Barrick Gold earmarks US$500 million for Argentina mine after spill

Barrick Gold Corp has earmarked US$500 million over five years for upgrades and expansions to its Veladero mine in Argentina, chief operating officer Richard Williams said on Tuesday, four weeks after a third cyanide solution spill at the mine.

Barrick, the world’s biggest gold miner, said improvements to the mine’s processing facility, where the spills occurred, would include adding containment barriers, reinforcing and moving pipes, and installing new high-definition cameras to monitor the site.

© Thomson Reuters 2017

Tariffs on Canadian softwood lumber could stack up to a trade war with the U.S.

Lumber producers south of the border are singing the praises of the U.S. government. The Canadian government is opposed to the tariffs. Legal Post’s Drew Hasselback: ‘we knew it was coming.’

McDonald’s beats fast-food industry slump with help from Big Mac makeover, shares jump to record high

A revamp of McDonald’s iconic Big Mac burger and more aggressive drink promotions are helping the restaurant giant overcome a broader slump in the fast-food industry.

The chain posted a surprisingly strong gain in same-store sales last quarter, with the measure growing 4 per cent globally. Analysts had estimated a 1.3 per cent rise. Earnings also topped projections.

The results suggest that Chief Executive Officer Steve Easterbrook got a payoff from efforts to overhaul the company’s menu. He rolled out different sizes of the Big Mac and offered US$1 and US$2 drink deals, a bid to attract customers in a cutthroat U.S. restaurant environment. A switch to all-day breakfast in the U.S. in 2015 also continues to fuel sales.

“U.S. sales showed a nice acceleration in the quarter,” said Michael Halen, an analyst at Bloomberg Intelligence. “They’ve made a lot of positive changes over the last two years, and all of these positive changes are starting to add up.”

Shares of McDonald’s Corp. rose as much as 3.6 per cent to a record US$139.09, the biggest intraday increase in five months. Through Monday’s close, the stock had climbed 10 per cent this year, outpacing the Standard & Poor’s 500 Index’s 6 per cent gain.

The Big Mac strategy represents a case of getting playful with a well-known product and not irking customers in the process. PepsiCo Inc. wasn’t so fortunate when it reformulated Diet Pepsi in 2015, a move that led to a consumer backlash. And Coca-Cola’s launch of “New Coke” in 1985 is considered one of corporate America’s most legendary failures.

McDonald’s now serves the Big Mac in three sizes: the traditional version, a larger Grand Mac and a smaller Mac Jr.

U.S. same-store sales rose 1.7 per cent last quarter, an unexpected gain. Analysts projected a 0.8 per cent drop. Earnings amounted to US$1.47 a share in the period, handily beating the US$1.34 estimate of analysts.

Delivery push

The company also is looking to delivery services and more digital options to help attract diners. It hasn’t been easy. U.S. competitors are advertising steeply discounted food, along with new fare. Industry same-store sales fell 0.6 per cent in March, slipping for the fourth straight month, according to MillerPulse data.

McDonald’s also performed well in overseas markets, which provide about two-thirds of revenue. Same-store sales at its high-growth division rose 3.8 per cent, topping the 2.7 per cent estimate. That segment includes China, where the chain is opening new locations to better compete with Yum China Holdings Inc.’s KFC and Pizza Hut brands.

Its so-called international lead markets climbed 2.8 per cent by that measure, driven by strong results from the U.K. and Canada. New fare has attracted diners in the U.K., while the chain has been working to improve its customer service at Canadian locations.

McDonald’s total revenue was US$5.68 billion last quarter, compared with the average projection of US$5.53 billion. Some of the gain may have come at the expense of other restaurant chains, including Sonic Corp. and IHOP, Halen said.

“They could be stealing traffic,” he said. “There’s no doubt things are looking up for McDonald’s.”

