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Resource prices declined in the wake of weaker-than-expected Chinese economic growth, while gold found some stability later in the week after its biggest sell-off in 30 years.
Resource prices are ending the week sharply lower, with gold experiencing its biggest sell-off since 1983 over last Friday and Monday’s trading sessions, according to Bloomberg. However, gold prices found some support on Wednesday thanks to buyers of physical gold taking advantage of the price drop.
The decline came amid reports that Cyprus would sell its gold reserves to help fund its bailout from the European Union and International Monetary Fund. As well, last week, Goldman Sachs (NYSE:GS) cut its price forecast for gold and recommended that investors short the metal. Also working against gold were fears that the Federal Reserve will slow its $85-billion-a-month bond-buying program, known as quantitative easing (QE). Those concerns were stoked by last week’s release of the latest Federal Open Market Committee meeting minutes, which show that some members favor cutting or halting QE in the near term.
More broadly, commodities were also negatively affected by disappointing growth figures out of China, the world’s largest commodity consumer: on April 14, The Wall Street Journal reported that China’s economy expanded at an annualized rate of 7.7 percent in the first quarter, down from 7.9 percent in the fourth quarter and below economists’ expectations of 8-percent growth.
Meanwhile, slightly weaker-than-expected jobs numbers in the US reminded investors that the country’s recovery remains fragile: figures from the Department of Labor, released Thursday, show that first-time jobless benefit claims rose by 4,000 last week, to a total of 352,000, UPI reported. That’s above the 350,000 that economists surveyed by Reuters expected. The four-week rolling average, viewed as a more reliable indicator, rose by 2,750, to 361,250.
Importantly for commodities, the US housing market remains a bright spot. On April 16, CNN reported that housing starts rose 7 percent in March, to an annualized rate of 1.04 million. That figure is also up 47 percent from March 2012.
In morning trade Friday, Brent crude is up 0.63 percent, at $99.77 a barrel, while copper is down 2.08 percent, at $3.14 a pound. Gold is up 0.75 percent, at $1,402.90 an ounce.
Gold
AuRico Gold (NYSE:AUQ,TSX:AUQ) announced its preliminary first-quarter production results this week. The company is focused on its Young-Davidson mine in Ontario, Canada and its El Chanate mine in Sonora, Mexico. During the quarter, the two projects produced a total of 46,170 ounces of gold at a cash cost of $633 per ounce. The results are in line with the company’s target. For the full year, AuRico expects to produce 190,000 to 220,000 ounces at a cash cost of $565 to $645 an ounce.
Crocodile Gold (TSX:CRK,OTCQX:CROCF) also reported its first-quarter production results this week. The company, which has three operating mines in Australia, produced 48,539 ounces of gold during the quarter. The result is in line with Crocodile’s 2013 production goal. The company also said that it unwound its hedged gold position and used the proceeds to pay down its outstanding credit facility from AU$69.2 million to $11.3 million.
Barrick Gold (NYSE:ABX,TSX:ABX) saw its shares downgraded by JPMorgan Chase (NYSE:JPM) on Monday, the Financial Post reported. Morgan analyst John Bridges cut his rating on Barrick stock to neutral from overweight and lowered his 12-month price target to $34 from $47. The downgrade came after a Chilean court ordered the company to halt work at its Pascua Lama project last week due to environmental concerns. Barrick plans to bring the mine, which is located in the Andes Mountains and straddles the border between Chile and Argentina, into production in the second half of 2014.
Oil and gas
Suncor Energy (NYSE:SU,TSX:SU) announced that it is selling its conventional natural gas operations in Western Canada to a partnership between UK-based Centrica (LSE:CNA) and state-owned Qatar Petroleum International for C$1 billion. Suncor estimates that these properties will produce 42,000 barrels of oil equivalent per day (boe/d), 90 percent of which is gas, in 2013. The sale does not include Suncor’s shale gas operations in British Columbia. Regulators must approve the deal, but Suncor expects it to close in the third quarter of 2013.
Woodside Petroleum (ASX:WPL), Australia’s second-largest oil producer, reported that its sales rose 21 percent in the first quarter, to US$1.45 billion from $1.21 billion a year ago. That’s ahead of investment bank UBS’ (NYSE:UBS) forecast of $1.43 billion, Bloomberg reported. Production jumped 55 percent, to 21.9 million boe, thanks to continued strong performances at its Pluto liquefied natural gas facility and the North West Shelf LNG project.
Anadarko Petroleum (NYSE:APC) discovered a new gas field off the coast of Mozambique. The company’s Orca-1 exploration well, which it drilled to a depth of about 16,391 feet in about 3,481 feet of water, encountered approximately 190 net feet of natural gas pay. The accumulation is fully contained in the Offshore Area 1 of Mozambique’s Rovuma Basin. Anadarko operates Offshore Area 1 and holds a 36.5-percent working interest. The company is now designing an initial two-well appraisal program to determine the extent of the Orca field.
Copper
Copper Mountain Mining (TSX:CUM) reported first-quarter production results from its Copper Mountain mine in British Columbia on Tuesday. During the quarter, the company shipped 29,400 wet metric tons of concentrate, containing about 15 million pounds of copper, 5,900 ounces of gold and 69,000 ounces of silver, for estimated gross revenue of $62.3 million. The mine produced 14.2 million pounds of copper, 5,300 ounces of gold and 64,200 ounces of silver during the quarter, which the company said is below average guidance for 2013. However, it did say that mill throughput improvements in March “will enhance the balance of 2013.”
Ivanplats (TSX:IVP) said that its Kamoa copper discovery won’t be negatively affected by the Democratic Republic of the Congo’s recently announced ban on exports of copper and cobalt concentrates. The policy aims to force miners to process minerals inside the country instead of exporting raw ores. In its press release, Ivanplats said that Kamoa is still three years away from initial production and includes what is expected to become the country’s first smelter. Ivanplats shares fell 18 percent on April 17 in response to the ban, the Financial Post reported.
Securities Disclosure: I, Chad Fraser, hold no positions in any of the companies mentioned in this article.
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