TSX falls short as energy shares decline

Last Updated: Monday, January 11, 2010 | 06:16 PM EST

Financial Post

Story courtesy of

The Toronto Stock Exchange closed Monday’s session just short of flat as positive news out of China was offset by forecasts for milder weather in the U.S. in the coming weeks, the latter of which hurt the energy sector.

The S&P/TSX composite index was down 6.7 points, or 0.06%, to 11,947.13. The most positive sectors were materials, telecommunications and consumer discretionary, while the biggest sectors, energy and financials, kept things in the negative.

The biggest detriment to the TSX index was Talisman Energy Inc., which was down 3.55% to $19.85. The most positive factor to the benchmark was Toronto-Dominion Bank, which was up 0.71% to $64.18.

Just after Monday’s open, the TSX benchmark index surpassed the 12,000 threshold, a level not seen since September 2008 when markets were in a downward spiral that would see it going almost as low as 7,500 by March.

The TSX Venture composite index was up 3.42 points, or 0.21%, to 1,608.53.

A number of markets around the world gained strength after news that Chinese exports rose for the first time in more than a year, with the December figure up 17.7% compared with last December. Imports surged 55.9% for the year — the strongest increase since February 2004.

Closer to home, Canada Mortgage and Housing Corp. said December housing starts rose 5.9% to an annual rate of 174,500 units in December. That beat expectations for between 160,000 and 165,000.

Statistics Canada, however, said the value of building permits fell in November by 4.6% from the previous month to $5.9-billion.

North American investors will soon be weighing their portfolios against a slew of corporate results as the fourth-quarter earnings season gets underway. Alcoa Inc. reported results after the close on Monday that trailed analysts’ forecasts. Earnings from Intel Corp. are due Thursday and JPMorgan Chase & Co. is scheduled to report Friday. Most major Canadian companies will not start releasing earnings until the latter part of the month.

“Equities have been advancing ahead of earnings season, which suggests that there may be more optimism this time around, particularly since confession season has been eerily quiet with very few profit warnings,” Colin Cieszynski, an analyst with CMC Markets Canada, said in a note. “This suggests that either companies are fairly confident about meeting forecasts or we may be in for a few surprises.”

On the New York Mercantile Exchange Monday, crude oil was down 23 cents to US$82.52 a barrel, after being up earlier in the day. Natural gas took a beating on U.S. weather forecasts, falling 29.5 cents to US$5.454 per million BTUs. Gold was up $12.50 to US$1,151.40 an ounce.

The Canadian dollar was down 24 basis points to 96.76 cents US.

U.S. markets were mixed. At the close, the Dow Jones industrial average was up 45.8 points, or 0.43%, to 10,663.99, helped along by industrial stocks after the China data came forth. The Nasdaq composite index was down 4.76 points, or 0.21%, to 2,312.41, indicative of profit-taking after this measure hit a 16-month high on Friday.

Most of the main European and Asian markets were up Monday, except in France, where the CAC index was down 0.5%.

Goldcorp to buy Xstrata stake in El Morro project

UPDATE 3-Goldcorp to buy Xstrata stake in El Morro project

11:51 EST Thursday, January 07, 2010

* To acquire 70 pct stake through deal with New Gold

* New Gold shares up 6.5 pct in Toronto (Adds comments from Goldcorp CEO, Barrick spokesman; updates share price; in U.S. dollars unless noted)

By Euan Rocha

TORONTO, Jan 7 (Reuters) - Goldcorp Inc said on Thursday it will spend $513 million to buy mining giant Xstrata's 70 percent interest in the El Morro copper-gold project in Chile, foiling Barrick Gold's plans to acquire the stake.

Goldcorp will buy the stake through a creatively structured deal with fellow Canadian miner New Gold Inc , the minority stakeholder and Xstrata's partner in El Morro.

In October, Swiss-based Xstrata agreed to sell its interest in the project to Canada's Barrick, the world's No. 1 gold miner, for $465 million. But, New Gold had the right of first refusal on Barrick's purchase -- meaning it had the right to match the offer -- until January 2010.

New Gold, through a wholly owned subsidiary, will exercise that right and acquire the 70 percent interest.

Goldcorp will advance $463 million to New Gold to fund the deal. After the acquisition by the New Gold subsidiary, Goldcorp will acquire that subsidiary from New Gold.

Goldcorp will pay New Gold $50 million in cash upon closing the acquisition of the subsidiary. Goldcorp has also agreed to amend certain terms of the El Morro shareholders agreement, with respect to New Gold's capital funding obligations.

On closing, Goldcorp will hold 70 percent of El Morro and New Gold 30 percent.

El Morro is an advanced stage copper-gold project located in north-central Chile. It contains proven and probable reserves of 6.7 million ounces of gold and 5.7 billion pounds of copper.

Goldcorp looks for large, high quality assets that have low operating costs and a long mine life, Chief Executive Chuck Jeannes told Reuters.

"This ticks all of those boxes. Additionally, we look for large property positions that are relatively unexplored, so that we have the opportunity for continued organic growth -- this property also fits that bill," said Jeannes.

For Barrick, the property had the additional appeal of promising costs-savings, as it is located not far from its Veladero mine, and Pascua Lama and Cerro Casale projects.

Barrick spokesman Vince Borg said the company would review the agreement and then decide whether it might try to stay in the process.

"It would depend on the agreement that they struck (but) we haven't seen that yet," he said.

Borg played down the prospect of frosty relations between Barrick and Goldcorp, which are the world's top two gold miners by market size and partners on the Pueblo Viejo project in the Dominican Republic.

"We're partners, peers and competitors," he said.

The deal comes as Goldcorp is also entangled in a bidding war for Canplats Resources , which owns the Camino Rojo gold-silver deposit in Mexico that sits close to Goldcorp's Penasquito gold-silver mine. [ID:nN24183175]

Construction of the Penasquito mine is nearing completion and Goldcorp plans to use the expertise of the team that led the build of that mine, to help spearhead work on the El Morro project.

Goldcorp expects its first full-year of production from El Morro in 2015, said Jeannes.

New Gold shares were up 6.5 percent at C$4.28 midday on the Toronto Stock Exchange, while Goldcorp fell 8 Canadian cents to C$43.30.

($1=$1.03 Canadian) (Reporting by Euan Rocha and Cameron French; editing by Rob Wilson)