Monday June 7, 2010

S&P/TSX Composite -242.26 11569.61 CANADA

Dow Jones -323.31 9931.97
S&P 500 -37.95 1064.88 The S&P/TSX Composite erased its weekly gain on Friday, after the U.S.
NASDAQ -83.86 2219.17 reported fewer new jobs than most economists forecast. Bank of Nova
S&P/TSX Venture -18.25 1464.92 Scotia (BNS) paced a declined in financials amid renewed concern over
Philadelphia SOX -15.97 348.48 sovereign debt in Europe.
Crude Oil (US$/brrl) +1.75 74.61
Gold futures retreated for a third day as the U.S. dollar gained against 14 of
Gas (US$/mmbtu) +0.27 4.69
16 other major currencies. Gammon Gold (GAM), a producer with
Copper (US$/lb) -0.14 2.80
operations in Mexico, said striking miners are blocking contract workers
Gold (US$/oz) -12.60 1210.00
Nickel (US$/lb) -0.44 8.44
and union members from entering its El Cubo mine. Gammon Gold said
Palladium (US$/oz) -24.75 426.25
the labour disruption is illegal and the company is “reviewing all means of
Platinum (US$/oz) -31.50 1512.50 potential legal recourse.”
Silver (US$/oz) -0.56 17.42 Western Coal (WTN), a coal producer with mines in Canada and the U.S.,
Uranium (US$/lb) +0.00 40.75 said it will reopen its Willow Creek mine two months ahead of schedule.
Canadian Dollar -0.0195 0.9418 The company also announced an 88% increase in the mine’s coal reserve.
30 Year Canada -0.07 3.711
30 Year U.S. -0.14 4.131 Galleon Energy (GO), an oil and gas producer with operations in western
Volatility Index (VIX) 6.02 35.48 Canada, said it has agreed to sell its Puskwa properties for about $135
million in cash.
Air Canada (AC.B) edged lower even after it said its system traffic
Call Me, Call Me Any, Anytime increased 9.7% to 4.2 billion revenue passenger miles in May from a year-
Keep your multi-billion stimulus ago period. Capacity increased 6.4% to 5.2 billion available seat miles
package, President Obama. system wide.
Forget your temporary job-
creation programs, Mayor UNITED STATES
Bloomberg. Stuff your small-
business loan initiative, Goldman Sachs. Riga, Stocks sank late Friday, sending the Dow below 10,000, as slower-than-
Latvia, this weekend tried to stimulate the estimated jobs growth spurred concern the economic recovery may not be
economy by hosting a parade of blondes. as robust as forecast.

Reuters reports an army of blonde women General Electric (GE) and American Express (AXP) led the declines
invaded Latvia’s capital Friday for the Eastern and Monster Worldwide (MWW) was also down sharply in the wake of
European city’s annual Go Blonde festival. the disappointing jobs report.

Nearly 1,000 blondes participated in the
parade on Saturday to show that they really do
have more fun. They hope the event will bring
positive energy to Latvia, which is forecast to
see its economy contract by 3.5% in 2010,
following an 18.0% contraction in 2009.
According to Marika Gederte, President of the
Latvian Association of Blondes, “We have to
cheer people up. We know there is an
economic crisis, but small things like a blonde
parade can cheer up all the residents of Riga.
Why not?”
Exxon Mobil (XOM) and Freeport-McMoRan (FCX) led commodities
producers lower as oil fell to near $71 a barrel and metals prices plunged.
Wal-Mart Stores (WMT) weighed on retailers after saying gasoline
prices and unemployment hurt traffic at U.S. stores.
Jacobs Engineering Group (JEC) fell after the second-largest publicly
traded U.S. engineering company agreed to buy TechTeam Government
Solutions for $59 million.
Krispy Kreme Doughnuts (KKD) climbed after it reported earnings more
than doubled in its first quarter.
Martek Biosciences (MATK) also rallied after the seller of infant formula
and dietary supplements reported results that beat analysts’ expectations.

This publication is a general market commentary and does not constitute a research report. Any reference to a research report
or a recommendation is not intended to represent the whole report and is not itself a research report or recommendation. This
commentary is for informational purposes only and does not contain investment advice. This publication may be wholly or
partially based on industry rumour, gossip and innuendo and as such is not to be relied upon as investment advice.
 – Canadian and U.S. Comments for Monday June 7, 2010 2

ECON 101
CANADIAN Data Today: No scheduled releases.
U.S. Data Today: This morning, Consumer Credit (Apr) is expected to come in flat, compared to $2.0 billion the previous
month.

ECON 201
Following large gains in April, Canada’s Employment rose by 25,000 in May, the fifth-consecutive monthly increase. The
unemployment rate was unchanged at 8.1%. Since the start of the upward trend in July 2009, employment has risen by 1.8% or
310,000.
The value of Canadian Building Permits rose 5.4% to $6.7 billion in April, following a 12.3% advance in March. Compared
with April 2009, the value of building permits has increased by 48.2%. The gain in April was due to the non-residential sector,
which more than offset the decline in the residential sector.
The Ivey PMI for Canada advanced to 62.7 in May, indicating that purchases were higher than in the previous month.
U.S. Payrolls rose by 431,000 last month, including a 411,000 jump in government hiring of temporary workers for the 2010
census. Economists projected a 536,000 gain. Private payrolls rose a less-than-forecast 41,000. The jobless rate fell to 9.7%.
The ECRI U.S. Future Inflation gauge fell in May to 98.9, from 101.8 in April; April was revised upward to a small gain. The
smoothed annualized growth rate slowed to 12.5% from 23.4%, indicating declining inflationary pressure on the U.S. economy.
Eurozone Final GDP showed a 0.2% sequential growth in Q1, which is less than the U.S. economy’s 0.8% growth rate, and
Japan’s 1.2% economic growth rate.
U.K. Housing Prices (Halifax) declined for the second-straight month in May, falling 0.4% from April, after a 0.1% fall in
April. House prices are 6.9% higher than a year ago.

