Copper reached its lowest level in three weeks as Greece failed to secure its second financial aid package.
By Shihoko Goto — Exclusive to Copper Investing News
A delay in providing a second bailout package to Greece is pushing copper prices to the lowest level in over three weeks. Also weighing down the red metal’s outlook is the looming threat of credit rating agency Moody’s downgrading 17 global and 114 European financial institutions.
Eurozone finance ministers failed to reach an agreement on how to provide Greece with further financial assistance during a three-hour teleconference late Wednesday, and a decision is unlikely to be reached until February 20 at the earliest.
Confidence in Europe’s financial stability has been further shaken as Moody’s stated Thursday that it may downgrade a slew of financial groups amid growing concerns that Greece’s conundrum will create a spillover effect across the continent and beyond.
In morning trade Thursday, COMEX copper for April delivery is 0.7 percent weaker at $3.78 a pound.
Looking ahead, though, Deutsche Bank is more bullish about 2012, “given the prospect for more ‘normal’ economic conditions.” The German group projects that the price of copper will rise 17 percent per metric ton to $8,600, as it sees “an element of re-stocking [that] could surface in both China and Europe within the next several months.”
Still, global copper production exceeded demand by 69,100 metric tons last year, according to the World Bureau of Metal Statistics. That compares to a shortage of 175,000 metric tons in 2010.
On the corporate front, industry titans BHP Billiton (ASX:BHP) and Rio Tinto (ASX:RIO) announced earlier this week that they will expand Chile’s Escondida mine in order to increase copper output, investing a combined $4.5 billion in the world’s biggest mine.
Still, the Escondida mine reported Wednesday that output dropped to 819,261 tonnes, nearly 25 percent in 2011 from the previous year, and its lowest level since 2002.
“The lower production is explained by lower ore grades and the illegal workers’ stoppage between July 21 and August 5,” the miner said in a statement. The mine’s net profit dropped 36 percent on year to $2.78 billion, while revenue fell nearly 20 percent to $7.42 billion.
Meanwhile, Mark Hoffman, the Vice President of the National Society of Mining, Petroleum and Energy, said in an interview with Bloomberg that Peru’s largest copper producers, including Freeport-McMoRan Copper & Gold (NYSE:FCX), Southern Copper (NYSE:SCCO), and Xstrata (LSE:XTA), face the risk of blackouts next year due to power line delays in the Southern Andes.
Nevertheless, BHP is beefing up its copper production in the US, as it reported earlier this week that it will restart mining at Pinto Valley in Arizona. The mine will have an annual production capacity of about 60,000 tons of copper in concentrate and should resume by the end of this year.
Nevsun Resources (AMEX:NSU) reported that it drilled 45 meters of 3.9 percent copper adjacent to its Bisha mine in Eritrea. A new resource and reserve statement will be published in the latter half of the second quarter or early in the third quarter, integrating 29,000 meters of 2011 expansion drilling, including the hanging wall copper zone.
Junior company news
Hana Mining (TSXV:HMG), it reported that infill drilling along the south limb of the Banana Zone in Botswana encountered more consistent high-grade copper as well as silver mineralization. CEO Marek Kreczmer stated that the latest results “demonstrate consistent grades and widths of copper-silver mineralization along strike and down dip. Overall, we have been pleased with the 2011 drilling program which has identified a number of prospective areas where we can commence mining.”
International Enexco (TSXV:IEC) President and CEO Arnold Armstrong stated that drilling results from its Contact copper project in Nevada “are most encouraging,” adding that “the program appears to be adding to the minable portion of the Contact deposit in the area east of our existing reserves, and confirms that the land acquisition we made last year was the right move for the project.”
Himalayan Capital (TSXV:HIM) reported the start of its first phase drill program at the La Higuera copper-gold project in Chile. The drill program includes 2,000 meters of diamond drilling and 2,000 meters of reverse circulation drilling planned over eight holes from five platforms.
Yellowhead Mining Inc. (TSXV:YMI) updated its NI 43-101 resource estimate for the company’s Harper Creek project in British Columbia. The estimate increases the measured and indicated reserves by 53 percent, or 815 million tonnes at a grading of 0.29 percent, containing 5.26 billion pounds of copper, an increase of 1.67 billion pounds of copper over the prior Preliminary Economic Assessment estimate. Yellowhead’s President and CEO, Ian Smith, was pleased to comment that “This resource update confirms our belief that the Harper Creek deposit holds significant potential for expansion.”
Securities Disclosure: I, Shihoko Goto, hold no direct investment interest in any company mentioned in this article.