STOCK MARKETS — Interest rate cut spurs TSE to record highs

A drop in interest rates ignited the Toronto Stock Exchange 300 composite index, which proceeded to blast through three successive record highs during the 5-day report period ended July 11. The composite surged ahead by 111.57 points to close at 4,649.83.

The Bank of Canada cut its key rate following a similar move by the U.S. Federal Reserve earlier in the week. The rates were cut in order to help boost sagging economies, both here and south of the border. The Bank of Canada rate fell almost half a percentage point to 6.58% from 7.05%.

The resulting drop in the rates in the two countries widened the spread between Canadian and U.S. rates. This had the effect of making Canadian bonds more attractive to investors and helped the Canadian dollar post a solid gain. It closed at US73.88 cents, up almost US1 cents from last week’s close of US73.88 cents.

The strong performance in the TSE composite was attributed to spirited gains in both the metals-and-minerals sub-index and the gold-and-precious-metals sub-index.

The latter, caught up in the tumultuous market activity, rose by 4.5%. Precious metals prices followed suit, with the London morning gold fix for July 12 at US$385.85 per oz., up $1.25. The fix for platinum was unchanged at US$434 per oz., and the silver fix was US$5.16 per oz., up US9 cents.

Senior gold producers and royalty companies rose on the upswing, with Placer Dome leading the charge with a $2.83 rise to close at $38.75. Other gains were posted by Barrick Gold, which added $1.25 to close at $36.25; Echo Bay Mines, which added 13 cents to $12.83; and Hemlo Gold Mines, which rose 38 cents to $15.25. Royalty companies Euro-Nevada Mining and Franco-Nevada Mining were also up. The former added $3.75 to close at $46.50, while the latter gained $2.50 to end at $74.50.

Acquisitions by Kinross Gold have caught the notice of investors. In addition to gaining ground in North America, the company plans to acquire a 25% stake in a Russian gold project. Shares of Kinross rose 38 cents to $10.88.

The metals and minerals sub-index vaulted almost 9% on the week, ending at 4,914.3, slightly below its 52-week high of 4,917.72 points. Base metal prices also surged, led by strong gains in copper and nickel prices. The July 12 London Metals Exchange price of copper rose US5 cents to US$1.45 per lb., while the price of nickel added US4 cents to close at US$3.95 per lb.

Nickel giant Inco soared to a new 52-week high on news that the company will make a normal course issuer bid for 10 million of its common shares, representing almost 10% of the company’s public float. Inco plans to buy the shares in order to prevent dilution of earnings resulting from the issuance of shares to acquire the interest in the Voisey Bay discovery. More than 8.8 million shares changed hands as the stock lept $6.13 to close at $45.50.

Most other senior base metal producers joined the rising tide. Falconbridge added $3.50 to $28.25; Rio Algom gained $1.75 to $28.25; Cominco rose by $2.63 to $27.75; and Noranda added $1 to $28.50.

Speculation continues to grow about a possible high-grade copper intersection drilled on the Vicuneria copper property in Chile under option to Inmet Mining. Inmet shares added $1.50 to close at $11.38. Although no assay results were available, Inmet reports that one hole intersected a “porphyry-style geological setting.” Drilling continues.

At presstime, a deal was announced concerning 39 base metal properties owned by Granges in Saskatchewan and Manitoba. Subject to certain conditions, Aur Resources agreed to buy the properties for 1.2 million shares and a 2% net smelter return royalty. Aur, in turn, has agreed to grant Thunderwood Resources and Consolidated Abitibi Resources each the right to earn a 30% interest in the properties, for cash and work commitments. Aur shares closed at $5.38, up 38 cents; Thunderwood added 1 cents to 40 cents; Abitibi rose by 6 cents to 42 cents; and Granges shares lost 3 cents to end at $2.28.