The S&P/TSX Composite index (INDEXTSI:OSPTX) surged higher by mid-day on Thursday with energy companies such as Baytex Energy Corp. (TSE:BTE)(NYSE:BTE) driving the index higher, while laggards like Bombardier Inc. (TSE:BBD.B) and First Quantum Minerals Limited (TSE:FM)put downward pressure on the index.
Canada’s main index was up by 91 points at 12,469.55 – a bump of 0.75 percent from yesterday’s close, driven largely by energy producers like Baytex Energy Corp that were experiencing buying as a result of the price of oil trading above US$32 a barrel.
Baytex, which has lost 97 percent of its value since its high above $48 in the summer of 2014, has been absent from the news in large part after it announced in December that it would spend $325 million to $400 million in 2016, and planned to generate production of between 74,000 and 78,000 barrels of oil equivalent per day. The company also amended its credit terms at the end of 2016, and now has long term debt totally over $1.6 billion.
Bombardier Inc., on the other hand, has seen 30 percent in market cap sliced off as investors contemplate the likelihood of the company’s ability to service its $9 billion debt load. There is still a lot of speculation surrounding whether the federal government of Canada or the country’s largest pension funds will be willing to throw what increasingly appears to be good money after bad as it pursues a further $1 billion bailout required to continue with its C-Series aircraft program, which is drastically behind schedule and over-budget.
Midas Letter cautioned readers in October 2015 that the company was a lousy investment, and there’s no debate that at this point, we’re right.
First Quantum Minerals Ltd. (TSE:FM) has its fate firmly tied to that of copper as demonstrated over the last five years in the above chart.
For its part, First Quantum Minerals Ltd. is staring down the barrel of continuing weakness in metals such as copper, which is its primary product. Shares of First Quantum Minerals are down $0.06, or 2.3 percent to $2.54 on volume of 6.3 million shares traded. First Quantum has seen its value deteriorate by 92 percent since 2011, after copper traded over $4 a pound. Copper today is at $2.06 per pound.
First Quantum’s life is further complicated by its penchant for operating in difficult jurisdictions, which puts it at the bottom of the list for many investors when it comes to evaluating which companies they might be interested in putting money into when a bottom is perceived.
First Quantum raised $1.44 billion last year at over $16 a share, which was the biggest mining deal on the TSX at that time, led by Goldman Sachs. Those investors are now buried in a stock that could go to zero unless markets turn around soon. If you were a Midas Letter subscriber, you’d never have been sucked into such a horribly ill-advised deal.