Copper Rallies on Surprise US Federal Reserve QE Decision

Base Metals Investing

Copper climbed to a four-week high Thursday following the US Federal Reserve’s surprise decision not to taper its economic stimulus program.

Copper climbed to a four-week high Thursday following the US Federal Reserve’s “surprise” decision not to taper its economic stimulus program. Financial market analysts had expected the Fed to cut its $85-billion monthly asset purchases by about $10 billion.

But the Fed stated it wants to wait for conclusive evidence that the US economy is in fact witnessing sustained growth before it reigns in its monthly purchases of Treasury and mortgage debt.

With interest rates expected to remain low, investor appetite for commodities like industrial-based copper got a second wind. “Investors also bought the industrial metal used in plumbing and wiring in expectation that stimulus cash will continue to support the US housing sector’s tentative recovery,” reported Bloomberg.

Copper futures for December delivery rose 2.1% Thursday to close at $3.347 per pound on the COMEX in New York.

Copper was also supported by declining stockpiles, said Tetsu Emori, the chief fund manager at Astmax Asset Management Inc.

However, INTL FCStone analyst Edward Meir warns not to forget about economic woes in China, which represents 40 percent of global copper demand. The Wall Street Journal reports Meir noting: “there are serious questions about high debt levels and looming policy reforms.”

Caution in the copper market also centers on new supply set to come online over the next few years.

“I would say that the copper market is well balanced until the year-end and there are significant projects that should keep the market well supplied in the future,” said analyst Andrey Kryuchenkov at VTB Capital in London.

Peru, the world’s third biggest copper exporter, is expected “to more than double its copper output by the end of 2016 as several large mining projects start production,” reported Reuters. The near-term production projects have a combined estimated worth of $57 billion and are expected to bring total annual production in the South American country to 2.8 million tons of copper, up from 1.3 million tons produced in 2012.

Company news

Inova Resources Limited (ASX:IVA,TSX:IVA) announced results from extension drilling at its Kulthor deposit as well as initial results from two metallurgical testwork holes at the SWAN deposit, both in Northwestern Queensland. The results include significant downhole intercepts (at equivalent copper cut-off of 1.00%) from hole SUNQ0215 showing 2.3 m @1.67% copper and 2.15 gt gold (2.96% copper equivalent) from 169.5 m; 7.0 m @1.37% copper and 1.78 gt gold (2.44% copper equivalent) from 306 m; and 9.0 m @2.03 % copper and 1.21 gt gold (2.75% copper equivalent) from 320 m. The results demonstrate that there is potential for an additional, offset block of mineralization occurring approximately 150 meters above the existing mining operation.

Significant results from two shallow drill holes in the SWAN deposit include (at cut-off grade of 0.5% copper equivalent) 95 m @1.05% copper and 0.75 g/t gold from 10 m in hole MER1228; and 83 m @1.19% copper and 0.75 g/t gold from 82 m in hole MER1227. Based on these results, the company plans to expedite further work to gather data for a scoping study for either a standalone or regional heap leach copper project.

NGEx Resources Inc. (TSX:NGQ) reported an updated mineral resource estimate on its Los Helados copper-gold porphyry deposit in Chile. Drilling completed during 2013 has resulted in a significant increase to the resource base at Los Helados. At a base case 0.30% copper equivalent cutoff, the updated resource estimate includes 1,730 million tonnes at a grade of 0.40% copper and 0.16 g/t gold for a copper equivalent grade of 0.52% in the indicated resource category; and 681 million tonnes at a grade of 0.32% copper and 0.11 g/t gold for a copper equivalent grade of 0.41%  in the inferred resource category.

NGEx also expects to have an updated resource estimate for the nearby Josemaria deposit completed by the end of September.

Columbus Copper Corp. (TSXV:CCU) announced the results from its 2013 diamond drill program at its Karapinar copper-molybdenum project in Turkey. Results included 31.2 meters of 0.45% copper and 0.08 g/t gold from 269 meters depth, 9 meters of 0.48% copper and 0.06 g/t gold from 312.5 meters depth, and 68 meters of 0.36% copper and 0.08 g/t gold from 379 meters depth in drill hole KDH028.

First Quantum Minerals Ltd. (TSX:FM,LSE:FQM), which has been granted an option to earn an initial 51 percent interest in the Karapinar property, is funding the work program. The next phase of drilling will be focus on the area North and Northwest following the continuation of the recently identified primary copper mineralization. A deep geophysical survey is also planned to outline deep primary copper targets.

Also this week, First Quantum signed a partnership agreement with Mirasol Resources Ltd (TSXV:MRZ) for the exploration and development of Mirasol’s Rubi Copper Property in northern Chile. The project is centered within a regional cluster of large, gold-bearing porphyry copper deposits and exploration to date has identified a number of priority drill targets. Under the agreement, First Quantum has the option to earn a 55 percent interest in the property upon completion of a US$6.5 million investment in exploration over the next four years, and a total of US $1.1 million in staged cash payments.

Western Copper and Gold Corporation (TSX:WRN,NYSE:WRN) provided a progress update on its Casino Project in the Yukon Territory, Canada. The company has made significant headway in permitting, engineering and obtaining a power supply for its project, one of the world’s largest open-pit gold, copper, silver and molybdenum deposits. Western Copper and Gold expects its Preparation of the Project Proposal, for review by the Yukon Environmental and Socioeconomic board, to be ready for submission later this year.


Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

Related reading: 

Fed Won’t Taper, Gold Up Over $30

The Conversation (0)