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A look at North American equities heading in both directions

On the rise

Shares of Barrick Gold Corp. (ABX-T) were higher by 1.4 per cent after it said on Thursday first-quarter gold production fell 15 per cent sequentially, as a harsh winter hampered the Canadian miner’s operations in northern Nevada and annual maintenance weighed on output at its Goldstrike mine.

Barrick’s gold output has been on a steady decline, falling for at least three consecutive years.

But the company said on Thursday it expects gold production to increase through the year, with the first quarter being the lowest. Copper production is expected to be higher in the second half of the year.

Gold output at Carlin took a hit from annual maintenance, resulting in lower throughput at Goldstrike mine in the mining district, Barrick said.

Gold’s all-in sustaining costs (AISC), a key industry metric that reflects total expenses, are expected to be 9 per cent to 11 per cent higher from the prior quarter on lower sales volumes.

AISC for copper, however, is expected to be down 14 per cent to 16 per cent due to lower sustaining capital expenditures.

Barrick’s total preliminary gold output was 952,000 ounces in the three months ended March 31, compared with 1.1 million ounces in the previous quarter.

Analysts on an average expected gold production of 988,700 ounces, according to Refinitiv IBES data.

The Toronto-based firm’s copper production was 88 million pounds during the quarter, down 8.3 per cent from the previous three months, weighed down by lower output at its Lumwana mine in Zambia and Zaldívar mine in Chile.

Gold prices rose 7.9 per cent during the January-March period, after a 9.9% increase in the previous quarter, as recent volatility in the banking sector spurred a rush toward the safe haven.

Barrick, scheduled to release its first-quarter results on May 3, said the average market price for gold in the period was US$1,890 per ounce, up from US$1,726 per ounce in the prior three months.

Copper miner Teck Resources (TECK-B-T) gained 2.7 per cent after it rejected Glencore PLC’s latest takeover proposal as value destructive, and is tweaking the structure of its own planned metallurgical coal spin off.

Glencore last week proposed buying Vancouver-based Teck in an all-stock deal worth US$21.3-billion at a 22 per cent to Teck’s market value. Glencore this week sweetened the offer buy adding US$8-billion in cash in lieu of stock.

In rejecting the sweetened offer, Vancouver-based Teck said the overall value of deal is unchanged, and there are still myriad risks over ESG, jurisdiction, and execution.

“Glencore has made two opportunistic and unrealistic proposals that would transfer significant value to Glencore at the expense of Teck shareholders,” Sheila Murray, chair of Teck, said in a release. “Teck’s proposed separation creates a significantly greater spectrum of opportunities to maximize value for Teck shareholders.

Teck earlier this year said it planned to separate into two entities, one containing its metallurgical coal assets, and the other its copper and zinc mines. Investors gave that proposal a lukewarm reception in part because Teck’s coal business would have to give up about 90 per cent of its cash flow for about 11 years to the metals business.

Opinion: However Glencore’s bid for Teck ends, more consolidation to come for Canadian mining

Teck on Thursday said it will now reduce the onus on its coal business to pay so much to the metals business. A royalty payment that previously would have taken 5.5 years to pay off will fall in duration to three years.

Glencore suffered another setback on Thursday with a British activist fund calling for Glencore PLC to radically overhaul its proposed acquisition of Teck Resources Ltd., calling the plan to merge its thermal coal unite with Teck’s metallurgical coal a bad idea.

- Niall McGee and Eric Reguly

Hudbay Minerals Inc. (HBM-T) reversed course and rose 2.4 per cent after it said on Thursday that it would buy peer Copper Mountain Mining Corp. (CMMC-T) in a $439-million all-share deal to boost its copper portfolio.

The deal is the latest in a wave of buyout offers across the mining sector, as companies look to expand their copper footprint. The red metal is a hot target as it is seen as indispensable to the global energy transition from hydrocarbons.

The combined company would create the third largest copper producer in Canada and the deal could unlock $30 million per year in operating efficiencies and corporate synergies, Hudbay said.

Last week Glencore Plc made an unsolicited $22.5-billion bid for copper miner Teck Resources.

Copper is used in everything from electrical wiring to rechargeable batteries is crucial for global energy transition towards renewable sources.

Under terms of the deal, each Copper Mountain shareholder will receive 0.381 of a Hudbay common share for each Copper Mountain common share held. The deal values Copper Mountain at $2.67 per share which represents a 18-per-cent premium to it last close.

Upon closing of the deal, existing Hudbay and Copper Mountain shareholders will own about 76 per cent and 24 per cent of Hudbay, respectively.

The miners expect the deal to be completed late in the second quarter or in early third quarter of 2023.

Alibaba Group Holding Ltd. (BABA-N) rebounded from steep overnight losses in the wake of a report Japanese technology investor SoftBank Group Corp has moved to sell almost all of its remaining shares in the Chinese e-commerce major.

The sale would come as valuations of China’s big tech firms have started recovering this year after an end to two years of heightened regulatory scrutiny, providing a window for long-time investors such as SoftBank to reduce exposure to an economy battered by strict pandemic policies and Sino-U.S. tension.

Alibaba shares fell by as much as 5 per cent at one stage in China, but later pared losses to close 2 per cent lower.

