UPDATE 2-North American mining stocks fall on debt fears despite strong results

Thu Jul 23, 2015 4:58pm EDT
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(Recasts with more investor comment, gold sector context; adds closing share prices)

By Nicole Mordant and Susan Taylor

VANCOUVER/TORONTO, July 23 (Reuters) - North American mining stocks slumped on Thursday, stripping two global producers of hundreds of millions of dollars in value, as market-beating results failed to appease investors fed up with bloated debt and hefty capital commitments.

The selloff, led by Freeport-McMoRan and Teck Resources, set the stage for a rough reporting season, as miners trudge through the fourth year of a commodity downturn.

Investors must scrutinize mining stocks and their debt loads, said Darren Lekkerkerker, co-manager of the Fidelity Global Natural Resources Fund, which has only about 4 percent of its investments in mining.

"You need to really be careful about owning those stocks, because as the commodity price comes down, when they have a lot of leverage, cash flow is really going to come down too," said Lekkerkerker.

"No one wants to own stocks where they may need to do an equity issue in order to shore up the balance sheet."

The stock of U.S.-based diversified miner and energy producer Freeport closed down 9 percent at $13.64, while Teck fell 4.6 percent to C$9.93. Both slid to six-year lows earlier, slashing $1.8 billion in market value from Freeport and C$600 million ($460 million) from Teck.

Freeport said Thursday its debt rose 3 percent in the June quarter.   Continued...