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Copper gains on expectations that the Federal Reserve will keep rates low until 2014 in order to keep the US economy’s path to recovery on even keel.
By Shihoko Goto – Exclusive to Copper Investing News
Hopes that US economic recovery will be on firmer footing amid expectations of continued low interest rates is pushing up copper prices. Bets are on that industrial output will rise and in turn drive up demand for the red metal is pushing up shares of copper producers as well.
The red metal reached a four-month high after the Federal Reserve said Wednesday that it will likely keep rates below 1 percent until 2014 in an effort to keep the US economic engine humming along. At the press briefing following the release of the latest Federal Open Market Committee’s statement, Fed Chairman Ben Bernanke said that while there have been signs of improvement including a stronger jobs market, “there are mixed signals,” including disappointing retail sales growth as well as continued worries about the financial state of the Eurozone.
In mid-morning trade Thursday, the COMEX copper contract for March delivery traded up 1.7 percent at $3.89 a pound.
On the corporate front, Rio Tinto (LSE:RIO) took majority control of Ivanhoe Mines (NYSE:IVN) this week which will allow it to gain full control of Mongolia’s Oyu Tolgoi copper and gold mine.
“Rio Tinto’s move to a majority stake in Ivanhoe further demonstrates our commitment to the safe and successful development of the Oyu Tolgoi mine for the benefit of all stakeholders. We are approaching a very important phase in the development of the Oyu Tolgoi mine, with 70 percent of the construction now complete. The lead-up to first ore in the second half of 2012 will mark an important milestone in the path towards commercial production of copper concentrate, slated for the first half of 2013,” stated its copper chief executive Andrew Harding. By purchasing an additional 15.1 million common shares, Rio Tinto now has a 51 percent stake in Ivanhoe.
Meanwhile, London-based Anglo American (LSE:AAL) reported fourth quarter copper output rising 10 percent from a year ago to 170,000 tons, which is 22 percent higher than the third quarter. The increase was a result of increased production capacity as it opened its Los Bronces mine in Chile in November. The company does, however, continue to be in dispute with Chilean state-owned copper giant Codelco over its Chilean operations including the Los Bronces mine. The two companies are in a legal struggle regarding a long-standing contract which gives Codelco an option to buy a 49 percent stake in the Anglo American Sur unit.
As for Canada’s Lundin Mining (TSX:LUN), CEO Paul Conibear told Bloomberg that it is looking to make an acquisition this valued at as much as $500 million.
“We’re looking at a few things that are non-public…I’d like to do something significant this year,” Conibear said.
Also in Canada, Canyon Copper (TSXV:CNC,OTCBB:CNYC) acquired Metamin Enterprises’ Moonlight copper porphyry property in Plumas County, California by paying $15,000 and issuing 75,000 shares of Canyon Copper to Metamin as well as 75,000 shares to Lester Storey, the optionor of the deal. Canyon Copper will also reimburse Metamin up to $100,000 in expenses incurred on the Moonlight copper property.
As for Copper One (TSXV:CUO) , it signed acquired the Queylus copper gold property near the town of Chibougamau, Quebec from Lounor Exploration (TSXV:LO) by paying $23,750 in cash. It also issued to Lounor 475,000 common shares of Copper One and granted Lounor royalties ranging from 1 percent to 2 percent of the net smelter return in connection with ore extracted from certain claims comprising the property.
Turning to Kazakhstan, the country’s largest copper producer Kazakhmys (LSE:KAZ) said it met its full year copper cathode equivalent production target of 300,000 metric tons and expects to produce a similar amount in 2012 due to strong demand for the red metal.
“For the fourth consecutive year we have met all our major production targets,” stated CEO Oleg Novachuk, adding that “we anticipate maintaining similar levels of copper output in 2012 and our sales contracts for the coming year have all been completed, reflecting continued strong demand for copper.”
Securities Disclosure: I, Shihoko Goto, have no interests in the companies mentioned in this article.
