US interest rate cut gives TSE a jolt

Buoyed by another cut in interest rates south of the border, the Toronto Stock Exchange 300 index rose 136.31 points over the holiday-shortened week of June 27-July 3 to finish the period at 7,748.32.

The yellow metal sank $8.40 over the period to land at a London morning fix of US$267.60 per oz. on July 4. The devalution precedes the Bank of England’s planned gold auction for July 11, when 20 tonnes will be sold as part of an ongoing effort to reduce the country’s reserves.

Canada’s gold producers all responded predictably: Barrick Gold sank $1 to $22.60; Placer Dome slipped $1.50 to $14.80; and Kinross Gold dipped 17 to $1.25.

TVX Gold received shareholder approval to forge ahead with an early conversion of its gold-linked convertible notes. Accordingly, 321.5 million shares will be issued upon receipt of regulatory approval, ballooning the company’s float to 357.2 million shares. The decision failed to bolster TVX’s share price, which dropped 9 to 80.

Also suffering from gold’s devalution were Meridian Gold, down $1.97 to $11.43, and Goldcorp, down $1.22 to $16.11. Riding the storm, Agnico-Eagle Mines remained unchanged at $12.95.

In step with a drop in palladium prices, North American Palladium dipped 65 to $11.80. The company, Canada’s only primary palladium producer, recently completed an expansion program at its Lac des les mine in northwestern Ontario. The mill should achieve design capacity of 15,000 tonnes daily by October.

Overall, the gold and precious metals sub-group tanked 215.06 points to 4,490.84. This represents a 4.6% loss in value.

The base metals rose 98.72 points over the period, with the metals and minerals sub-index ending the week at 4,394.57. The increase contrasts with the poor performance by physical metals: nickel sank 10 to a London morning fix of US$2.74 per lb. on July 4; copper and zinc eased back a penny each; and lead remained unchanged at US20 per lb.

Noranda, which fell 24 to $16.06, announced its intention to acquire the El Pachon copper deposit, on the border between Chile and Argentina. The major must pay Cambior US$28 million, plus another US$2 million four years after the deal closes, or when a production decision is made.

With the exception of Falconbridge, which slipped 40 to $16.27, the remaining majors increased in market capitalization: Inco rose 1 to $25.65; Teck‘s B-series rose 23 to $12.98; Cominco rose 48 to $29.08; and Sheritt International climbed 11 to $5.01.

First Quantum Minerals and New York-listed Phelps Dodge have extended the deadline for the former’s acquisition of the Kansanshi copper-gold deposit in Zambia. A definitive agreement was to have been signed by June 29, but the paperwork is taking longer than expected. First Quantum must pay Phelps Dodge US$2.5 million and grant it 1.4 million shares in return for an 80% stake in the deposit, which hosts 267 million tonnes grading 1.28% copper and 0.16 gram gold per tonne. First Quantum ended the week up 21 at $3.73.

Among juniors, Gabriel Resources rose 25 to $3.85 on a light volume. Subject to regulatory approval, the company will issue 3 million shares at $3.50 apiece to raise $10.5 million in gross proceeds. The deal eliminates the need for a bridge financing with Resource Capital Fund and lays the foundation for another financing following completion of a feasibility study at the Rosia Montana gold project in Romania.

Gammon Lake Resources slipped 5 to $1.40 prior to releasing more news from its Ocampo gold-silver properties in Mexico. Preliminary column testing has yielded encouraging recovery rates.