MARKET MOVERS
Technical Indicators:
TSX TSX-V NYSE NASDAQ AMEX
Advancers 509 374 292 280 120
Decliners 989 397 2806 2355 349
Net -480 -23 -2514 -2075 -229
Notable 52-Week Highs:
Celtic Exploration CLT $ 11.85 HBP Nymex Long NGas/Short Oil HNO $ 13.90
Dundee DC.PR.A $ 24.68 Loblaw Companies L $ 39.54
Diamond Fields International DFI $ 0.30 Otelco OTT.UN $ 17.68
Enghouse Systems ESL $ 9.49 Peyto Energy Trust PEY.UN $ 15.11
Front Street Strategic Yield FSS.A $ 9.83 QLT QLT $ 6.70
Distinction Group GD $ 2.60 Income STREAMS III STQ $ 22.00
Notable 52-Week Lows:
Amorfix Life Sciences AMF $ 0.25 ISE ISE $ 2.52
Apollo Gold APG $ 0.28 Lithium Americas LAC $ 1.40
Cdn Energy Convertible Deb Fd CFE.UN $ 8.80 O'Leary BrIC-Plus Income & Gr OBF.UN $ 10.00
CryptoLogic Limited CRY $ 2.72 Powertech Uranium PWE $ 0.18
Noveko International EKO $ 0.59 Reko International Group REK $ 0.66
Forsys Metals FSY $ 2.79 Stonegate Agricom ST $ 0.61
HBP Nymex Long Oil/Short NGas HON $ 6.86 BMO Eq Wt US Banks Hedged CAD ZUB $ 14.33

This publication is a general market commentary and does not constitute a research report. Any reference to a research report
or a recommendation is not intended to represent the whole report and is not itself a research report or recommendation. This
commentary is for informational purposes only and does not contain investment advice. This publication may be wholly or
partially based on industry rumour, gossip and innuendo and as such is not to be relied upon as investment advice.
 – Canadian and U.S. Comments for Monday June 7, 2010 3

CANADIAN EQUITIES OF INTEREST

Listed Alphabetically by Symbol

Oil Services
Like to have your feet on solid ground? Canaccord Genuity Oil & Gas Analyst John Tasdemir points out that onshore service
stocks have been outperforming and appear poised to continue to move higher in the near term. As of Thursday’s close, the Oil
Service Index (OSX) has had a 27% correction since this year's high, set on April 23. The broad offshore bucket of stocks that
Canaccord Genuity tracks is down 30% since its high, while the onshore bucket is down 15%. Tasdemir thinks growth in
onshore drilling in U.S. and Canada focused on horizontal completions in oil and liquid-rich natural gas plays and dry gas shale
will remain intact. Therefore, he believes that, unlike past corrections, many onshore focused stocks have been oversold and
"thrown out with the bathwater," even with the relative outperformance vs. the offshore group. He also highlights that without
question, E&P costs in the Gulf of Mexico (GoM) are going up. Just how much costs are going up will take longer to answer.
Insurance, regulation, equipment redundancies, etc., will all be part of the economic equation. He thinks many GoM producers
are not only revaluating spending plans for the next six months due to the deep water moratorium, but are also considering
longer-term plans. Looking at the offshore producers and considering their other resource opportunities, Tasdemir expects more
dollars will be focused onshore. Not only that, the oil spill news flow and timeline for GoM recovery creates near-term
overhang. He thinks news flow from the GoM will continue to paint a negative light on the sector at least until the oil spill is
stopped, which could take until August. Continuing to linger, however, will be environmental and removal impacts. Finally, he
notes that he thinks the cumulative market value for offshore-related stocks is approximately $80 billion ($221 billion including
diversifieds), which compares to the onshore group at about $32 billion. He believes small capital moves away from the
offshore into the onshore stocks are a major needle mover for the purer-play onshore group. Tasdemir’s favourite onshore
stocks are the ones that are driven primarily by the horizontal trend. This includes: Trican (TCW), Calfrac (CFW), Phoenix
Technology Income Fund (PHX.UN), RPC (RES), Superior Well Services (SWSI), Complete Product Services (CPX),
and Key Energy Services (KEG). We also like select land drillers including Helmerich & Payne (HP), Nabors Industries
(NBR) and Transdigm Group (TDG). He is also warming up to Precision Drilling (PD), as its trust conversion has taken
place.

