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Chinese Premier Wen Jiabao raised hopes of stimulus this week with his comment that China is still facing economic challenges. Low inflation in the US is stirring the same hope in American investors.
Renewed hopes for steady global economic recovery are pushing up demand for copper as speculation grows that China and the United States will provide more stimulus. The greenback’s gains, however, are putting a cap on the red metal’s near-term upward momentum.
After faltering earlier in the week, copper trended up following Chinese Premier Wen Jiabao’s comment that the country continues to face economic challenges. That could be a signal that Beijing plans to take stimulus measures, including further interest rate cuts.
“The downward pressure on the economy is still relatively large and the economic slowdown may continue for a while,” Wen said, even though according to The Wall Street Journal, China should be able to meet its economic and social growth targets for the year. As the world’s largest copper consumer, cornering over 40 percent of the market, an uptick in Chinese appetite for the red metal would have a significant impact on overall copper demand.
Meanwhile, continued low inflation in the United States is giving hope to some analysts that the US Federal Reserve will also take action to spur growth. Earlier in the week, the Department of Labor reported that consumer prices were unchanged in July as energy prices dropped to compensate for a rise in food costs. Market players will be closely monitoring the upcoming economic policy meeting in Jackson Hole, Wyoming, taking place from September 12 to 13 and featuring a number of high-profile speakers, including Federal Reserve Chairman Ben Bernanke.
In afternoon trading Thursday, COMEX copper for September delivery was up 0.6 percent at $3.37 a pound.
Yet in Chile, the nation’s Copper Commission, better known as Cochilco, lowered its copper price projection for the year to an average of $3.52 a pound, down from $3.85 per pound in its previous projection. For 2013, the price is expected fall further to average $3.48.
Company news
Rio Tinto’s (ASX:RIO,NYSE:RIO,LSE:RIO) Oyu Tolgoi site in Mongolia is near completion, according to Turquoise Hill Resources (NYSE:TRQ,TSX:TRQ) (formely Ivanhoe Mines), the Australian mining giant’s subsidiary. The copper and gold project is 94 percent complete and remains on track to begin commercial production by the first half of 2013, with the cost of the first phase of development estimated at $6.2 billion as projected. The company expects electrical power from China to be available for the start of initial production later this year, and notes that a separate power-purchase agreement must be signed between the Mongolian and Chinese authorities before Chinese electrical power can be imported into Mongolia.
Oz Minerals (ASX:OZL) reported that its revenue for the first six months of 2012 fell to AU$514.8 million compared to AU$632.7 million during the same period a year ago. The fall was largely a result of the decline in copper prices, the Australian mining group said.
Teck Resources (NYSE:TCK,TSX:TCK.A) acquired an additional 3 million shares in Strait Minerals (TSXV:SRD) for 10 cents per common share as part of a private placement by Strait. Teck now holds 6 million shares in Strait, or nearly 11 percent of the company’s outstanding common shares. Toronto-based Strait Minerals focuses on exploring for copper as well as gold, silver and molybdenum in Peru.
Junior company news
Toronto-based (TSX:KAT) Katanga Mining posted a loss in the second quarter due in part to lower copper prices and weaker sales. The company, which focuses on mining in the Congo and is over 75 percent owned by Glencore International (LSE:GLEN), reported a net loss of $900,000 compared to a net profit of $43.7 million during the same period a year ago. Revenue fell 38 percent on year to $102.5 million as copper cathode volume sales fell 23 percent on year to 11,488 metric tons and copper concentrate sales dropped 28 percent to 11,111 tons.
Coro Mining (TSX:COP) of Vancouver acquired a new copper and gold project in Chile. The El Inca property borders the Inca de Oro project that is held jointly by PanAust (ASX:PNA) and Codelco. The site is also 20 kilometers east of Coro Mining’s Berta project, where a resource definition drill program and sampling for metallurgical test work are currently underway.
Candente Copper (TSX:DNT) appointed Anthony Pitirri as its new chief financial officer to replace Aurora Davidson, who had been in the position for the past four years. Separately, Candente’s president, Sean Waller, will be serving as president elect of the Canadian Institute of Mining, Metallurgy and Petroleum next year and will serve as its head in 2014.
Securities Disclosure: I, Shihoko Goto, hold no direct investment interest in any company mentioned in this article.