Canadian Stocks Retreat as Uranium Shares Plunge After Earthquake in Japan

Canadian stocks fell, led by producers of uranium and other raw materials, as a new stimulus package from the Bank of Japan failed to stem the impact of the March 11 earthquake on global equity markets.

Cameco Corp., the world’s second-largest uranium producer, sank 13 percent as Japan struggled to contain a disaster at a nuclear-power plant. Manulife Financial Corp. (MFC), which had 120 life insurance sales offices in Japan as of Dec. 31, dropped 3.5 percent. West Fraser Timber Co., Canada’s largest lumber producer, rose 4.7 percent as forestry stocks jumped on the prospect of rebuilding in Japan.

The Standard & Poor’s/TSX Composite Index declined 55.06 points, or 0.4 percent, to a six-week low of 13,619.19.

The nuclear crisis “is affecting how people in the U.S. are thinking about their fledgling nuclear expansion,” said Doug Davis, vice chairman of Toronto-based money manager Davis- Rea Ltd., which manages C$425 million ($436 million). “Who are you going to sell your uranium to if the Americans don’t expand nuclear power plants and the Japanese don’t need it for a while?”

The S&P/TSX sank 4.1 percent last week, the most since July, as U.S. jobless claims increased, Moody’s Investors Service cut Spain’s debt rating and oil retreated from a post-2008 high. The Canadian benchmark has climbed 1.3 percent this year, less than half of the gain of the S&P 500.

Thousands Missing

The count of deaths from the 8.9-magnitude earthquake and subsequent tsunami reached 1,823, with 2,369 missing, Japan’s National Police Agency said today. A second explosion occurred at the Fukushima power plant north of Tokyo, where military staff members tried to prevent a meltdown.

Japan’s central bank deployed 15 trillion yen ($183 billion) into money markets to assure financial stability. The Nikkei-223 Stock Average tumbled 6.2 percent, the most since December 2008.

Japan is the fourth-biggest buyer of Canadian exports behind the U.S., U.K. and China, according to Statistics Canada.

The nuclear crisis may cause delays in plant construction, especially in earthquake-prone areas like China, Greg Barnes, a Toronto-Dominion Bank analyst, wrote in a note to clients today. Japan accounts for about 12 percent of global demand for uranium, a nuclear fuel.

Cameco Corp. (CCO) fell 13 percent, the most since October 2008, to C$31.70 after Barnes cut his rating on the shares to “hold” from “buy.”

Uranium One

Uranium One Inc. (UUU), a mining company controlled by Moscow- based ARMZ Uranium Holding, slumped 28 percent to C$4.31. Denison Mines Corp. (DML), which produces the metal in the U.S. and Canada, tumbled 22 percent to C$2.48.

Most S&P/TSX financial stocks fell after AIR Worldwide, a disaster modeler, said Japanese insurers and global reinsurance companies that backstop their policies may face as much as 2.8 trillion yen in claims related to the earthquake.

Manulife, which derived 18 percent of its revenue from Asia in the 12 months ending Sept. 30, declined 3.5 percent to C$16.74. Great-West Lifeco Inc. (GWO), Canada’s second-largest insurer, dropped for a sixth day, slipping 1.4 percent to C$25.49. Fairfax Financial Holdings Ltd. (FFH) lost 1.4 percent to a 19-month low of C$348.70.

EnCana Corp. (ECA), Canada’s biggest natural gas producer, climbed 4.2 percent to C$31.07. Natural gas futures gained 0.7 percent on speculation Japan will need more of the fuel with nuclear-power production reduced.

Forestry Companies

Forestry companies surged. In a note dated March 11, Richard A. Kelertas, an analyst at Dundee Securities Ltd., told clients the rebuilding effort in Japan “should have a positive impact on most of the North American timber, lumber and building-materials stocks.”

West Fraser Timber gained 4.7 percent to C$53.22 after Kelertas raised his rating on the stock to “buy” from “neutral.” Canfor Corp. (CFP), another lumber producer upgraded by Kelertas, advanced 3.3 percent to $13.50. Sino-Forest Corp. (TRE), Canada’s largest forestry company by market value, increased 2.6 percent to C$21.32.

Teck Resources Ltd. (TCK/B), Canada’s largest base-metals and coal producer, lost 2.7 percent to C$49.56 after saying weather conditions will lead to below-average first-quarter coal sales.

Equinox Minerals Ltd. (EQN), which mines copper in Africa, slid 7.1 percent to C$4.84. The shares have plunged 23 percent since Feb. 27, the day before Equinox said it would bid C$4.8 billion for Lundin Mining Corp.

Petrobank Energy & Resources Ltd. (PBG), a western Canadian energy producer, retreated 5.3 percent to C$19.64 after Philip R. Skolnick, an analyst at Canaccord Financial Inc., cut his rating on the company to “speculative buy” from “buy.” Petrobakken Energy Ltd. (PBN), in which Petrobank has a majority stake, fell for a ninth day, decreasing 5.8 percent to a record- low C$17.75.

Gabriel Resources Ltd. (GBU), which is developing a gold mine in Romania, tumbled 12 percent, the most since August 2009, to C$7.14. In a telephone interview, Chief Executive Officer Jonathan Henry attributed the decline to the removal of the stock from the Market Vectors Junior Gold Miners exchange-traded fund.

The Van Eck Securities Corp. fund owned 10.7 million Gabriel Resources shares as of March 11.

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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