Canadian Stocks Slip as Gold Producers’ Shares Decline

Canadian stocks fell for the first time in three days as declines by gold producers, which have failed to advance with bullion prices this year, outweighed gains by energy shares.

China Gold International Resources Corp. fell 6.5 percent. Premier Gold Mines Ltd. (PG), which explores in Ontario and Nevada, decreased 4.5 percent. Potash Corp. of Saskatchewan Inc. declined 1.6 percent as wheat futures fell. Suncor Energy Inc. (SU), Canada’s largest oil and gas producer, gained 1.6 percent as oil climbed on speculation that the U.S. economy will continue to strengthen.

The S&P/TSX Composite Index (SPTSX) decreased 17.26 points, or 0.1 percent, to 12,479.70 in Toronto.

“Investors now seem like they’re pretty much throwing in the towel with these gold stocks,” Bob Decker, a money manager at Aurion Capital in Toronto, said in a telephone interview. The firm oversees about C$5.5 billion ($5.6 billion). “The stocks have underperformed the commodity pretty consistently this year because of their inability to convert the strong gold prices of the last 12 months into earnings power.”

The index slipped 0.1 percent last week as economic data from the U.S. helped commodity shares pare losses after China reported a smaller gain in exports than economists had forecast. Energy and raw-materials companies make up 46 percent of Canadian stocks by market value, according to Bloomberg data.

Trailing Gold Prices

Materials stocks in the S&P/TSX fell, led by gold companies, even as gold futures rose after a drop in the dollar boosted the appeal of the metal as an alternative asset. An index of Canadian gold producers has fallen 6.4 percent this year, while gold futures rose 6.2 percent.

China Gold International Resources Corp. fell 6.5 percent to C$4.44. Premier Gold Mines Ltd., which explores in Ontario and Nevada, decreased 4.5 percent to C$4.70.

Nevsun Resources Ltd. (NSU), which mines gold in the African country of Eritrea, gained 4.9 percent to C$3.46 after saying it may buy back as much as 2 percent of its shares.

Potash Corp., the world’s biggest fertilizer producer, slipped 1.6 percent to C$44.66 as wheat fell the most in two months in Chicago on speculation that rain will boost production in North America and China.

Canadian energy companies increased for a third straight day as oil futures in New York gained 1 percent. The National Association of Home Builders/Wells Fargo index was unchanged in March and sales expectations climbed.

Energy Valuations

Suncor Energy increased 1.6 percent to C$33.46. Canadian Natural Resources rose 1.3 percent to C$35.50. The Canadian energy shares with the highest market capitalizations are valued at 20 percent below a five-year average for earnings before interest, taxes, depreciation and amortization, UBS AG analyst George Toriola wrote in a March 16 note.

“As we get a growing global economy the price of energy will remain firm and I don’t believe oil prices reflect that yet,” Tony Demarin, chief investment officer at BCV Asset Management in Winnipeg, Manitoba, said in a telephone interview. The firm oversees C$335 million. “In terms of oil stocks, there’s still a bit of a disconnect between their prices and the lofty price for crude. They still have more room to climb to catch up, and you’re seeing that a bit today.”

Cardiome Pharma Corp. (COM), which develops heart drugs, plunged 54 percent to 88 Canadian cents after Merck & Co. decided to discontinue further advancement of the oral formulation of an atrial fibrillation drug it was developing with the company.

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

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

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