Bloomberg News

Uber Technologies Inc lays out aggressive partnership plan to begin testing flying taxis by 2020 in both Dallas and Dubai

Uber Technologies Inc. hopes to one day operate a network of flying cars. On Tuesday, the ride-hailing company laid out some aggressive plans to get closer to its first flight.

Officials in Dallas-Fort Worth and Dubai have signed on to work with the company on testing vehicles that can take off and land vertically in their cities by 2020, Uber said at a conference in Dallas. The San Francisco company said it’s partnering with a handful of aircraft manufacturers and real estate firms, as well as with ChargePoint Inc. to lay an electric charging network.

Uber sketched out a clearer vision for its flying taxis at a time when it’s struggling with more urgent problems at the ground level. The company is facing an internal investigation of its work culture, the ongoing search for a chief operating officer to help its embattled leader Travis Kalanick, a core business with mounting losses despite rapid growth and a lawsuit from Alphabet Inc.’s self-driving car group over alleged theft of documents.

In addition to being a rival in the courtroom, Alphabet could pose competition in the skies. Chief Executive Officer Larry Page funded at least two flying car projects. The startups Kitty Hawk and Zee.Aero, which are separate from Alphabet, are racing to build personal aircrafts similar to those Uber has proposed. Kitty Hawk released a video on Monday showing one of its vehicles zooming across a lake, hovering about 15 feet in the air, with a rider astride the top like on a motorcycle. Airbus SE has proposed several different concepts for vertical takeoff vehicles, and the government of Dubai is joining with China’s EHang to bring closed-top passenger drones to the city.

Uber first revealed its intentions to build a system of flying cars in a white paper last fall. In February, the company said it hired NASA aircraft engineer Mark Moore to work on Uber Elevate, its flying car initiative. Uber said Tuesday that it’s teaming up with Aurora Flight Sciences, Pipistrel Aircraft, Embraer SA, Mooney International Corp. and Bell Helicopter Textron Inc. to develop electric vehicles. It also said it’s working with Hillwood Properties in Dallas-Fort Worth and several other real estate firms in Dubai to choose sites and construct ports for vehicle takeoffs and landings.

Bloomberg News

Trudeau either target or example as his play-nice Trump strategy yields a trade war over lumber

Justin Trudeau has always played nice with Donald Trump. The refugee-hugging liberal bit his tongue, flooded Washington with envoys, feted Ivanka Trump on Broadway and relentlessly talked up Canada-U.S. ties.

It hasn’t worked.

On Monday, Trump teed off a fresh trade war by slapping tariffs of up to 24 per cent on Canadian softwood lumber as battles brew over the North American Free Trade Agreement and the dairy industry. After winning praise for his Trump strategy, with Angela Merkel and others pressing the Canadian prime minister for advice, Trudeau finds himself a target — or an example.

“Think of this as the violin Trump gets to play and set the mood of the place,” said Eric Miller, a former Canadian diplomat who is now a Washington-based trade consultant with the Rideau Potomac Strategy Group. “It’s a great way to underline America First to the Europeans, Japanese and others, if you actually take a hard line with Canada.”

Canada is hardly a poster-child trade offender for Trump. It’s the number-one buyer of U.S. goods with a largely balanced trade relationship, a peaceful next-door neighbor and among the closest U.S. allies. Trudeau moderated his message, re-calibrated his domestic agenda to court Trump and even helped him dial back G-20 commitments on trade. Trump himself pledged only a “tweaking” of ties before turning on Canada this month.

Wooing the White House

Though Canada wasn’t an early Trump target and a softwood battle has long been expected, Trudeau’s government took nothing for granted. Trudeau appointed a new foreign minister, Chrystia Freeland, as his Trump lieutenant and set up a swat team in his office to manage ties. The core tenets of Trudeau’s strategy — revealed in multiple conversations with Canadian government officials — are simple enough: come to Trump’s doorstep, flatter him, court his top aides and find back-channel intermediaries. 