Lithium
2012 = Critical Mass in Canada. Automakers said Friday that fully-electric vehicles should be widely available to Canadian
consumers within two years, with offerings in the pipeline from Nissan, Ford Motor (F), Toyota (TM), Mitsubishi and others.
Speaking at a conference on green vehicle technology in Toronto, Toyota Canada's managing director, Stephen Beatty stated, "I
think what you're hearing across the board is that 2012 is the time when you're going to have critical mass and a huge number of
(electric) products coming forward from every manufacturer." The Canadian Press reported that Nissan is poised to be the first
major carmaker to introduce a purely electric consumer vehicle into the Canadian market, with its Leaf set to be in showrooms
by late 2011 (the Leaf is already on sale in the U.S.). Additionally, Ford said it plans to launch its Transit Connect battery-
electric van and an electric version of the Focus sedan by late 2011. Rounding out the late 2011 launches, Mitsubishi said it
hopes to begin selling its zero-emission iMiev in Canada by late 2011. Toyota intends to launch an all-electric commuter car by
2012. Toyota's Beatty predicts that there will be 8-12 fully-electric vehicles on the market in Canada by 2012.

Alamos Gold (AGI : TSX : $14.94), Net Change: -0.02, % Change: -0.13%, Volume: 334,259
Remember the...Alamos Gold eked out a gain on a drilling update from its Mexican and Turkish projects. At San Carlos on its
100%-owned Mulatos project in Mexico, the company completed 9,920 m of drilling in 48 holes. The San Carlos area is located
at the north-east end of the Mulatos trend and about 2.5 km from the Estrella open pit where current mining is proceeding.
Notable results: 9.90 m grading 14.71 g/t, 21.34 m grading 1.27 g/t Au, 16.75 m grading 6.41 g/t Au. Drilling continues to focus
on a high grade structurally and stratabound controlled zone of mineralization identified over a 270 m strike length. At Puerto
del Aire extension, also in Mexico, 10,425 m in 32 holes have been completed. Drilling is focused on expanding the mineralized
zone to the northeast and infilling the high-grade zone. Notable new assays include: 13.3 m grading 4.08 g/t Au and 10.7 m
grading at 4.69 g/t Au. This suggests the existence of possible lateral and southern extensions to the high-grade zone. In Turkey,
at its Agi Dagi Au asset purchased in January 2010 from Fronteer Gold (FRG) and Teck Resources (TCK.B), 4,500 m in 27
drill holes have been completed. The company indicated that most holes are confirming grade expectations and are providing

This publication is a general market commentary and does not constitute a research report. Any reference to a research report
or a recommendation is not intended to represent the whole report and is not itself a research report or recommendation. This
commentary is for informational purposes only and does not contain investment advice. This publication may be wholly or
partially based on industry rumour, gossip and innuendo and as such is not to be relied upon as investment advice.
 – Canadian and U.S. Comments for Monday June 7, 2010 4

additional confirmation of continuity within the established resource. Alamos is working towards a pre-feasibility study for the
Agi Dagi and Kirazli properties, which is expected to be completed during H1/11. Canaccord Genuity Mining Analyst Wendell
Zerb is neutral on the story based on valuations.

Diamond Fields International* (DFI : TSX : $0.25), Net Change: -0.02, % Change: -7.55%, Volume: 1,385,366
A diamond in the mud? Diamond Fields announced Friday that its joint venture partner, Manafa International Trade Company
of Saudi Arabia (Manafa), has been granted an exclusive mining license for a period of 30 years, extending over the Atlantis II
Deeps, one of the largest hydrothermal polymetallic deposits in the world, located within the Red Sea. The ownership of
the joint venture agreement is Diamond Fields 50.1% and Manafa 49.9%. The partners stated that the project will be developed
in defined stages, commencing with a Scoping Study to start immediately and designed to test the accuracy of the huge volume
of historic data available on the deposit. Diamond Fields noted that the Atlantis II Deeps has a surface area of 60 sq-kms and
contains an extensive volume of metal enriched mud, the consistency of soft toothpaste – though, not dentist recommended. The
partners highlight that extensive historical work has been conducted on the project, with a total of 628 cores having been taken,
with a total length of approximately 4 km. According to Diamond Fields, the latest historic resource estimates (not NI 43-101
compliant) of Atlantis II Deeps suggest tremendous economic potential with approximately 1.83 million tonnes of zinc, 402,000
tonnes of copper, 3,432 tonnes of silver contained within 89.5 million tonnes of ore.

Franco-Nevada* (FNV : TSX : $31.75), Net Change: 0.48, % Change: 1.54%, Volume: 487,445
What’s bad for money is good for gold. Credit Suisse initiated bullish coverage on the royalty company, comparing the name to
a gold ETF, with exploration upside. Franco-Nevada is a royalty company with a focus on gold and precious metal production
and additional interests in base metals and oil & gas assets. The portfolio consists of over 300 royalties, including revenue-based
(56%), profit-based (15%) working interests (7%) and others like stream-based royalties (22%). The majority of revenues come
from its gold royalties. At spot prices, precious metals are expected to comprise 78% of revenues this fiscal year, with gold
contributing 70% of total revenues. Credit Suisse sees value, given that: 1) Upside to metal prices, particularly gold with less
risk than a traditional producer and more leverage than the ETF. The analyst expects FNV will benefit from new investment in
the sector as traditional ETF investors seek a way to beat the ‘ETF benchmark’; 2) Exploration upside from a royalty stream
through Red Back Mining’s (RBI) Tasiast mine could add $1.20 to share price; 3) They believe the market is not currently
ascribing the full potential value of Prosperity gold stream transaction. As the project advances in the coming months, the
market could ascribe $2.00-3.00 more to the share price; and 4) If gold prices continue to rise into a growing credit crisis,
Franco Nevada may drive growth as junior exploration and development companies are not able to secure traditional bank
financing. And in regards to Credit Suisse’s assertion that its like an ETF, well that seems to be a bit of bit of a stretch. While
Franco Nevada has outperformed the price of gold in Canadian dollars over the last two years, gaining 52% versus gold’s 42%
increase, the company’s shares showed weak performance in the second half of 2009, resulting in a gain of just 5.5% over the
past year, versus gold’s 17.6% gain over the past 12 months.

