Bloomberg News

Canadian Stocks Decline as Agnico-Eagle Halts Quebec Operation

October 19, 2011

Oct. 19 (Bloomberg) -- Canadian stocks fell for a second time in three days, led by metal producers, after Agnico-Eagle Mines Ltd. suspended production at its Goldex mine in Quebec and copper prices slipped.

Agnico-Eagle, a gold producer that also has operations in Mexico and Finland, plunged 18 percent after saying it will write off its investment in Goldex. Teck Resources Ltd., Canada’s largest base-metals and coal producer, dropped 5.1 percent after copper fell for a third day on concern demand may weaken as economic growth slows in China, the top global consumer of the metal.

The Standard & Poor’s/TSX Composite Index lost 203.61 points, or 1.7 percent, to 11,849.50.

“The index is really living and dying with commodities sentiments and not taking its cues from global events,” Barry Schwartz, a money manager at Baskin Financial Services Inc., said in a telephone interview. The firm oversees C$410 million ($404.3 million). “People aren’t buying into the fact that recession worries are off, and holding onto the idea that China is facing a harder landing than expected, and that is holding back the commodity stocks.”

The index rallied 7.8 percent through yesterday after closing at a 14-month low Oct. 4 as energy and raw-materials companies climbed. Crude oil surged 17 percent and copper rose 8.3 percent as investors speculated European officials will craft a plan to prevent the continent’s debt crisis from jeopardizing economic growth. The S&P/TSX gained or lost at least 100 points all nine days, the longest such streak ever.

Ground Instability

Agnico-Eagle, Canada’s fifth-largest gold producer, will indefinitely suspend operations and gold production at its Goldex mine in Quebec because of ground instability and flooding. The Toronto-based company will write off the book value of the mine and will record a charge of about $170 million, or $1 a share, in third-quarter results. The mining company sank 18 percent to C$47.35, its lowest price since December 2008.

Jaguar Mining Inc. tumbled 22 percent, the most since June 2003, to C$4.28. The gold producer with operations in Brazil was cut to “neutral” from “overweight” at JPMorgan Chase & Co., which said lower production and mechanical failures at the company’s Paciencia mine are likely to hurt fourth-quarter earnings.

Nevsun Resources Ltd. plunged 18 percent. The producer of base and precious metals in Africa slipped as Eritrea faces tougher United Nations sanctions that would ban companies from investing in the African country’s mineral resources such as gold.

‘Always Disappoint’

“Mining companies always disappoint in terms of production and reserves,” Schwartz said. “It’s an impossibly tough business to predict when you are dealing with political and geographic instability and rising costs you can’t contain.”

Goldcorp Inc., the world’s second-biggest producer of the precious metal by market value, slipped 3.6 percent to C$45.34. Barrick Gold Corp., the No. 1 producer, dropped 4.4 percent to C$45.68. Kinross Gold Corp., Canada’s third-largest producer of the metal, erased 6.6 percent to C$13.80.

Copper producers slumped as the metal dropped 3 percent, the most in three weeks.

Teck Resources lost 5.1 percent to C$34.12. First Quantum Minerals Ltd., Canada’s second-largest publicly traded copper producer, declined 6.9 percent to C$15.01.

Oil Inventories

An index of Canadian oil and gas shares briefly pared its loss after the U.S. Energy Department reported an unexpected drop in oil inventories, before ending down 1.3 percent.

Vermilion Energy Inc., an oil and gas producer with operations in Australia, Europe and Canada, gained 1.8 percent to C$46.50 after it was raised to “buy” from “hold” at Toronto-Dominion Bank, which cited its production outlook and sustainable dividend. Baytex Energy Corp., a western Canadian oil and gas producer, advanced 1.2 percent to C$50.75.

Canadian Oil Sands Ltd. slumped 4.3 percent to C$21.79. The biggest owner of the Syncrude project slid after Syncrude Canada Ltd. cut its November production forecast by 1.3 million barrels to 8.7 million, according to a person with knowledge of the situation. The reduction is because additional work must be done during a turnaround at the Syncrude upgrader in Alberta.

Other Syncrude owners also dropped. Suncor Energy Inc., Canada’s largest oil and gas producer, erased 1.8 percent to C$30.04. Imperial Oil Ltd., the country’s second-biggest energy company by revenue, lost 1.5 percent to C$40.72. Nexen Inc., an oil and gas producer with operations on five continents, fell 1.1 percent to C$16.78.

Sun Life Financial Inc. slumped 1.3 percent to C$23.85. Canada’s third-largest insurer may lose its Aa3 credit rating, Moody’s indicated, changing its ratings outlook on the company to “negative” from “stable.”

Cameco Corp., the world’s biggest uranium producer, slumped 2.7 percent to C$20.52. Rio Tinto Group, the world’s third- largest mining company, agreed to pay C$578 million ($572 million) to acquire Canadian uranium explorer Hathor Exploration Ltd., trumping a hostile bid by Cameco. Hathor Exploration surged 9.4 percent to C$4.41.

--With assistance from Matt Walcoff in New York. Editors: Joanna Ossinger, Jeff Sutherland

To contact the reporter on this story: Kaitlyn Kiernan in New York at kkiernan2@bloomberg.net.

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.


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