Those brokers included Fairfax Financial Holdings Ltd. Chairman Prem Watsa, Power Corp. Chief Executive Officer Paul Desmarais Jr., former newspaper magnate Conrad Black and former Prime Minister Brian Mulroney, according to the officials. “I said that Mr. Trump had nothing but goodwill toward Canada, and wished only slight changes to U.S.-Canada free trade, and that the two personalities would be entirely compatible,” Black said by email last month.

The early signs from the U.S. were positive. A Trump adviser flew to Alberta in January to preach calm to Trudeau’s cabinet. Canada’s ambassador, David MacNaughton, praised the White House, saying “they’ve been delightful to deal with.”

But it was early days. During one visit, MacNaughton arrived to a White House without staff, furniture or a full complement of televisions, according to two officials. He asked for a coffee and was told the White House didn’t have a coffee maker yet. So Canada took that early optimism cautiously.

Mark Wilson/Getty Images

Mark Wilson/Getty ImagesJustin Trudeau helps Ivanka Trump with her chair during a roundtable discussion on the advancement of women entrepreneurs and business leaders at the White House February 13, 2017 in Washington, DC.

The First Daughter

Even before inauguration, Trudeau had been dispatching chief-of-staff Katie Telford and principal secretary Gerald Butts for secret meetings with Trump aides including strategist Stephen Bannon, son-in-law Jared Kushner, chief-of-staff Reince Priebus and economic adviser Gary Cohn.

Rarely a day has since gone by without a Canadian minister in Washington. Trudeau’s office keeps an Excel spreadsheet of congressmen and governors, systematically aiming to meet each one to triangulate Canada’s case on trade — all while saying they live in fear they’ll wake up to a Trump tweet aimed north, as they did on Tuesday.

Even Trump rivals are being lobbied, to be safe. Marc Garneau, Trudeau’s transport minister, met with Jeb Bush last week at a Panera Bread outlet in Florida. “He said, ‘you’re doing exactly what you need to be doing,’” Garneau later said.

The Canadians have placed particular emphasis on the president’s daughter. When Trudeau visited the White House in February, Telford suggested holding a round-table of women business leaders with Ivanka Trump. She joined Trudeau again a few weeks later at a Canadian musical on Broadway — one, incidentally, based on the story of Canadians welcoming American travelers during the Sept. 11 attacks. Trudeau’s officials privately say Kushner and Ivanka Trump are their go-to White House officials. Merkel is now wooing the first daughter, too.

“You’re trying to build a relationship from scratch,” Richard Boucher, a senior fellow at Brown University and longtime U.S. diplomat, said in an interview last month. “It just shows how back to square one we are — everyone is — with this president.”

‘Bad Week’

Trump announced the countervailing softwood duties Monday to conservative media outlets, a key conduit to the base of Trump’s America First message. A week earlier, Trump blasted Canada’s system of protectionist dairy quotas — even though the U.S. still sells far more dairy to Canada than it buys.

In a Bloomberg interview last week, Trudeau said Canada is not “the challenge” for U.S. dairy producers — and that he finds Trump more flexible than some world leaders. “He will take a different position, if it’s a better one, if the arguments win him over,” Trudeau said.

Speaking in a radio interview Tuesday, the prime minister called the U.S. softwood spat “nothing new.”

There are reasons for optimism. Trump’s bark on trade is often worse than his bite, and some expected lumber duties to be higher. Monday’s move was largely predictable — “the rerun of a movie I have seen too many times,” former Canadian ambassador Derek Burney said. Canadian lumber stocks rallied in early trading Tuesday.

Meanwhile, Trump remains cool to Paul Ryan’s border-tax proposal, which would be devastating to Canada. A softwood standoff isn’t surprising — Trudeau got along famously with Barack Obama, but couldn’t extend a deal that expired in 2015. But the manner of its announcement is sure to rattle the Canadians. Commerce Secretary Wilbur Ross’s statement on Monday night wrapped lumber, dairy and NAFTA all into one.

