Bloomberg News

Canada Stocks Fall as Raw Materials Slip, Ivanhoe Mines Plunges

December 13, 2011

Dec. 13 (Bloomberg) -- Canadian stocks fell, led by raw- materials shares, as Rio Tinto Group said it won’t buy all of Ivanhoe Mines Ltd., European growth concerns persisted and the U.S. Federal Reserve refrained from new economic stimulus.

Ivanhoe Mines, Rio Tinto’s partner in the Oyu Tolgoi copper project in Mongolia, plunged 22 percent. Goldcorp Inc., the world’s second-largest gold producer by market value, declined 2.9 percent as the metal fell on a stronger U.S. dollar. PetroBakken Energy Ltd. rose 5.8 percent after reporting a production increase.

The Standard & Poor’s/TSX Composite Index slipped 147.95 points, or 1.2 percent, to 11,759.94 at 4:10 p.m. Toronto time. The market extended its loss after the Federal Open Market Committee made few changes from its Nov. 2 statement in its comments today and didn’t announce a third round of asset purchases, known as qualitative easing.

“There was chatter earlier today, ‘There’s always a chance they might mention QE3 given what we’re seeing in Europe,’” Brian Huen, a managing partner at Red Sky Capital Management Ltd. in Toronto, said in a telephone interview. The firm oversees about C$55 million ($53 million). “They didn’t hint at that whatsoever. That’s when we saw the market sell off.”

The S&P/TSX is set to underperform the S&P 500 for the first time in eight years in 2011 as stocks most-closely tied to economic growth have declined on concern the European debt crisis will lead to a new recession. Indexes of financial, energy and materials companies each lost at least 9.8 percent this year. The three industries make up 75 percent of Canadian stocks by market value, according to Bloomberg data.

Mining Partners

Ivanhoe Mines sank 22 percent to C$16.57 after an arbitrator’s ruling that Rio Tinto can incrementally add to its stake in Ivanhoe Mines without having its holdings diluted under a shareholder rights plan. Rio Tinto, which owns 49 percent of Vancouver-based Ivanhoe Mines, “currently has no intention of making a full takeover bid for Ivanhoe’s shares,” the London- based company said in a statement.

The S&P/TSX Gold Index fell as the U.S. dollar climbed to an 11-month high against the euro. The European currency slid after two officials with knowledge of the discussion said Chancellor Angela Merkel told German coalition lawmakers the 500 billion euro ($654 billion) cap on Europe’s planned permanent bailout fund will stay in place. The officials spoke on condition of anonymity because the talks are private.

Gold Shares

Goldcorp dropped 2.9 percent to C$48.10. Barrick Gold Corp., the world’s largest company in the industry, lost 1.9 percent to C$48.29. Detour Gold Corp., which is developing a mine in Ontario, slumped 8.5 percent to C$25.42 after saying it will raise about C$10 million through the sale of flow-through shares.

PetroBakken Energy Ltd., a Western Canadian oil producer, gained 5.8 percent to C$10.57 after saying production has increased 23 percent from third-quarter levels. Average production will climb another 15 percent next year, the company said in a statement. Petrobank Energy and Resources Ltd., PetroBakken’s majority shareholder, rose 2.1 percent to C$8.95.

Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, rose 1.1 percent to C$41.74 as wheat futures gained for the first time in a week.

Barclays Plc named Potash Corp. to its list of top picks for 2012. In a note to clients, the bank said Potash Corp. should benefit from low supply and strong demand for the crop nutrient.

RIM Tumbles

BlackBerry maker Research In Motion Ltd. decreased 3.8 percent to C$16.01, the lowest price since January 2004, after Rod Hall, an analyst at JPMorgan Chase & Co., said in a note to clients that the company is likely to delay the release of new smartphones. RIM has tumbled 72 percent this year.

Canadian National Railway Co., the country’s largest railroad, slipped 1.5 percent to C$77.44 after Walter Spracklin, an analyst at Royal Bank of Canada, cut his rating on the shares to “sector perform” from “outperform.” Spracklin said CN’s shares are more expensive than those of its peers relative to earnings.

--With assistance from Tony Czuczka in Berlin. Editors: Stephen Kleege, Jeff Sutherland

Ksenia Galouchko in New York at kgalouchko1@bloomberg.net

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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