Lithium One* (LI : TSX-V : $1.39), Net Change: -0.01, % Change: -0.71%, Volume: 300,125
Red, red brine. Stay close to me. When not talking about making war with the North, the South Koreans are scouring the world
for resource projects. Lithium One and Korea Resources (KORES), a state-owned corporation of the Government of the
Republic of Korea, announced a development joint venture (JV) at the Sal de Vida Lithium Brine Project in Argentina. KORES
has the option to earn a 30% interest in the Sal de Vida Project by funding and delivering a Definitive Feasibility Study and
funding other pre-development Exploration and Prefeasibility activities totalling up to US$15 million. KORES has also agreed,
upon exercise of the option, to provide a Project Completion Guarantee, securing the debt portion of Lithium One's 70% share
of project development costs. The agreement provides for the parties entering into a marketing agreement pursuant to which
KORES may market lithium products produced from Sal de Vida in China, Japan and Korea on behalf of the JV and Lithium
One may market potash products produced worldwide. KORES will have the right and obligation to purchase 30% of the
lithium products produced from the project at market prices and a right of first offer to purchase an additional 20% of the
lithium products from the project. The Sal de Vida Lithium Brine Project is located at Salar del Hombre Muerto, the only
commercial lithium-producing salar in Argentina and the source of more than 10% of the world's production of lithium. KORES
has a strategic vision is to become a global top 20 mining company by 2020 through overseas expansion.

New Gold* (NGD : TSX : $6.59), Net Change: 0.09, % Change: 1.38%, Volume: 2,288,075
New Gold, new index, new friends. New Gold is about to get some increased exposure, as it has met the necessary criteria join
the FTSE Gold Mine Index, effective June 21, 2010. The index is designed to reflect the performance of gold miners on a global

This publication is a general market commentary and does not constitute a research report. Any reference to a research report
or a recommendation is not intended to represent the whole report and is not itself a research report or recommendation. This
commentary is for informational purposes only and does not contain investment advice. This publication may be wholly or
partially based on industry rumour, gossip and innuendo and as such is not to be relied upon as investment advice.
 – Canadian and U.S. Comments for Monday June 7, 2010 5

scale with eligibility based on the quantity of gold produced. To join the exclusive group, a company must have sustainable and
attributable gold production of at least 300 koz per year, and derive a majority of their revenue from mined gold. New Gold is
guiding towards 2010 production of 330-360 koz of gold. Randall Oliphant, executive chairman deemed the inclusion, "another
important milestone in the advancement of New Gold." He further stated that it, "reflects our growing gold production, market
capitalization and trading volume." A Bay Street analyst believes that New Gold's inclusion in FTSE Gold Mines Index
positively highlights its expanding gold production profile and should drive broader investor exposure, especially among index
tracking funds.

Suncor Energy* (SU : TSX : $32.46), Net Change: -0.83, % Change: -2.49%, Volume: 5,765,980
I'm breaking records, let me out of the penalty box. Suncor reported May oil sands production (ex-Syncrude) of 304 MBbl/d
highlighted by a strong operational performance. Canaccord Genuity Oil & Gas Analyst Phil Skolnick notes May production
includes the immediate impact of an 85 MBbl/d production drop resulting from the scheduled upgrader turnaround that started
on May 17. Per a discussion with Suncor, oil sands production prior to the turnaround averaged 350 MBbl/d up to May 16,
which is essentially a new record. He highlights that this is also a significant improvement from the 333 MBbl/d average
production number for April, which was Suncor’s previous record month. The improvement was due to strong upgrader and
mining operations performance as well as direct bitumen sales into the market. Suncor’s oil sands guidance for 2010 remains at
280 MBbl/d (+/- 5%), which compares to Skolnick's 274 MBbl/d estimate. He views improved production performance is a
positive for Suncor, especially in light of it having been put in the penalty box (rightfully so) early this year due to the two
recent fires. Skolnick also reiterated his bullish stance as he believes the company has done a good job selling assets; and when
coupled with oil sands growth, an increase to its oil sands exposure should result in a longer reserve life and hence a higher
multiple.

