STOCK MARKETS — Gold issues rally on TSE as yellow metal

The good news, if you are a gold bug, is that the gold rally continues. The precious metal, which has moved in fits and starts this year, topped US$391 per oz. in London during the week ended July 6. The price is a long way from the metal’s 1993 low of US$326.10 recorded in March and may yet have further pleasant surprises in store.

Some analysts, however, are advising caution. The Bank Credit Analyst of Montreal points out that gold and gold shares “have run much faster and further than is warranted by near-term prospects for inflation.” Repeating an earlier observation about the speculative nature of the current activity, the publication states that the run-up “reflects the rotation of hot money flows which are part of the overall mania environment. Investors in this area should be prepared for a volatile roller-coaster ride.”

Today, July 7, gold roared ahead to US$395.80 at the London afternoon fix. Investors on the Toronto Stock Exchange are obviously believers in gold issues; they bid up the gold and silver index by almost 504 points during the week. Among the gold stocks benefiting were Hemlo Gold, up $1.50 to $14.75; Lac Minerals, up 25 cents to $13.50; Echo Bay Mines, up $1.88 to $17.75; Pegasus Gold, up $4.63 to $34.63; and Agnico-Eagle Mines, up $3.25 to $16.50. Also ahead on the week, by more than 21 points, was the TSE 300 composite index. Today, the index dropped 11.7 points to 3972.7 on a volume of 64.2 million shares.

So great has been investor enthusiasm this year, that the TSE reports surpassing the record for yearly trading volume after slightly more than six months. The more than 7.4 million shares traded by the July 6 close topped the previous record set (over a 12-month period) in 1987.

On the Montreal Exchange, share value is reported to be up 32% and the volume of shares traded ahead by 72% compared with the same 6-month period in 1992. In June, the ME set a record in terms of the value of shares traded — more than $3 billion.

In general economic news, the Bank of Canada bank rate dropped to its lowest level (4.73%) in 26 years, resulting in a reduction in mortgage rates by chartered banks. And — good news for exporters — the Canadian dollar, trading below US78 cents, fell to its lowest level since January, 1998. Development of the Eskay Creek gold project took a new turn when it was announced Homestake Canada and Placer Dome will not proceed with a joint-venture arrangement. Placer says it will not convert its 44% interest in Stikine Resources (which owns half of Eskay) into a 22% direct interest in the property. Placer Dome gained 88 cents on the week to $27.88. Cambior, which climbed 88 cents to $20, says it has agreed with Serem-Quebec to acquire the latter’s 50% interest in the Grevet zinc project in northwestern Quebec, making Cambior the sole owner of the property. Cambior plans to swap shares worth $7 million for the half-interest. Increasing its stake in Teck through a private acquisition (of Teck A shares) was Metall Mining; the copper producer now has a direct and indirect voting interest in Teck of 33.5%. Metall, which gained $1.38 to $12.25, says it has no immediate intention of acquiring more Teck shares. Gaining 50 cents, Teck’s A shares closed at $21.75.

With all the excitement about gold, the diamond exploration scene across Canada has become quiet. A couple of high-profile issues — Dia Met Minerals, which was off 13 cents to $47.50, and SouthernEra Resources, which slipped 38 cents to $8.38 — reflect this state of affairs.

Orvana Minerals has exercised an option to buy the Central Inlier gold property in Jamaica from BHP Minerals International. Work under way on the property includes a program of 10 shallow holes. Orvana closed unchanged at $2.30.

Greater Lenora Resources, up a dime to 85 cents, says it has been advised by Hemlo Gold that the second phase of drilling is under way at the Omega gold property near Kirkland Lake, Ont. Lenora also says it is considering carrying out a final feasibility study for its Goldfields gold property in northern Saskatchewan.