“It’s been a bad week for U.S.-Canada relations,” said Ross, a friend of both Mulroney and Freeland. “This is not our idea of a properly functioning free trade agreement.” Despite the U.S. benefiting from the status quo — Canada often has a trade deficit with the U.S. outside of oil, its lumber makes U.S. homes cheaper, and the dairy market is tilted in the U.S.’s favor — trade tensions are near a boiling point.

T.J. Kirkpatrick/Bloomberg

T.J. Kirkpatrick/BloombergWilbur Ross, U.S. commerce secretary, says "It's been a bad week for U.S.-Canada relations."

‘Sleeping with an Elephant’

It’s also a cautionary tale for other world leaders such as Merkel, Theresa May and Shinzo Abe who have worked hard to strike up a good relationship with Trump after an election campaign that stirred fears about the president’s commitment to free trade and the western military alliance.

Canada pledged legal action while criticizing the “unfair and punitive duty,” saying it will raise the cost of U.S. homes. It’s also threatening to pivot away, responding to duties by highlighting efforts to sell more lumber to China.

“Canada will continue to press their American counterparts to rescind this unfair and unwarranted trade action,” Freeland and Natural Resources Minister Jim Carr said Monday night in a statement. “We remain confident that a negotiated settlement is not only possible, but in the best interests of both countries.”

Canada looks set to stick to its play-nice strategy, and Trudeau had fair warnings on all this. His father, former prime minister Pierre Trudeau, famously described Canada-U.S. relations as “sleeping with an elephant,” with Canada “affected by every twitch and grunt.” This elephant is now wide awake.

Bloomberg News

Canada regulators seek comment on regulating foreign auditors

The Canadian Securities Administrators is seeking comment on a proposal mandating potential oversight requirements for foreign audit firms.

“Auditors are important gatekeepers in our market, and we are seeking input on our current oversight requirements to ensure there continues to be public confidence in the integrity of financial reporting,” said Louis Morisset, CSA chairman and chief executive of Quebecs Autorité des marchés financiers.

The move recalls the Sino-Forest scandal. An OSC review of Chinese companies listed on Canadian stock exchanges that followed the Sino-Forest revelations revealed a number of concerning issues. Foremost among them were the challenges faced by the Canadian Public Accountability Board (CPAB) in accessing audit work performed in a foreign jurisdiction.
CPAB requested that the CSA amend its rules to require all audit firms involved in a significant portion of an audit (component auditors) to register as a participating audit firm (PAF), which would give CPAB a legal basis to inspect the audit work done by these firms.
According to CPAB, audits that involve foreign components in the United States, United Kingdom and Australia, comprise 37 per cent of the total number of reporting issuers whose audits involve foreign component auditors, and 90 per cent of the market capitalization. But CPAB has acknowledged that these are not high risk jurisdictions.
The difficulty is that even if PBA registration was in place, access to auditors’ work in China would still be restricted. The extent of access to working papers in at least five other emerging markets was also unclear.  
For  its part, the CSA acknowledges that requiring PAF registration for component auditors might present challenges in finding auditors willing to subject themselves to CPAB inspection. Some auditors might raise these fees in reaction to the new requirements.
The CSA is also considering whether to require additional transparency in situations where CPAB access has been denied or impeded.

Financial Post

Teck Resources falls 6% as decline in zinc production drags down earnings

Teck Resources Ltd , North America’s largest producer of steelmaking coal, reported earnings and revenue that lagged expectations on weakness at its zinc unit, sending its U.S.-listed shares down about six per cent.

TD Securities analyst Greg Barnes said the earnings miss reflects lower sales and higher costs at Teck’s zinc unit, which he had expected to report a gross profit of $276 million.

The unit reported first quarter gross profit of $164 million on increased operating costs and a 23 per cent production drop at Red Dog mine, due to lower grades. Zinc in concentrate production fell to 130,000 tonnes from 165,000 tonnes in the same period last year.

