STOCK MARKETS — Lower interest rates help TSE forge ahead

Despite persistent fears of a new recession, the TSE 300 composite surged ahead over the 5-day report period ended June 20, helped in part by falling interest rates and a strong performance in precious and base metal stocks. The TSE 300 composite jumped 55.27 points to close at 4,547.37.

Signals of a weaker economy continue to put downward pressure on the trend-setting Bank of Canada rate. This week, the Bank lowered its key rate by 20 basis points to 6.99%. Over the past four weeks, the rate dropped 72 basis points, falling to its lowest level since mid-December.

There is speculation that this latest drop may end up being passed on to businesses and consumers. Most analysts, however, think a drop in chartered loan rates might not be seen until July or August.

Even though interest rates are falling, the Canadian dollar managed to gain US0.16 cents to close at US72.49 cents.

All precious metals prices were stronger on the week. The London morning gold fix for June 21 was US$390.70 per oz., up US$3.90; the platinum fix was US$442.75 per oz., up US$6.15; and silver posted a US12 cents gain to close at US$5.49 per oz. The gold and precious metals subgroup hit a new 52-week high of 11,194 points. The strength in the subgroup and in the spot price of gold was attributed to potential labor problems at South African mines.

Gold producers moved onward and upward, with many setting new 52-week highs, including Placer Dome which hit $38.38 before rolling back to $37.38, up $1.88. Other winners included Barrick Gold, up $1 to $36.25, and Echo Bay Mines, up $1 to $13.38.

Hemlo Gold Mines was the only weak performer, shedding 25 cents to close at $14.75. Workers at the company’s Golden Giant mine in northwestern Ontario went on strike, shutting down operations. The mine accounts for about 90% of Hemlo’s production.

Gold royalty companies Euro-Nevada and Franco-Nevada Mining were up sharply, with Euro-Nevada surging ahead by $5.13 to end at $41 and Franco-Nevada rising by $5.63 to close at $76.

Base metal prices also surged, led by a sharp increase in the price of copper. The red metal hit a new 6.5-year high of US$1.42 per lb. as demand increased and inventories plummeted. The metals and minerals subgroup, buoyed up by the performance of copper, was up 1.9% to close at 4,404.32 points.

Several senior base metal producers, spurred on by the gains in copper and nickel prices, also made gains.

Among the best base metal performers were: Inco, vaulting $2.50 to $37.25; Cominco, rising $1.50 to $25.88; Teck, gaining 75 cents to $27.50; Rio Algom, up 63 cents to $26.63; Inmet Mining, up 38 cents to $9.75; Noranda, adding 25 cents to $27.13; and Falconbridge, up 75 cents to $24. Falconbridge announced its intention to proceed immediately with development of the Raglan nickel-copper deposit in northern Quebec.

Reports of high-grade drill intersections at Wheaton River Minerals’ Golden Bear project in northern British Columbia drove the company’s shares higher. In fact, they almost doubled, adding $1.40 to end the week at $3.

Positive reports by U.S. market newsletters were cited as the reason for increased trading of shares of Ariel Resources. More than 1.8 million shares changed hands as the stock rocketed to a new 52-week high of $4.05. By the end of the week, some profit-takers entered the market, but the shares still managed to end on an up note, closing at $3.40, up 83 cents on the week.

Several juniors on the Montreal Exchange were up on the week. Shares of Consolidated Precious Metals jumped to a new high of $2.15 before settling back to $2. The company is in the process of reorganizing and acquiring interests in exploration properties.

Investors took interest in Mazarin Mining after the company settled a long-standing legal dispute. The dispute, which centred on an asbestos project, had the effect of tying up the project’s revenues. More than 1.2 million shares were traded as the shares added 8 cents to close at $1.63.