STOCK MARKETS — Rise in U.S. interest rates deflate TSE still further

More than 54 million shares of Bre-X crossed the trading floor as investors continued to bail out

Base metal companies rolled with the punches over the report period ended April 8, as U.S. interest rates rose and mutual funds scrambled to get out of stocks and into bonds.

After suffering a 3.9% drop in the previous week, the TSE’s metals and minerals sub-group tumbled another 290.42 points, or 5.4%, to finish the week at 5,069.99.

Hardest hit among base metal producers was resource giant Noranda, down $2.60 to close at an even $28. Other companies reeling from heavy loses included: Cominco, down $2.45 to $35; Inco, down $2.40 to $43.25; Cameco, down $2.15 to $50.75; and Teck B series shares, down $2 to $28.50.

Falconbridge slipped $1.45 to $27.60, Rio Algom was off $1.15 to $32.55 and Westwin Resources dropped 15 cents to $6.80.

The overall market fared somewhat better than in the previous week, with the TSE 300 composite index down 79.365 points, or 1.3%, at 5,821.01 points. Even the gold and precious metals sub-group rebounded somewhat, losing only 173.73 points (compared with more than 800 points in the previous week) to finish the report period at 9,414.18.

All eyes were on embattled Bre-X Minerals, which, in the previous report period, lost 75% of its share value after Freeport McMoRan Copper & Gold issued a release stating it had encountered “insignificant amounts of gold” at the Busang project in Kalimantan, Indonesia.

More recently, a report issued by an independent consulting firm contracted by Bre-X described gold particles from Busang core as “mostly rounded with beaded outlines,” giving rise to speculation that the gold was from an alluvial, rather than a bedrock, source.

The Bre-X trading frenzy started afresh during the recent report period, with a whopping 54 million shares crossing the floor. The issue also suffered the highest percentage loss, dropping 41% to $2.30 for a loss of $1.55. Also clobbered was Bre-X’s parent company, Bresea Resources, which traded 13.8 million shares. The company saw its share value fall 22 cents, to close at $1.32.

Investor anxiety directed at senior gold producers seemed to wane over the report period. Previous Busang contenders Barrick Gold and Placer Dome suffered only mild losses. Placer closed the week at $32.45, down 65 cents, whereas Barrick shed 5 cents to finish at $24.70. One major that continued to be unaffected by recent market jitters was Franco-Nevada, which added $4.50 to finish the week at $69.50. Sister company Euro-Nevada gained 75 cents to close at $41.25.

The Canadian dollar was 70 basis points lower against the greenback. On April 9, the Loony had a noon rate of US72.07 cents. The dollar gained headway, however, against all other major currencies.

Gold was fixed at US$348 per oz. in the London bullion market on April 9 — a drop of $2.70 over the report period. Platinum, meanwhile, lost $2.75 to close at US$366 per oz., whereas silver dropped 21 cents to finish at US$4.77 per oz.

The big loser among base metals was nickel, which shed 14 cents to close at US$3.31 per lb.

Activity in the junior sector was lively. Getty Copper gained 69%, or 43 cents, to close at $1.05. Also strong was Laminco Resources, which saw its shares rise 35% in value, up 14 cents to 54 cents. The company announced that an independent engineering firm released a positive feasibility study for the Luz del Cobre open-pit, heap-leach copper project in Sonora state, Mexico, where reserves stand at 9.2 million tonnes grading 0.87% copper.