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Canadian Raw-Materials Stocks May Rise on Gold, Fed Rate Cuts

Posted on September 18, 2007 in Economy News

Sept. 18 (Bloomberg) — Canadian raw-materials stocks may rise along with prices of gold and nickel on expectations the Federal Reserve will cut borrowing costs to keep the U.S. economy out of recession, which may boost demand for commodities.

Goldcorp Inc. may gain as prices of bullion rose to the highest in 16 months. Inmet Mining Corp. may rise along with copper. DundeeWealth Inc. may gain after selling its banking unit and a stake in itself to Bank of Nova Scotia.

The Standard & Poor’s/TSX Composite Index fell 36.55, or 0.3 percent, to 13,809.86 yesterday in Toronto dropping for the first time in five days. The index has still risen 7 percent this year even after falling 5.6 percent from its July 19 record on concern that tighter credit due to mortgage defaults may slow growth in the U.S., Canada’s biggest trading partner.

A report today showed that prices paid to U.S. producers declined the most since October and may temper concerns that the economy is headed for a recession. Slower inflation may give the Federal Reserve room to reduce its benchmark interest rate today for the first time in four years. The Fed’s decision on interest is scheduled for 2:15 p.m. in Washington.

Gold advanced to the highest in 16 months on speculation the Federal Reserve will cut benchmark interest rates today to insure against recession, hurting the dollar and fueling demand for gold as an alternative investment.

Nickel rose to a two-week high in London on demand growth in China, the largest consumer of the metal used in stainless steel. Copper and lead also gained.


Bullion Miner

Goldcorp, the world’s third-largest bullion miner, may rise 11 cents to C$28.61, based on bids already submitted on the Toronto Stock Exchange. Larger rival Barrick Gold Corp. may climb 8 cents to C$38.42, bids indicated.

Inmet Mining, a producer of copper, zinc and gold, may advance C$1.71 to C$96.26, bids showed.

Energy stocks may move as crude oil rose to more than $81 a barrel for the first time, on speculation rising demand will deplete stockpiles needed during the Northern Hemisphere winter.

Suncor Energy Inc., the second-largest oil-sands producer, may add 12 cents to C$98.83, bids indicated.

Financial stocks, whose profit margins are directly related to the cost of borrowing, may move on the Fed decision.

Toronto U.S. Stock Futures

U.S. stock-index futures advanced after profit at Lehman Brothers Holdings Inc. exceeded analyst estimates and investors speculated the Federal Reserve will cut its benchmark lending rate.

S&P 500 Index futures expiring in December gained 8.70 to 1,498.50 as of 8:36 a.m. in New York. Dow Jones Industrial Average futures rose 67 to 13,570. Nasdaq-100 Index futures climbed 17.75 to 2,024.

The following shares may have unusual price changes. This preview includes news that broke after markets closed yesterday.

Coventree Inc. (COF CN): The finance company that last month failed to renew about C$4.89 billion ($4.64 billion) of asset- backed commercial paper said it will reduce its workforce by 30 percent and close its office in Denver, to cut costs. The moves will cost about C$1 million ($973,520) and will be recorded in the fiscal fourth quarter, Toronto-based Coventree said in a release. The shares slipped 1 cent to C$1.17 and have lost 92 percent this year.

Endeavour Silver Corp. (EDR CN): The Vancouver-based silver producer said in a statement that it won’t meet production targets of 2.8 million ounces because of operating issues at its mines. The shares gained 6 cents, or 1.6 percent, to C$3.84. Trading was halted after markets closed in Toronto.

Gildan Activewear Inc. (GIL CN): North America’s biggest T- shirt maker, said in a Market Wire statement that it agreed to buy sockmaker V.I. Prewett & Son Inc. for $125 million in cash. Gildan fell 22 cents, or 0.7 percent, to C$32.60.

Northgate Minerals Corp. (NGX CN): The gold producer said the Joint Federal-Provincial Environmental Review Panel has recommended Canada’s provincial Ministers of the Environment not approve the company’s Kemess North project. The Toronto-traded shares added 1 cent to C$3.23.

Northland Resources Inc. (NAU CN): The minerals explorer is holding a general shareholders’ meeting. The shares added 1 cent to C$3.59.

Stratos Global Corp. (SGB CN): The provider of satellite phone services said in a statement that Alfred Giammarino resigned as chief financial officer, effective Sept. 24. He will be replaced by Paula Sturge, who’s currently a senior vice president, finance. The shares fell 3 cents to C$6.77.

TransForce Income Fund (TIF-U CN): The owner of a transport and logistics business said on Sept. 14 that it agreed to buy Century II Holdings Inc. (CH CN) for C$114 million ($110 million).

Separately, TransForce was raised to “market outperform” from “market neutral” by analyst Byron Berry at Dundee Securities Corp. The analyst expects the shares to climb to C$14.25 within 12 months. TransForce added 25 cents, or 2.2 percent, to C$11.50. Century II gained 1.3 percent, to C$10.03.

This story could be played out in Toronto

Many expect further discussion on Toronto interest rates.

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