Vermilion Energy Trust* (VET.UN : TSX : $33.14), Net Change: -0.59, % Change: -1.75%, Volume: 195,627
Cardium potential factored into unit price? Vermilion Energy held its investor day last Thursday. Overall, the session was
positive, as it clearly outlined the significant upside resource potential from Vermilion’s existing asset base, especially from the
Pembina Cardium. Canaccord Genuity Oil & Gas Trust Analyst Kyle Preston says the strong Pembina Cardium results reported
by the trust, while still early in the development stage, illustrates the superior quality of Vermilion’s Cardium land and provides
an indication of what we can expect from future drilling results. With a more aggressive drilling program planned for next year,
Preston expects the Pembina Cardium to contribute meaningful growth for Vermilion over the next several years. Of the five
Cardium oil wells drilled by Vermilion in Q1/10, four have been completed and three have been on production for over one
month. The trust reported an average 30-day production rate of 440 boe/d (90% oil with no water) from these wells ranging
from 366 to 537 boe/d, which is well above other competitor wells in the area and also above the company’s internal
expectation of 330 boe/d. It also indicated that two of the three Cardium wells on production are currently producing at rates
above the 30-day IP reported (530 boe/d versus IP of 414 boe/d and 376 boe/d vs. IP of 366 boe/d). These wells were completed
with 18-stage oil fracs over 1250 to 1500 metre laterals at an all-in cost of approximately $4.5 million. However, the trust
expects these costs to come down to the $3.8-3.9 million range over time. Vermilion recently expanded its land position at West
Pembina and now has approximately 150 net sections with 426 net Cardium locations currently identified. Of the 426 net
locations they identified, 300 of them are located in the thicker sands (5-8 metres) along the main productive trend on the west
side of the Pembina field, which to us would suggest these initial results may be repeatable across a portion of the acreage (do
the math, this could be huge). The fund plans to drill 15 net wells this year followed by 30-40 wells next year and has increased
its 2010 production guidance by 1,000 boe/d to 31,000-32,000 boe/d with an expected exit rate of 33,000-34,000 boe/d. Watch
for other analyst upgrades in the coming days.

Western Coal* (WTN : TSX : $4.82), Net Change: -0.26, % Change: -5.12%, Volume: 6,389,085
Under promise and over deliver? Western Coal will re-open its Willow Creek Mine, located in B.C., two months ahead of
schedule. The company also announced an increase in the Willow Creek mine coal reserve of 88% to 29.6 million tonnes,
thereby extending the mine life and supporting potential expansion to 1.7 million tonnes per annum. The Willow Creek mine’s
current approvals support a production rate of up to 900,000 tonnes of met coal per year, with applications underway to increase
production by late 2011 to 1.7 million tonnes per year over a 13-year life of mine. As part of the expansion, it is planned to
increase the throughput capacity to the processing plant and rail load-out facility to handle over 3.7 million tonnes of coal per
year. The newly expanded facilities will process coal from both the Willow Creek mine and the nearby Brule mine, eliminating
the need to construct a plant and load-out facility for Brule. Separately, a prefeasibility study was recently completed for the
Willow Creek property. The study identifies in situ Measured Coal Resources of 37.3 million tonnes and Indicated Resources of

This publication is a general market commentary and does not constitute a research report. Any reference to a research report
or a recommendation is not intended to represent the whole report and is not itself a research report or recommendation. This
commentary is for informational purposes only and does not contain investment advice. This publication may be wholly or
partially based on industry rumour, gossip and innuendo and as such is not to be relied upon as investment advice.
 – Canadian and U.S. Comments for Monday June 7, 2010 6

11.6 million tonnes (total 48.9 million tonnes) plus 0.3 million tonnes of Inferred Coal Resources. This is an increase of 40% in
Measured plus Indicated Resources. The study also contributes 27.7 million tonnes of Proven run-of-mine (ROM) coal and 1.9
million tonnes of Probable ROM coal (total 29.6 million tonnes of ROM coal reserves) within a designed open pit mine. This
new Reserve is expected to produce up to 7.0 million tonnes of coking coal and 14.6 million tonnes of PCI coal. Previously
reported reserves were 14.8 million Proven and 0.9 million tonnes of Probable ROM coal.

U.S. EQUITIES OF INTEREST

Listed Alphabetically by Symbol

Employment
Jobs, not Steve Jobs. U.S. employers added 431,000 nonfarm jobs nationwide in May, the biggest increase in a single month in
a decade, but the bulk of the growth was in government jobs, driven by hiring for the Census, and private-sector job growth was
weak. The U.S. unemployment rate fell to 9.7% nationwide (using a different survey) from 9.9% in April. The U.S. figures for
May represented the fifth consecutive month that payrolls have risen, but fell below analysts’ expectations that 540,000 jobs
would be added to the economy. Most of the private-sector gains were in manufacturing, but overall, the figures suggest that
nongovernment hiring was weak. This was also a disappointment to some, given the President Obama said, earlier in the week,
that the report would show strong jobs growth – which was partially true. Altogether, 411,000 of the jobs added were for
Census workers whose positions will disappear after the summer. In April, nonfarm payroll employment grew by 290,000, but
the unemployment rate rose that month as more people entered the work force. The May figures suggest that the job market still
has a long way to go. The economy has to add more than 100,000 jobs every month to absorb the new entrants to the market.
And they are joining a labour pool that is already swollen with 15 million Americans looking for work. More than eight million
people have lost their jobs since the start of the recession in December 2007. The so-called underemployment rate, however, fell
to 16.6% in May from 17.1% in April, and 16.9% in March. The rate includes people with jobs whose hours have been cut, and
those who accepted part-time jobs because they could not full-time work. The rate was 16.9% in March.

