower, but held on to most of last week’s gain. Lead and zinc both fell 1 cents to US32 cents and US46 cents.

Metals and minerals stocks were also generally lower, though their TSE subindex fell only 22.87 points (0.4%) to 5,067.00. The most active issue on the index was Aur Resources, which was down 38 cents to $6.50. Inco was 50 cents lower at $47.88; Diamond Fields was off 75 cents at $25; and Cameco put on $1 for a close of $51. Copper’s woes hit Falconbridge (which lost 88 cents to close at $30.25), as well as Inmet (down 38 cents to $10) and Rio Algom (off 25 cents to $26). Noranda emerged unscathed, and unchanged, at $28.88.

Junior issues that posted notable performances this week included Tandem Resources and NAR Resources. The companies intersected a 27.3-ft.-wide, gold-bearing zone on Tandem’s Guibord Twp. property. The zone contained an interval that assayed 0.252 oz. gold over 14.4 ft., which included a narrower intercept of 9.1 ft. that averaged 0.396 oz. More than 2.7 million Tandem shares changed hands as the stock surged 23 cents to close at 54 cents. NAR shares also jumped, rising 37 cents to end at 85 cents.

Cuban explorer MacDonald Mines intersected significant lengths of gold-bearing massive sulphides in its first three drill holes on the Golden Hill discovery. More than 1.8 million MacDonald shares traded as the stock rose 5 cents to close at 43 cents.

Junior Exall Resources announced it intends to purchase Hemlo Gold’s 60% interest in the Hislop-Beatty gold property in northeastern Ontario. Exall hopes it can start deriving cash flow from the operation by late 1996. Buoyed by this news, Exall shares rose 5 cents to end at 50 cents.

African explorer International Gold Resources took it on the chin this week after the Ghanaian government announced it would sell an 18% interest in the Bibiani gold project to a third party. Over the past few weeks, the company had stated it was negotiating to acquire the interest in the project. As a result of the sale, International Gold will remain operator and hold a 45% interest in the project. Shares of the company shed 55 cents and dropped to $3.50.