Feb. 22 (Bloomberg) -- Canadian mining and energy shares gained on optimism investors will buy the stocks because rising prices for the commodities may increase earnings.

The Standard & Poor's/TSX Composite Index added 38.41, or 0.4 percent to 9720.72 as of 11:53 a.m. in Toronto. Gauges of producers of raw materials shares and oil stocks led the gain. The S&P/TSX has increased 5.1 percent this year and is headed for its highest close since Oct. 24, 2000, when it last ended the day above 10,000. The benchmark tumbled 8.1 percent the next day after Nortel Networks Corp., which made up about a third of the index at the time, reported lower-than-expected third-quarter sales.

Today, zinc rose to the highest in more than seven years, posting the biggest gain on the London Metal Exchange, after Umicore SA, the world's fourth-largest zinc refiner, said it plans to cut production by 130,000 metric tons a year starting in the second half. Zinc for delivery in three months was up $28, or 2.1 percent, to $1,396 a ton on the London Metal Exchange. It earlier reached $1,397, the highest since September 1997.

``Investors are buying zinc stocks because they see a shortage in supply,'' said Mark Jackson, the chief investment officer with Aegon Capital Management in Toronto, which manages C$6.5 billion. Jackson said he holds Teck Cominco.

Teck Cominco Ltd., the world's largest zinc miner, added C$1.84 to C$44.75. Falconbridge Ltd., the world's No. 3 nickel producer, gained 61 cents to C$34.85.

Falconbridge is producing enough cash so that it won't have to borrow to increase production, said Jackson, who holds the stock.

Gold Miners

Gold miners gained after South Korea's central bank said it plans to diversify its reserves, sending the dollar lower and boosting the gold's appeal as an alternative to U.S. assets.

Barrick Gold Corp., the world's third-biggest gold producer, added C$1.13, or 3.8 percent, to C$30.72. Placer Dome Inc., Canada's No. 2 gold producer, rose 87 cents to C$23.50.

Bema Gold Corp., a gold miner in South Africa and Russia, advanced 13 cents to C$3.75. Jackson holds Bema Gold and Placer Dome shares, he said.

Oil shares advanced as crude oil climbed to $50.05 a barrel in New York, the highest since Nov. 30, because a cold snap is increasing demand in northwestern Europe and the U.S. Northeast, the world's top two markets for heating fuels.

Suncor Energy Inc., the world's second-largest miner of oil sands, advanced C$1.38, or 2.9 percent, to C$48.36, and was the biggest contributor to the index's gain. EnCana Corp., Canada's biggest natural-gas producer, added C$1.19 to C$79.19. PetroFalcon Corp., a Canadian oil company drilling in Venezuela, jumped 50 cents, or 11 percent, to C$4.89.

An index of energy shares has risen 17 percent this year, the best performance among 10 industry groups in the S&P/TSX.

Bank of Montreal

Bank of Montreal sank 5 cents to C$56.65, even though Canada's fifth-largest bank by assets said fiscal first-quarter profit climbed 15 percent to C$1.16 a share on higher fees from investment banking and mutual funds. Five other Canadian banks will report earnings this week.

Investors will be watching for data from the U.S. Labor Department tomorrow that will probably say consumer prices in January rose 0.2 percent overall from the previous month, according to the estimate of economists in a Bloomberg survey.

The following is a list of companies whose shares are making gains or losses in the Canadian market. Stock symbols are in parentheses after company names.

Forzani Group Ltd. (FGL CN) dropped 49 cents, or 3.7 percent, to C$12.66. Canada's biggest sporting-goods retailer said fourth-quarter net income fell to 40 cents a share from 50 cents a year ago as sales of licensed clothing dropped amid the National Hockey League's lockout of its players. Forzani was expected to earn 47 cents, the average forecast of analysts surveyed by Thomson Financial.

Bank of Montreal (BMO CN)
Barrick Gold Corp. (ABX CN)
Bema Gold Corp. (BGO CN)
EnCana Corp. (ECA CN)
Falconbridge Ltd. (FL CN)
PetroFalcon Corp. (PFC CN)
Placer Dome Inc. (PDG CN)
Suncor Energy Inc. (SU CN)
Teck Cominco Ltd. (TEK/SV/B CN)

To contact the reporter on this story: Laure Edwards in Princeton at ledwards2@bloomberg.net

Last Updated: February 22, 2005 11:54 EST