Banking Sector
Banking on credit. Credit Suisse expects that improved profitability and book value growth among the large banks helps
support current valuation levels and will potentially help drive some multiple/valuation restoration. The banks are forecast to
grow book value (BV) by 9% and tangible book value (TBV) by 17% in 2010. While the regional bank book values (BV) will
experience low growth in 2010, Credit Suisse expects the growth rates to significantly increase in 2011. This will be driven by a
return to profitability, and also from the release of deferred tax assets. Given some early indications of stabilization in consumer
credit quality trends, particularly some relief in credit card portfolios, Credit Suisse is forecasting a 30% decline in provision
expense in 2010 for our large-cap bank universe. Further, we expect an additional 25% decline in provisions in 2011. Despite
the fact that large cap banks are positioned for better profitability and stronger book value growth in 2010, the large cap and
regional banks trade in line at 1.4 times TBV. According to the analyst calculations, 10% return on equity and 14% return on
tangible equity implies that the large cap banks should trade at 1.8x book value and 2.3x tangible book value, which is a 15%
discount to historical BV and 25% to historical TBV. This would imply 40-50% upside from current levels for the large cap
banks. Credit Suisse is bullish on Bank of America (BAC) and JPMorgan Chase (JPM).

Steel Sector
Soft steel. Steel companies were hit especially hard on Friday, as Goldman Sachs removed U.S. Steel (X) from its conviction
list. As well, the ISM monthly survey of steel buyers (end-market buyers, not service centers/distributors) for May, appeared to
indicate that there is a choppy demand outlook which was partially offset by a modest improvement in the outlook for inventory
restocking and imports. Of respondents, 36% plan to decrease inventories over the next six months, versus 42% in April, while
21% indicated they will increase inventories versus 0% last month. Respondents also indicated that 29% expect orders to be
down in the next three months, versus 17% in April, while 36% expect orders to be up in the next three months, versus 33% in
April. According to data from the full report, Credit Suisse believe that it appears end market consumers are less optimistic
about continued improvements in US economic activity in the second half of the year versus the first half of the year. As well,
slightly fewer respondents indicated foreign steel makers were offering more competitive prices (8% versus 10% last month),
while the number of respondents indicating the activity of foreign mills was greater than 3 months ago dropped. Overall, this
outlook appeared to provide a mixed message from steel end-market buyers in the U.S.

This publication is a general market commentary and does not constitute a research report. Any reference to a research report
or a recommendation is not intended to represent the whole report and is not itself a research report or recommendation. This
commentary is for informational purposes only and does not contain investment advice. This publication may be wholly or
partially based on industry rumour, gossip and innuendo and as such is not to be relied upon as investment advice.
 – Canadian and U.S. Comments for Monday June 7, 2010 7

ATP Oil & Gas (ATPG : NASDAQ : US$9.19), Net Change: -0.40, % Change: -4.17%, Volume: 10,302,903
Following the BP (BP) oil spill, life has been difficult for all Gulf of Mexico (GoM) producers and service companies. There is
now some clarity, finally, for ATP Oil & Gas. The company announced on Friday that that one of its key growth drivers, the
MC 941 #3, will be completed as planned and is not impacted by the moratorium. The company now estimates it can produce 9-
10 mmboe (25,000-27.000 boepd) as compared with pre-spill estimate of 12 mmobe or 33,000 boepd. Also, ATP reaffirmed
second quarter volume projections of 2.0 mmboe. Canaccord Genuity Oil & Gas Analyst Irene Haas welcomes this news, as a
18-24% haircut to 2010 production estimate is manageable and not as bad as some might have feared. Additionally she
highlights that the company could cut capex by $50 million to $100 million. Haas believes that this is an opportune time to
accumulate shares as she believes the market beat this stock senseless and, while operating in the GOM will be no bed of roses,
she anticipates ATP will continue to carry on and revise its plan to adjust to the regulatory uncertainties. The stock is currently
trading at $13.04/boe of proven reserves, nearly a 47% discount to her coverage universe, which trades at nearly $24.60/boe of
proven reserves. Upcoming catalysts: Continued drilling and completion efforts at the Telemark Hub would bring incremental
barrels to ATP’s top line. Any positive news regarding the oil spill could also give ATP’s shares a lift.

BP (BP : NYSE : US$37.16), Net Change: -2.11, % Change: -5.37%, Volume: 62,450,212
The nuke option is off the table. BP reported on Sunday that a containment cap placed on a ruptured well about a mile deep in
the Gulf of Mexico collected 10,500 barrels of oil Saturday. That's up from the 6,077 barrels the company collected on Friday.
BP Chief Executive Tony Hayward says the company will also implement an additional containment system this week which
will be in place by the coming weekend. Hayward hopes with the two containment systems in place, BP will be able to contain
the majority oil from the Gulf of Mexico leak. These containment measures are "stop-gap fixes", until two relief wells, currently
being drilled, are expected to be completed in August. Despite success with the containment cap, there is growing concern over
the several massive oil plumes are under the surface. Hayward has flatly declared "there aren’t any plumes." Separately, the
debate over a potential BP dividend cut continues. During his Friday's visit to Louisiana, U.S. President Obama expressed anger
at BP for considering more than $10 billion in stock dividends and for launching a $50 million public-relations campaign. Last
week, the U.S. Department of Energy ruled out using a small nuclear device to seal off the leaking well. According to media
reports, the Soviet Union used this desperate measure on three runaway wells in the past.