SoftBank has been seeking ways to monetise its stake in Alibaba, which the Japanese conglomerate bought into more than two decades ago with just US$20-million spending.

“They have been clear that ... they need to monetise profitable holdings,” Jon Withaar, head of Asia special situations at Pictet Asset Management, said of SoftBank.

“Perhaps some expected that they may slow the pace of their selling in now that their Arm IPO is moving closer to completion, but ultimately everything they are doing is within the scope of what they have told the market.”

SoftBank aims to list British chip designer Arm this year in an initial public offering (IPO) that would raise at least US$8-billion, people familiar with the deal told Reuters last month.

On Wednesday, the FT said forward sales based on filings at the U.S. Securities and Exchange Commission showed SoftBank’s Alibaba stake would eventually fall to 3.8 per cent from almost 15 per cent.

On the decline

Corus Entertainment Inc. (CJR.B-T), the parent company of Global Television, slid 6.6 per cent as it reported a loss in its latest quarter compared with a profit a year ago, as its revenue fell five per cent.

The television and radio broadcaster says its loss attributable to shareholders was $15.5-million or eight cents per diluted share for the quarter ended Feb. 28 compared with a profit of $16.2-million or eight cents per diluted share a year earlier.

Revenue in what was the company’s second quarter totalled $343.9-million, down from $361.7-million in the same quarter last year.

Corus chief executive Doug Murphy says the results reflect the impact of current global advertising market conditions on advertising revenue, partially offset by significant growth in its owned content business.

The company says its overall television revenue was $321.5-million, down from $339.7 million a year ago, as the advertising segment fell to $169.1-million from $184.7-million and subscriber revenue slipped to $124.1-million from $132.8-million. Distribution, production and other revenue in its television business rose to $28.4-million from $22.1-million.

Radio revenue came in at $22.3-million, up from $22.0-million in the same quarter last year.

Delta Air Lines (DAL-N) turned lower and closed down 1.1 per cent on Thursday after it forecast higher-than-expected profit for the second quarter, citing “record” bookings for summer travel, including strong demand for international trips.

The company’s earnings in the January-March quarter, however, fell short of Wall Street estimates. Chief Executive Ed Bastian, in an interview with Reuters, said fuel price volatility and bad weather affected the company’s performance in the quarter.

Mr. Bastian remained upbeat about consumer demand despite growing risks of an economic recession. Premium cabin revenue grew faster than the main cabin in the first quarter.

“Consumers are anxious to travel,” he said, adding that demand for international travel was especially strong this summer and travelers were booking trips well in advance.

Travel demand in the United States is currently strong but rising interest rates, persistently high inflation, mounting job losses and a turmoil in the banking industry have cast a shadow over consumer spending.

U.S. carriers have leveraged the demand to offset rising labor and fuel bills with higher ticket prices. But investors are worried that any pullback in travel spending would hurt airline profits.

American Airlines (AAL-Q) on Wednesday forecast first-quarter profit below market expectations, joining rival United Airlines (UAL-Q) in signaling a hit from high labor and fuel costs.

Bastian downplayed those concerns. He said Delta recorded the 10 highest sales days in its history last month and had been able to protect its pricing power despite adding capacity.

The company expects its revenue in the June quarter to rise 15 per cent to 17 per cent from a year ago on capacity growth of 17%.

“We’re growing supply at that level and not seeing a deterioration in the overall revenues,” he said. “It’s unusual in our industry.”

Delta expects an adjusted profit of US$2.00 to US$2.25 per share in the second quarter, with an operating margin of 14 per cent to 16 per cent. That is higher than a profit of US$1.66 per share estimated by analysts.

Non-fuel costs for the quarter are projected to rise between 1 per cent to 3 per cent year-on-year. Delta pilots last month ratified a new contract that includes over US$7-billion in cumulative increases in pay and benefits over four years and is widely expected to be a benchmark for contract negotiations at rival carriers.

Delta retained its full-year earnings forecast after reporting adjusted profit for the first quarter of 25 US cents a share, below 30 US cents a share expected by analysts.

Motorcycle maker Harley-Davidson Inc. (HOG-N) fell 1.7 per cent after it said late Wednesday Chief Financial Officer Gina Goetter was leaving the company at the end of April, and toymaker Hasbro Inc. (HAS-Q) said she would take over as its finance chief.

Harley issued a statement saying that Vice President, Treasurer David Viney will serve as interim CFO after Ms. Goetter’s departure on April 28.

Ms. Goetter was appointed CFO in September 2020 and played an integral role in Harley’s restructuring plan, called “Rewire,” to phase out less popular bike models and simplify its business strategy by catering to an older customer base.

Before joining Harley, Ms. Goetter held top finance roles at meat company Tyson Foods Inc and cereal maker General Mills Inc.

After cutting hundreds of jobs in 2020, Harley has either beaten or met Wall Street earnings forecasts in recent years, while navigating high inflation and supply chain constraints. The company benefited from strong demand for leisure purchases during the COVID-19 pandemic.

Hasbro said Ms. Goetter will assume the role as CFO on May 18, succeeding Deborah Thomas at the company that makes Transformers action figures.

With files from staff and wires

Follow David Leeder on Twitter: @daveleederOpens in a new window

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