Copper Breaks Recent Gains, Still Drawing Optimism

Copper fell today after making gains earlier in the week, but overall sentiment toward the red metal is still positive. As always, copper demand has been closely tied to perceptions of fluctuating demand from China.

Copper futures for three-month delivery fell 0.8 percent to trade at $6,885.25 per tonne on the London Metal Exchange (LME) today, while copper for delivery in July fell 1 percent, to $3.1425 per pound, on the New York COMEX, according to Bloomberg. The metal had hit its highest price in 11 weeks on the LME the day before.

Investing.com identifies lukewarm data regarding US GDP as the driving factor for today’s losses, and indicates that copper prices have been bolstered by the belief that the US economy should pick up over the summer. Mark Newson-Smith, head of metal sales at London’s Xconnect Trading, said that “[s]entiment is still underpinned by a strong cash copper price, but after recent run-ups, open interest appears to have been reduced,” as per Bloomberg.

What goes up must come down

Earlier this year, Thomson Reuters released the GFMS Copper Survey for 2014. In it, the firm predicts that the copper surplus will stay steady on the basis that producers will likely continue to bring the metal to market to play out investments made a few years earlier. Similarly, Bloomberg cites a May 27 report from JPMorgan Chase & Co. (NYSE:JPM) that predicts that prices will descend due to large Chinese stockpiles.

However, other factors surfaced last week to suggest that the copper glut may not be as big as initially perceived. LME copper stocks are dropping, and a report from Wednesday shows that registered inventories lost a further 6,725 tonnes of the red metal, bringing total reserves down to 169,825 tonnes. According to Reuters, copper levels at the metal exchange are now at their lowest in almost six years.

Greg Barnes, a TD Securities analyst, is positive on copper, listing factors such as healthy demand from China, uncertainty over Indonesian concentrate exports and lower LME copper levels as contributors to a possible deficit. As he told the Financial Post, “the much discussed 300,000-tonne 2014 surplus may have just disappeared.” Indeed, China is still sucking a large amount of the red metal off the market — Reuters states that the country’s net draw has gone up by 560,000 tonnes so far in 2014.

Barnes also said that China is showing indications of shrinking copper warehouse stocks, despite recent purchases, while CIBC World Markets analyst Tom Meyer told the Post, “[l]ike natural gas advancing from its April 2012 lows, and the surprisingly sharp and unexpected move higher in nickel and molybdenum this year, we wonder what could be in store for copper.”

Certainly, the environment for copper is encouraging at the moment, and wise investors will be watching present indicators of global supply rather than holding to earlier surplus predictions.

Company news

Indico Resources (TSXV:IDI) today reported the completion of the Phase 3 drill program at its Ocaña project in Peru. Results indicate a horizontal layer of near-surface, supergene mineralization up to 90 meters thick. Assay results have so far indicated good potential for increasing the grade and tonnage of mineralization at the project.

Also today, Vancouver’s Copper Fox Metals (TSXV:CUU) closed a previously announced non-brokered private placement in Carmax Mining (TSXV:CXM) through its subsidiary Desert Fox Copper. Copper Fox will work with Carmax to explore and develop the copper-molybdenum–gold–silver Eaglehead property in Northern British Columbia. Copper Fox CEO Elmer B. Stewart said, “[t]his investment follows our strategy to locate, explore and add value through the exploration and development of large copper deposits located in North America.”

Australia-based Tiger Resources (ASX:TGS) announced that it has commenced production at its Kipoi copper project in the Democratic Republic of the Congo. According to Mineweb, Tiger is moving forward with production remarkably quickly, as construction commenced for the copper cathode plant in January of 2013.

Kincora Copper (TSXV:KCC) began drilling activities following initial exploration at its Bronze Fox project. Kincora is also starting trenching for its Happy Geo prospect after receiving positive results from geophysical analysis and sample assays. Kincora CEO Sam Spring commented, “the gold potential across the project is being pursued, noting that approximately a third of all holes previously drilled at Bronze Fox have returned intervals of at least 1g/t gold.”

Lastly, Anfield Resources (TSXV:ARY,OTCQB:ANLDF) extended its agreement with Blue Zen Memorial Parks (CSE:BZM) regarding the Binghampton/Copper Queen copper project, located in Arizona. The agreement now has a deadline of mid-August 2014 to allow Blue Zen to perform further development work prior to drilling. Anfield Resources CEO Corey Dias said that he looks forward to working with Blue Zen on defining an NI 43-101 resource estimate for the project.

Securities Disclosure: I, Teresa Matich, hold no investment interest in any companies mentioned. 

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