Dell (DELL : NASDAQ : US$13.24), Net Change: -0.52, % Change: -3.80%, Volume: 29,899,766
Privacy concerns…While speaking at a Stanford C. Bernstein conference in New York, Dell CEO Michael Dell said he is
considering taking the company private, raising speculation of a premium buyout. The company has been struggling to keep
pace with large competitors Hewlett-Packard (HPQ) and Apple (AAPL) as rising costs have eroded margins. To maintain
market share, the company needs to make a strategic move. In addition to a potential buyout there is also speculation that the
company may be considering smaller acquisition opportunities that would strengthen its I.T. department. Further, analysts have
commented that if the company were to go private a lot financing would have to take place. Dell’s market cap is roughly $27
billion. Accumulating this amount before any premium to shareholders, would not be an easy task, even for its billionaire CEO.
Regardless, Michael Dell said he is “totally committed to continuing to run the business for a long period of time.”

Google (GOOG : NASDAQ : US$498.72), Net Change: -6.88, % Change: -1.36%, Volume: 3,896,332
Really, the only One. It’s harder to find a Nexus One handset these days, as Google has stopped selling the mobile phone in its
web store. The search engine giant admitted in May that sales of the Android-based handset were slower than expected, and that
it will be teaming up with local network partners to sell the phone through their street shops instead. On Friday, Barclay’s
reduced its forecasts for Google, saying that these changes in the distribution of the Nexus One could overhang quarterly results.
The firm is now projecting Q2 revenue growth of only 1.9% quarter over quarter, and earnings of $6.49 a share. For the full
year, it has reduced its projected net revenue growth to 19.5%, and EPS to $27.67. These are still respectable numbers, to be
sure, and reason enough for Barclay’s to remain bullish. The firm views its estimate adjustments as housekeeping more than
material changes, and they don’t factor in any potential underlying weakness in Europe beyond foreign exchange changes.

HSBC Holdings (HBC : NYSE : US$45.30), Net Change: -1.26, % Change: -2.71%, Volume: 4,004,765
"You will always remember this as the day you almost caught Captain Jack Sparrow." – Privateers of the Caribbean.
Europe's biggest bank is in talks to spin out its private equity fund management businesses in Hong Kong, Britain, the United
States, Canada and the Middle East. HSBC's regional private equity businesses manage $8.8 billion of assets and focus on

This publication is a general market commentary and does not constitute a research report. Any reference to a research report
or a recommendation is not intended to represent the whole report and is not itself a research report or recommendation. This
commentary is for informational purposes only and does not contain investment advice. This publication may be wholly or
partially based on industry rumour, gossip and innuendo and as such is not to be relied upon as investment advice.
 – Canadian and U.S. Comments for Monday June 7, 2010 8

supporting management buyouts in Britain, technology investments in Asia, mid-market private equity and mezzanine deals in
the U.S. and management buyouts and providing capital for growing businesses in Africa. HSBC intends to retain its
investments of about 20% of the private equity businesses, a spokesman said. HSBC spun off its bigger European buyouts
business in 2003, retaining a minority stake in the firm which subsequently became Montagu Private Equity. Tougher regulation
of the banking industry is leading banks to pare back non core activities, such as private equity investing, to focus on core
businesses. The announcement from HSBC follows plans from Barclays (BCS) to spin off its mid-market buyouts arm this
summer ahead of a planned fundraising by the private equity business later in the year. Royal Bank of Scotland (RBS) is also
in talks to sell its European and U.S. private equity funds portfolios.

Jacobs Engineering Group (JEC : NYSE : $40.14), Net Change: -3.56, % Change: -8.15%, Volume: 1,043,400
Hold on...Shares of Jacobs sold off hard as a very weak overall market overshadowed “mildly positive” news that it had
acquired TechTeam Government Solutions (TTGSI) from TechTeam Global. TTGSI is headquartered in Virginia and employs
500 people. The company provides support to government agencies with core competencies in systems integration, enterprise
application integration, ERP implementation support, IT infrastructure support, network operations management and call center
operations. The acquisition price is $59 million with consideration to be made in cash. Canaccord Genuity Infrastructure
Analyst Yuri Lynk views the news as mildly positive, as he believes TechTeam will enhance Jacobs’ service offering to its
clients. He estimates Jacobs paid approximately 7x EBITDA for TechTeam, making it accretive on a cash flow basis. With
$743 million in freehold cash, Lynk expects Jacobs will continue to be active on the acquisition front at home and abroad.
Sectors of interest include aerospace & defence, water & wastewater, upstream oil & gas, as well as power and mining, which
would be new business lines. Lynk is neutral on the story as shares currently trade a premium to its peers.

Martek Biosciences (MATK : NASDAQ : US$22.37), Net Change: 3.12, % Change: 16.21%, Volume: 2,370,614
That's a grown-up move. Shares of Martek Biosciences jumped after the company posted a better-than-expected profit, helped
by strong demand in Asia for its nutritional ingredients in both the infant formula and non-infant formula markets, and forecast
2010 revenue above market estimates. Martek said it earned $12.6 million, or $0.37 per share, for the quarter ended April 30, up
from $11.0 million, or $0.33 per share, during the same period a year ago. Excluding charges, the company said it would have
earned $0.45 per share. Revenue increased 34% year-over-year to $124.0 million from $92.4 million. The Street was
expecting net income of $0.32 per share on revenue of $114.9 million. Looking ahead, management forecast third-quarter net
income of $0.33-0.36 per share on revenue of $113-118 million, which compares to the Street's expectations for net income of
$0.39 per share on $112.6 million in revenue. For the full fiscal year, Martek now expects revenue of $440-445 million, above
analysts' average estimate of $439.1 million.