Teck also lowered its 2017 zinc guidance to 590,000-615,000 tonnes from 660,000-680,000 tonnes previously, said Clarksons Platou analyst Jeremy Sussman, due to weather and electrical equipment failures at Red Dog.

U.S.-listed shares of the company were down US$1.35 at US$20.61.

The Vancouver-based diversified miner, which primarily mines coal, zinc and copper, reported adjusted first quarter earnings of $1.16 per share and revenue of $2.89 billion.

Both trailed analyst expectations for $1.29 in earnings and $3.04 billion in revenue, according to Thomson Reuters I/B/E/S.

Teck, which has been using cash flow and profit to cut debt, had debt of $5.1 billion at the end of the quarter.

After completing its debt reduction plan, the company has said it will consider increasing or revising its dividend policy. In 2015, Teck cut its twice-yearly dividend two times.

The company sold 5.9 million tonnes of steelmaking, or coking, coal, at an average realized price of US$213 per tonne, in the three months ended March 31.

First-quarter coal production was 6.1 million tonnes, 8 percent lower than last year, and production costs rose by $13 to $56 per tonne, Teck said.

Demand for steelmaking coal increased after a slow start in the quarter and Teck said it is in a “strong position” for the rest of the year.

Second-quarter benchmark pricing for steelmaking coal has not been agreed up, Teck said, due to supply disruptions in Australia following Cyclone Debbie. It reaffirmed a second-quarter sales forecast of at least 6.8 million tonnes of steelmaking coal.

Reports suggest a key rail coal rail line in Australia will restart at the end of April, but it will take time to clear a backlog of vessels at port, Teck said.

Spot prices for steelmaking coal stabilized at US$150 to US$160 per tonne in the first quarter, after topping US$300 last November, while copper and zinc prices rose by 25 per cent and 66 per cent, respectively, Teck said.

Bloomberg News

The loonie dives to 14-month low against the U.S. dollar as Washington sets lumber duties

The Canadian dollar slumped to a 14-month low against its U.S. counterpart on Tuesday after the United States said it would impose preliminary anti-subsidy duties averaging 20 per cent on imports of Canadian softwood lumber.

The move sets a tense tone as the two countries and Mexico prepare to renegotiate the 23-year-old North American Free Trade Agreement.

At 9:22 a.m. ET (1322 GMT), the Canadian dollar was trading at C$1.3594 to the greenback, or 73.56 U.S. cents, weaker than Monday’s close of C$1.3516, or 73.99 U.S. cents.

The currency’s strongest level of the session was C$1.3498, while it touched its weakest since Feb. 25, 2016, at C$1.3615.

“The Canadian dollar has extended its recent weakening trend overnight, with a not-too-surprising move by the U.S. to impose duties on Canadian softwood lumber being part of the backdrop,” Avery Shenfeld, economist at the CIBC World Markets Inc. said in a note.

“More telling will be how the broader NAFTA talks go, and in the immediate future, a Trump tax reform proposal due this week that we expect will reject a border adjustment tax.”

The reaction to the news leaves potential opportunity, as the Canadian dollar weakness is “likely overdone” short-term with offers into C$1.3600, traders in Toronto told Bloomberg News, as lumber accounts for 0.2 per cent of Canadian exports.

Recent weakening in the price of oil, one of Canada’s major exports, has added to pressure on the nation’s currency amid doubts about the Organization of the Petroleum Exporting Countries’ ability to reduce global crude inventories.

U.S. crude was down 0.30 percent at $49.08 a barrel.

Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries. The two-year fell 3.5 Canadian cents to yield 0.757 percent, and the 10-year declined 27 Canadian cents to yield 1.52 percent.

Canadian retail sales data for February is due on Wednesday.

© Thomson Reuters 2017, with files from Financial Post Staff