Base Metals

Copper Gains on Positive Chinese and US Manufacturing Data

Base Metals

Copper made up some lost ground this week as US and Chinese economic fundamentals showed signs of recovery. There is some expectation that prices may stabilize at a higher level in the next year, but continued weakness in the Eurozone may lead to further volatility.

Copper gained ground this week after China’s manufacturing sector expanded for the first time in 13 months, and as investors gained hope that US lawmakers will be able to reach a deal to avoid the so-called “fiscal cliff” — a set of automatic tax hikes and spending cuts set to come into effect in January.

The HSBC Flash China Purchasing Managers’ Index rose to its highest level in 13 months, HSBC and Markit Economics said in a press release, confirming that the “economic recovery continues to gain momentum towards the year end.” Markit also said data for the US shows the strongest improvement in manufacturing conditions in five months. Meanwhile, the Eurozone economy “continued to deteriorate at an alarming pace in November, and is entrenched in the steepest downturn since mid-2009,” Chris Williamson, Markit’s chief economist, said in a statement.

Nic Brown, head of commodities research at Natixis, said the Chinese data “suggests that, at last, things are starting to get better,” Reuters reported. He said Natixis’ forecast is for average copper prices of about $8,500 per tonne in 2013, helped in part by positive signs in the US housing market.

Thomas Keller, CEO of Chile’s Codelco, said last week that beyond price volatility, “the industry’s fundamentals are still quite solid” due to the “relatively uncertain outlook” for the global economy; as a result, price ranges should remain at what they are today, even if there is a global surplus of copper, Business News Americas reported. In addition, the world’s largest copper producer is planning to cut its surcharge on sales to Japan and Korea in 2013 by 8.6 percent, according to Bloomberg.

On the London Metal Exchange, copper for three-month delivery closed at $7,715 per tonne in mid-afternoon trade compared to $7,692 the day before. Due to the Thanksgiving holiday in the US, no settlements took place on Thursday. But, amid thin trading, COMEX copper was up 0.1 percent at $3.4995 per pound in midday trading in New York.

Company news

Xstrata shareholders (LSE:XTA) approved the proposed merger with Glencore International (LSE:GLEN), but vetoed a plan to give top executives $223 million, prompting Xstrata chairman John Bond to resign. Glencore shareholders also approved the deal. Meanwhile, EU regulators have approved the takeover, Reuters reported.

In other Xstrata news, the company said it will support Lonmin’s (LSE:LMI) plan to issue shares to raise $817 million, but that it wants to see changes in the company’s board and management, Fox Business reported. Xstrata owns nearly 25 percent of Lonmin.

BHP Billiton (ASX:BHP,NYSE:BHP,LSE:BLT) is looking for a new CEO both within, and outside, of the mining industry, The Australian reported.

Junior company news

Discovery Metals (ASX:DML) said at its annual general meeting that it expects strong production growth in 2013. It continues to reject Cathay Fortune Investment’s $1.70-per-share offer for the company as “inadequate.” “Now is not the time for shareholders to hand over potentially significant future returns to an opportunistic bidder,” Brad Sampson, managing director, said.

Khalkos Exploration (TSXV:KASsigned a deal that gives it the option to acquire the McNickel nickel-copper-cobalt deposit in Lac Saint-Jean, Quebec. Khalkos must issue 2.6 million shares to the seller over a period of six years. Also, the seller will retain a net smelter return of 2 percent, half of which can be bought for $1 million.

Orsu Metals (TSX:OSU,LSE:OSU) signed a non-binding term sheet to borrow up to $25 million from RK Mine Finance to help fund the construction of the Karchiga copper project in Kazakhstan.

Equinox Exploration (TSXV:EQXcontinues to locate new copper manto mineralization at its Aura copper project in Chile.

Southern Arc Minerals (TSXV:SAreceived a forestry permit for its West Lombok copper-goldsilver project in Indonesia. The permit allows it to resume exploration activities.

Lumina Copper (TSXV:LCC) “significantly” increased its mineral resource estimate for its Argentina-based Taca Taca copper-gold-molybdenum project.

Canstar Resources (TSXV:ROXstarted drilling at the Mary March property in Buchans, Newfoundland and Labrador. The project is a 50/50 joint venture with Xstrata Zinc Canada.

Guerrero Exploration (TSXV:GEX) plans to start drilling at its Cerro Azul copper project in Guerrero, Mexico in early 2013.

Orestone Mining (TSXV:ORSstarted the drilling program at the copper-gold porphyry Captain project in British Columbia.

 

Securities Disclosure: I, Ragnhild Kjetland, hold no investment interest in any company mentioned in this article. 

MARKETS

Markets
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COMMODITIES

Commodities
Gold1914.57-0.23
Silver23.49+0.02
Copper4.12+0.03
Palladium1713.170.00
Platinum1087.260.00
Oil75.74-0.14
Heating Oil2.900.00
Natural Gas2.43-0.03

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