Bloomberg News

Canadian Stocks Fall on Europe Contagion Concern

November 17, 2011

(Corrects name of newsletter in second paragraph after ‘Precious-Metals Producers’ sub-headline in article that ran Nov. 16.)

Nov. 16 (Bloomberg) -- Canadian stocks fell, led by raw- materials producers, after Fitch Ratings said the spread of the European debt crisis “poses a serious risk” to U.S. banks.

Teck Resources Ltd., Canada’s largest base-metals producer, fell 3.7 percent as copper futures dropped a first time in four days. Barrick Gold Corp., the world’s biggest gold-mining company, declined 1.4 percent as the U.S. dollar advanced a third day against the euro. Jaguar Mining Inc., which produces gold in Brazil, soared 46 percent after two people familiar with the matter said Shandong Gold Group Co. bid for the company.

“It’s no secret that Europe is pretty fragile,” Irwin Michael, a money manager at ABC Funds in Toronto, said in a telephone interview. The firm oversees about C$1 billion ($980 million). “The Fitch thing is adding more fuel to the fire.”

The Standard & Poor’s/TSX Composite Index slipped 54.91 points, or 0.5 percent, to 12,174.36 after advancing as much as 0.5 percent before the Fitch statement.

The S&P/TSX has dropped 9.4 percent this year as industries most-tied to economic growth, such as base-metals mining, energy and finance, have declined. World equities have retreated in part on concern the European debt crisis will weaken the broader economy. The International Monetary Fund said in September the world economy will expand 4 percent this year and next, compared with June forecasts of 4.3 percent in 2011 and of 4.5 percent in 2012.

Credit Outlook

Stocks fell after Fitch said “the broad credit outlook for the U.S. banking industry could worsen” if the debt issue in Europe isn’t resolved soon. Earlier today, the Bank of England said failure to resolve the turmoil could lead to “significant adverse effects” on the global economy.

Base-metals and coal producers in the S&P/TSX declined to a three-week low. Teck lost 3.7 percent to C$37.45. Ivanhoe Mines Ltd., Rio Tinto Group’s partner in the Oyu Tolgoi copper and gold project in Mongolia, decreased 5.9 percent to C$21.20. Lundin Mining Corp., which operates in Europe, slumped 4.7 percent to C$3.65.

Uranium One Inc., a mining company controlled by Moscow- based ARMZ Uranium Holding, sank 5.7 percent to C$2.49 after S&P assigned the company a “BB-” credit rating, three levels below investment grade. In a statement, the ratings company cited Uranium One’s “limited operating and geographic diversification, relatively short collective mine life, limited track record, and reliance on residual cash flows from its joint venture mine operations.”

Precious-Metals Producers

Precious-metals producers retreated as the U.S. dollar rose against all 16 other major currencies today as investors sought safer assets.

Barrick Gold Corp., the world’s largest gold producer, slipped 1.4 percent to C$52.65. Kinross Gold Corp., Canada’s third-biggest company in the industry by market value, fell 1.5 percent to C$14.04. Minefinders Corp., a precious-metals company with operations in Mexico, plunged 11 percent, the most since December 2008, to C$12.46 after the Gold Stock Analyst newsletter recommended that investors sell the shares.

Jaguar jumped 46 percent, the most since October 2003, to C$7.98 after two people familiar with the offer said Shandong, the parent of China’s second-largest gold producer by market value, bid $9.30 a share for the company. The people asked not to be identified because the information is confidential. Jaguar received “proposals over the past few weeks” and has decided to explore alternatives, the Concord, New Hampshire-based company said today in a statement.

NovaGold Surges

NovaGold Resources Inc., which is developing gold and base- metals properties, surged 25 percent to C$11.25 after saying it will spin off the Ambler copper project in Alaska. The new company, NovaCopper Inc., will be led by current NovaGold Chief Executive Officer Rick Van Nieuwenhuyse, while Gregory A. Lang, president of Barrick’s North American unit, will become NovaGold’s CEO. The shares’ rally was the biggest since September 2009.

Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, fell 1.7 percent to C$46.08. James T. Prokopanko, the chief executive officer of Plymouth, Minnesota-based peer Mosaic Co., said at an industry conference today that higher supplies of the nutrient will make prices unsustainable above $600 a ton through 2020.

West Texas Intermediate crude oil settled at a five-month high of $102.59 a barrel after Enbridge Inc. said it agreed to buy ConocoPhillips’s 50 percent interest in the Seaway pipeline system, which runs from Cushing, Oklahoma, to the Gulf Coast, for $1.15 billion. Enbridge will reverse the flow of the line, shipping oil southward. A bottleneck at the Cushing hub has helped keep WTI prices below those of Brent crude traded in London this year.

Canadian Natural Resources Ltd., the country’s second- largest energy producer by market value, rose 3.2 percent to C$38.69. Suncor Energy Inc., the country’s largest oil and gas producer, gained 1.5 percent to C$32.75. Cenovus Energy Inc., Canada’s fifth-biggest company in the industry, increased 1 percent to C$33.94.

--Editors: Joanna Ossinger, Stephen Kleege

To contact the reporter on this story: Matt Walcoff in Toronto at mwalcoff1@bloomberg.net

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


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