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TSX dragged lower by energy and financials, Sino-Forest jumps 50%

Published: 16:56 06 Jun 2011 BST

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After initially opening slightly higher, Canada’s TSX composite index quickly reversed course and moved firmly lower, following a weak start in New York were the Dow Jones, S&P 500 and Nasdaq all kicked off the first week of trading in June on a downbeat note.  TSX losers outnumbered gainers by a ratio of almost 2:1, with the biggest drag being energy and financial stocks.  

There were several companies moving against the tide however, including commercial forest plantation operator Sino-Forest (TSE:TRE) which surged 50%, recovering some of the sharp losses it incurred last Friday. The morning the company responded to fraud allegations made last week by US-based research firm Muddy Waters.  Muddy claimed that Sino-Forest inflated its revenues, and made it impossible for others to understand or keep track of its operations, but the company defended itself last week, saying Muddy fundamentally misunderstood and misrepresented the "most basic facts". On its website today, Sino-Forest plans to post several documents proving the ownership of its holdings in the Chinese province, including summary schedules, signed contracts, and extracts from the company's annual information form, describing the nature of its assets.

Quite a few mining companies also moved higher this morning - buoyed by higher gold,  silver and copper prices - including copper miner First Quantum Minerals (TSE:FQM, LON:FQM) which rose 1.9%, while gold producers also benefited; Allied Nevada (TSE:ANV, AMEX:ANV), Goldcorp (TSE:G, NYSE:GG) and Barrick Gold (TSE:ABX, NYSE:ABX) all added more than 1%.

Shares in Vancouver-based explorer Exeter Resource Corp (TSE:XRC, AMEX:XRA) were also in demand this morning after the company announced results of its prefeasibility study (PFS) on the Caspiche project in northern Chile, with cash costs of just $524 per ounce of gold and a net present value of more than $329 million.

 

The study was based solely on the near-surface oxide portion of the Caspiche deposit, which was considered a standalone mine as the more than 100 metre thick oxide blanket would be removed from the large, underlying sulphide resources at the project. Exeter plans on assessing both the oxide and sulphide resources in a combined study due out in the fourth quarter of this year.

 

The Caspiche project is a gold-rich porphyry system with significant copper and silver credits. It sits in-between Kinross Gold (TSE:K, NYSE:KGC) and Barrick's Cerro Casale gold deposit and the Refugio Mine, also controlled by Kinross.

 

According to the economic report released today, the oxide portion of the deposit will produce an estimated 210,000 ounces of gold and 364,000 ounces of silver annually over a five year mine life, at a cash operating cost of $524 per ounce of gold. Shares in Exeter climbed 1.7% to CAD$4.83 per share.

 

Energy and financials dragged on the market though. Talisman Energy (TSE:TLM, NYSE:TLM), Canadian Natural Resources (TSE:CNQ, NYSE:CNQ) and Suncor (TSE:SU, NYSE:SU) were among the worst performers in the energy sector, dropping 1.7%, 1.9% and 1.6% respectively. The energy sector fell lost 1.1% this morning.

Financials were also out of favour, falling 0.9%.  Insurance giant Manulife (TSE:MFC, NYSE:MFC) dropped 1.8% while Royal Bank of Canada (RBC)(TSE:RY, NYSE:RY) gave up 87 cents, or 1.6%.  Outside of commodities and financials, Research In Motion (TSE:RIM, NASDAQ:RIMM) bucked the wider trend, climbing 0.75% to CAD$38.44.

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