STOCK MARKETS — Eastern markets stirred by diamond news,

All was quiet on the eastern stock markets during the week ended Aug. 25 with investors taking time out to bask in the first spell of sunny, hot weather to descend on central Canada all summer.

The Toronto Stock Exchange composite 300 index, taking its cue from falling U.S. markets, shed 9.7 points. The metals and minerals index followed suit, dropping 9.6 points to 2952.24. Today (Aug. 26), 20.4 million shares valued at $221 million changed hands as the TSE 300 moved up by 7.2 points. Creating some excitement on the Montreal Exchange was diamond explorer KWG Resources, which jumped 77 cents to $3.65 on more than one million shares after briefing reporters on plans to launch a “massive” exploration program in two areas of northern Ontario.

Using project code words reminiscent of a James Bond movie, KWG says it plans to spend $5 million searching for diamonds in the James Bay lowlands near the Attawapiskat River and another $2.5 million looking for gems along the Quebec-Ontario border east of Kirkland Lake, Ont.

The projects will be called “Spider #1” and “Spider #2”, referring to the loose pattern formed by the fault structures that control kimberlites as they branch out from a centre, much like the legs of spider.

KWG affiliate St. Genevieve Resources also moved on the announcement, with 855,000 shares changing hands. The Montreal-based explorer closed up 8 cents at 63 cents.

Other active diamond issues included United Reef Petroleums, up 4 cents to 9 cents, and Westfort Petroleums, up 3 cents to 9 cents. United Reef recently signed an option agreement on a diamond prospect in central Africa; Westfort shares an interest in the Lac de Gras play with Aber Resources. Aber closed up 2 cents to $2.07 after announcing a 230-ft. intersection grading 6.9% copper on its High Lake project in the Northwest Territories. Some investors are questioning the wisdom of putting their money behind diamonds after De Beers released an interim statement that put a gloomier light on the global diamond market. The big gem producer/marketer said a “dramatic increase” in the supply of illicit diamonds from Angola and a weak global economy are likely to lead to a softer market and lower annual earnings.

But some bullish observers of the Lac de Gras play say that De Beers, by being uncharacteristically public about its fears, is simply trying to quash the flurry of diamond exploration by its competitors in North America. De Beers closed recently at US$14.37 on NASDAQ, down from US$30 last November. Troubled junior Audrey Resources shed 4 cents to 68 cents as the former base metal producer agreed to hand over the reins of control to Cambior. Under pressure from its banker, Audrey agreed to sell 20 million shares to Cambior at 65 cents, giving the gold producer a 55% interest in Audrey. Cambior has also offered to buy shares from four Audrey shareholders to increase its interest to 65%.

Audrey, which shut down its Mobrun polymetallic mine earlier this year, will use the proceeds to pay off a US$12.1 million debt to Elders Finance. Cambior edged up to $9.38 for a gain of 38 cents.

Other gold producers also benefitted from a better gold price. Gold closed in London at US$341.40, up $5.30 from last week’s afternoon fix. American Barrick added $1.62 to $34.25 while Lac Minerals and Hemlo Gold Mines added 38 cents to $8.38 and 50 cents to $9.50, respectively. Top trader Placer Dome shed 13 cents to $12.25 on 2.4 million shares.

White Star Copper Mines added some volatility to an otherwise sleepy CDN market on speculation over results from a deep hole being drilled by Falconbridge on the junior’s Kidd Twp., Ont., property. White Star climbed 67 cents to $1.50 before dropping back to $1.10.

In Nova Scotia, majors are said to be bidding for control of Rio Algom’s Rio Kemptville tin mine. But if a deal is not reached by Sept. 3, observers say, Rio will begin dismantling the mill selling off the parts piece by piece. Rio closed up 25 cents at $16.88.

Up one penny to 11 cents was Joutel Resources. Aur Resources is reported to have resumed drilling on Joutel’s copper prospect at Joutel, Que. Previous drilling on the property returned low-grade zinc values. Aur was up 5 cents to $2.95.