Copper Recovers from Seven-Month Low

- May 3rd, 2011

Copper recovered from its descent to seven-month lows, Tuesday, after better-than-expected US factory orders spread sentiment that the country is in position to extend its economic recovery.

By Leia Michele Toovey-Exclusive to Copper Investing News

Copper recovered from its descent to seven-month lows, Tuesday, after better-than-expected US factory orders spread sentiment that the country is in position to extend its economic recovery. Copper CMCU3 for three-month delivery on the London Metal Exchange (LME) ended at $9,350 a tonne. Earlier, the red metal fell  to a low of $9,194.75 a tonne and closed on Thursday, before the long weekend, at $9,320 a tonne.

Earlier in the day, the metal plunged in a knee-jerk reaction to reports of stalling manufacturing growth in both China and the United States. According to a survey out of China, manufacturing growth in April slowed, providing support to fears that the government’s monetary tightening is taking a bite out of the world’s largest copper consumer’s growth. For the second-largest copper consumer, the United States, data released on Monday showed that US manufacturing growth in April fell below expectations. While the release of positive data out of the US seemed to overshadow the lower-than-expected manufacturing report, uneasiness over China’s economy capped the red metal’s gains.

Also weighing on prices, copper’s inventories rose by 150 tonnes to 463,800 tonnes, their highest level in 11 months. Analysts will be waiting for non-farm payroll data from the US, to be released this Friday, for further direction on the state of the world’s largest economy.

Barclays Capital released a note this week on the copper market, to provide insight as to why the metal’s previously bullish rally seems to be encountering some resistance. “Refined copper demand and output through January of this year suggest the copper market recently experienced a widespread compression of the supply chain,” Barclays Capital said. Although total reported copper stocks jumped nearly 70,000 mt in January, there was also a seemingly incongruous refined copper deficit of 20,000 mt that month, according to data released this week by the International Copper Study Group. The data further showed that demand for refined copper shot up by 11 percent in the year through January, in contrast to the 3 percent year on year rise in refined copper production levels during the same period, Barclays said. “Such a picture ties in with our view that, despite softer market indicators in Q1 such as rising LME stocks, the key factor behind this was not significantly weaker demand levels but rather a large scale and widespread compression of the supply chain.”

Company news

Just a few short days after an acquisition Lundin Mining Corp. (TSX:LUN) by Equinox Minerals was prevented by Barrick Gold’s (NYSE:ABX) purchase of Equinox, Lundin is rumoured to have received another offer. Lundin shares spiked 11 percent Friday amid media reports that a Chinese consortium has been considering a takeover bid for the Toronto-based company. Lundin, a copper and zinc company may be the next takeover target. So far this year Lundin has attracted not only the attention of Equinox and a Chinese Consortium, but earlier in the year Lundin and Inmet Mining Corp. (TSX:IMN) agreed to call off their proposed merger. Lundin was also abandoned back in 2009 by HudBay Minerals Inc. (TSX:HBM).

B.C.-based junior Serengeti Resources (TSXV:SIR) has signed an exploration agreement with copper giant Freeport McMoran (NYSE:FCX) over their Choo and Tchentlo properties, in British Columbia. The agreement suggests Freeport sees potential at Choo and Tchentlo to find copper-gold porphyries that may lie hidden beneath thick glacial till covering much of the properties. To earn its 51-percent interest, over the next four years Freeport, through subsidiary Phelps Dodge, must spend US$5 million on exploration at Choo and Tchentlo, at which point either company can decide to enter into a 51-49 percent joint venture on the properties. If neither decides to go down the JV road, Freeport can up its 51-percent interest to 70 percent by putting together a feasibility study for an as of yet undiscovered project.

Nevada Copper Corp. (TSX:NCU) released further positive drill results from the Western Deposits at the 100% owned Pumpkin Hollow Property located in Nevada. In the North Deposit, a hole drilled to collect geotechnical data in the southwestern portion of this deposit encountered a very large mineralized zone. This drill hole, NC-GT-09, intersected 363 meters, 1,164 feet  true thickness, averaging 0.49% copper, a fact that according to Nevada Copper, shows that the southwestern boundary of the deposit remains open. “Drilling in the North Deposit continues to intersect significant zones of mineralization. NC10-GT09 intersected one of the largest mineralized zones to date. The hole proved very positive as not only was necessary geotechnical data collected and mineral continuity confirmed, the hole was successful in expanding mineralization along the southern boundary of the deposit. Follow up holes are planned and will be added to 2011 program”, commented Gregory French, Vice President, and Senior Project Manager of Nevada Copper.

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