McDonald's (MCD : NYSE : US$66.70), Net Change: -1.15, % Change: -1.69%, Volume: 7,466,062
Supersized recall…The fast food giant has recalled 12 million “Shrek” themed drinking glasses, and warned customers to stop
using the glassware immediately, on concern that excess levels of the toxic metal cadmium have been leaching from the
glassware. The 16-oz glasses were sold for around $2 each, as part of a promotional campaign for the movie “Shrek Forever
After.” With the promotion starting in May, roughly seven million of the glasses have already been sold, and fortunately another
five million are still in stores. McDonald's worked with the U.S. Consumer Product Safety Commission. (CPSC) to recall the
glass wear, and although cadmium can cause bone weakening and kidney problems, a spokesperson from McDonald's
announced that the glassware is safe for consumer use but they were just being overly cautious. In May, the CPSC announced
the recall of roughly 19,000 “Best Friends” charm bracelet sets, sold by accessory chain Claries, after they were found to also
contain cadmium. Luckily for McDonald's, the CPSC reported the amount of cadmium found in the bracelets was substantially
more than what was found in the glassware. CPSC representative Scott Wolfson would not comment on the amount of cadmium
found, but did say that the amounts were “slightly above the protective level currently being developed by the agency.” The
CPSC hopes stronger controls will be used in the future.

Pfizer (PFE : NYSE : US$14.76), Net Change: -0.48, % Change: -3.13%, Volume: 77,375,433
Floaties. Pfizer voluntarily recalled two of its intravenous (IV) antibiotics and an anti-nausea medication on Thursday following
the discovery of “floating matter” at a manufacturing plant where they were made. The affected products were manufactured by
Claris Lifesciences, one of the largest generic pharmaceutical companies in India. The decision to recall the non-sterile drugs
was to prevent potentially fatal infections in weakened patients, something the FDA warned of earlier on in the week. Of the
roughly 1.7 million IV bags licensed for distribution, about 80% currently remains in Pfizer’s control; it advised its customers to
discontinue distribution of all remaining recalled products. The company has not yet received customer reports of quality

This publication is a general market commentary and does not constitute a research report. Any reference to a research report
or a recommendation is not intended to represent the whole report and is not itself a research report or recommendation. This
commentary is for informational purposes only and does not contain investment advice. This publication may be wholly or
partially based on industry rumour, gossip and innuendo and as such is not to be relied upon as investment advice.
 – Canadian and U.S. Comments for Monday June 7, 2010 9

problems, but it is “closely monitoring its patient database for any safety concerns.”

Wal-Mart (WMT : NYSE : US$50.40), Net Change: -1.32, % Change: -2.55%, Volume: 23,853,625
Bank of Wal, U of Mart. Shares of the retail giant fell during Friday’s session despite the company approving a new $15-billion
share repurchase program. The share repurchase plan replaces the previous $15-billion program, which had $4.7 billion of
remaining authorization. The company reported a record $18.5 billion in repurchased shares over the past three years.
Management went on to say, “In addition to share repurchase, Wal-Mart will pay shareholders more than $4.5 billion in
dividends during fiscal year 2011.” The company is paying an annual dividend of $1.21 per share this fiscal year, an 11%
increase from the $1.09 paid last year. In separate news, Wal-Mart Canada has confirmed that it has received final approval
from the Canadian federal government for a banking license that will allow the company to expand into financial-services
products like savings accounts and credit cards. This likely presents new competition to Canadian store brands like Canadian
Tire (CTC.A) and Loblaw’s (L). Wal-mart’s plans could likely be in more direct competition with Loblaw’s President Choice
banks than Canadian Tire’s customer loyalty-focused program.

COFFEE BEANS
– McDonald’s (MCD) is recalling 12 million drinking glasses it is selling to promote the new “Shrek” movie because painted
designs on the cheap collectibles contain cadmium. (The Wall Street Journal).
– Bankrupt Lehman Brothers Holdings hopes to raise as much as US$10 million by selling its art collection this fall. The failed
investment bank, which filed for bankruptcy in September 2008 at the start of a global meltdown of the financial system,
applied to a New York court on Friday for approval to sell its art through a public auction. (CBC News)
– The New York Yankees opening day payroll was over $206 million. The Toronto Blue Jays' payroll in 2010 is just under $63
million. (Sportsnet)

THE LAST DROP: It’s simple. You turn them off. They’ve got to sign on. They give you their credit card number. And
that’s it. And then you e-mail them and say you’re putting the price up or you’re taking it down or whatever.
– Rupert Murdoch’s strategy for getting online readers to pay for online content

* Canaccord Genuity and its affiliated companies may have a Corporate Finance or other relationship with the company and
may trade in any of the Designated Investments mentioned herein either for their own account or the accounts of their
customers, in good faith and in the normal course of market making. The authors have not received, and will not receive,
compensation that is directly based upon or linked to one or more specific Corporate Finance activities, or to coverage
contained in the Morning Coffee.

This publication is a general market commentary and does not constitute a research report. Any reference to a research report
or a recommendation is not intended to represent the whole report and is not itself a research report or recommendation. This
commentary is for informational purposes only and does not contain investment advice. This publication may be wholly or
partially based on industry rumour, gossip and innuendo and as such is not to be relied upon as investment advice.