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Copper halted a two-day rally on Thursday as a fall in China’s export orders and concerns over the health of the global economy weighed down demand prospects.
By Leia Toovey- Exclusive to Copper Investing News
The slide in prices was modest, despite data suggesting demand prospects will remain weak as supply-threats in Indonesia limited the red metal’s downside. Union workers at Freeport-McMoRan Copper & Gold’s (NYSE:FCX) Grasberg mine in Indonesia may strike as wage talks appear stalled, according to reports. Freeport McMoRan, the world’s largest publicly traded copper mining company, has been negotiating contracts with the union since July, after workers held a strike at the mine. The union, whose current contracts expire in October, is requesting higher-pay, more in line with what copper miners are earning in other operations around the world.
Copper has retreated 11 percent since hitting a record high in February, as concerns over the health of the global economy, and political instability has rattled the markets “Fundamentally, upside for metals remains capped,” Walter de Wet, an analyst at Standard Bank Plc., said in a research report yesterday. “As a result, a rally in base metals is more likely to be on an increase in speculative activity rather than more sustainable real demand.”
Adding to the recent slew of pessimistic numbers, China recently released their purchasing manager’s index. The index stayed near the borderline between expansion and contraction in August, rising to 50.9 from a 29-month low of 50.7 in July, with new export orders falling to 48.3 from 50.4 of the previous month, the China Federation of Logistics and Purchasing said in a statement. In an interview with Bloomberg Television, Shen Jianguang, chief economist for greater China at Mizhuho Securities Asia Ltd., commented that the number shows that China’s economy is slowing down, however, inflation pressure is still high, leaving Chinese officials with a dilemma of how to deal with inflation while at the same time balancing economic growth. Inflation reached a three-year high of 6.5 percent in July. China Premier Wen Jiabao signaled on Thursday that controlling inflation will remain a top priority in coming months even as the world economy wobbles. Jianguang added that August’s purchasing managers index is usually higher than July, by a few percentage points, so the 50.9 figure is very low- and a sign the country’s economy is decelerating.
Company news
Xstrata Copper (LON:XTA), Goldcorp Inc. (NYSE:GG) and Yamana Gold Inc. (NYSE:AUY) havereached a definitive agreement providing Minera Alumbrera the exclusive option to acquire Yamana’s 100 percent interest in the Agua Rica project. Agua Rica is a feasibility stage project in the province of Catamarca, Argentina, located approximately 35 kilometers from the currently operating Alumbrera mine. Minera Alumbrera is a joint venture operation between Xstrata Copper (50 percent), Goldcorp (37.5 percent) and Yamana (12.5 percent). Under the terms of the agreement, Minera Alumbrera holds an exclusive four-year option to acquire Yamana’s interest in the Agua Rica project for cumulative payments made by Goldcorp and Xstrata Copper of $110 million. During the option period Minera Alumbrera will manage the Agua Rica project and fund a feasibility study and all development costs. An independent feasibility study has now commenced under the direction of Xstrata Copper. Subject to a positive feasibility study, the option being exercised, and all necessary corporate and government approvals, a construction decision is expected to follow with construction potentially starting in 2013.
Taseko Mines’ (TSX:TKO) plan to construct a $1-billion dollar gold and copper mine in central British Columbia is being revived, after a new proposal for the project was formally accepted by the Canadian Environmental Assessment Agency. This month, Taseko submitted a revised proposal to the federal government for the new Prosperity Project near Williams Lake, B.C., after a previous submission was rejected on account that the project would have a significant adverse effect on fish and fish habitat, on grizzly bears, on navigation, on the use of lands and resources for traditional purposes by First Nations and on established Tsilhqot’in Aboriginal rights. The original plan would have resulted in the destruction of Fish Lake, Little Fish Lake and portions of Fish Creek for use as tailings ponds for toxic mine waste. The new proposal reduces the environmental impacts, including the preservation of Fish Lake and its aquatics.
Securities Disclosure: I, Leia Toovey, have equity interests in Freeport McMoRan Copper and Gold Inc.