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Tepid bargain hunting is nudging copper prices up, but investors remain wary about the economic outlook in Europe and the United States. Still, hopes are rising that central banks will intervene to jump start these ailing economies.
Copper is nudging back up slightly on tepid bargain hunting backed by a weaker dollar. However, investors remain largely cautious of the global economic outlook, especially as Europe’s financial situation remains shaky. At the same time, a drop in US home sales is increasing speculation that the Federal Reserve may step in to bolster the economy, which in turn could spur global growth.
Despite the stimulus measures introduced by finance ministers, concerns about Spain and Greece continue to plague the European Central Bank, and market eyes will be closely following the ECB and Fed meetings next week amid growing hopes for monetary policy intervention. In the meantime, a weaker greenback has encouraged some bargain-hunting buying from non-dollar investors.
Continued weakness in the US housing market is also a worrisome factor for copper traders. New home sales in June plunged 8.4 percent from a year ago to an annual rate of 350,000 units, the lowest rate in five months, according to the US Department of Commerce. The latest data is worrisome for analysts expecting a steady recovery as a key part of the US economy. The Commerce Department reported last week that June housing starts increased by the fastest pace in over three years, rising 6.9 percent on year to an annual rate of 760,000 units. Concerns about the housing sector in particular, however, are once again increasing expectations that the Fed may provide a third round of quantitative easing through large-scale bond purchasing.
Peru’s copper output for May rose over 8 percent from a year ago to 106,593 metric tons (MT), and for the first five months of the year output rose nearly 2.1 percent on year to 498,170 MT, the Energy and Mines Ministry said.
In Japan, however, rolled copper output dropped by 6.1 percent in June from a year ago, to 67,953 MT, as global demand for semiconductors and household appliances fell.
In late afternoon trade Thursday, COMEX copper for September delivery is trading up 0.6 percent at $3.39 a pound.
Company news
On the corporate front, Australia’s OZ Minerals (ASX:OZL) reported that its copper production in the second quarter fell 9 percent from the same period a year ago to 25,521 MT. Australia’s third-largest copper producer expects production for the full year to be at the lower end of its previously announced forecast of 100,000 MT to 110,000 MT.
As for Chile’s Antofagasta (LSE:ANTO), it appointed former Codelco CEO Diego Hernandez as its new leader. He will be taking over from Jean-Paul Luksic on August 1 as Luksic continues as chairman.
Meanwhile, Italy’s Tenova Mining & Minerals said its Tenova TAKRAF and Tenova Bateman Technologies units will be building a copper ore processing system for Antofagasta’s Minera Antucoya unit. The plant will be located in Chile’s Antofagasta region and will produce 80,000 tonnes of fine copper cathode a year over a 20-year life span.
Teck Resources (NYSE:TCK,TSX:TCK.B) reported sluggish second quarter results, in part due to lower copper prices. The Canadian mining group produced a record 90,000 tonnes of the red metal, but sales fell 2 percent to CA$731 million from the same period a year ago due to a fall in the price of copper.
Junior company news
Lundin Mining (TSX:LUN) reported that its second-quarter net earnings fell to $44.1 million from $60.1 million during the same period a year ago. While copper sales volume rose to 16,749 tonnes from 15,023 tonnes, unit cash costs for copper fell 24 percent on year to $1.61 a pound from $2.13 a pound.
Guerrero Exploration (TSXV:GEX) has placed a bid to acquire privately-held Pinette Copper’s issued and outstanding shares. Vancouver-based Pinette has two exploration properties in Botswana and has invested about $2.5 million in the sites to date. In a letter of intent, Guerrero said it will issue about 33,809,885 to the shareholders of Pinette. In addition, a nominee of Pinette will join the board of Guerrero, and the current private placement of up to $250,000 will be increased to up to $1,000,000 on the same terms. Current management will continue, although Guerrero will issue 4,080,000 common shares at a deemed price of $0.05 per share to settle any obligations it may have under existing consulting agreements.
Khalkos Exploration (TSXV:KAS) found copper minerals at its Nanuq property in Quebec. The mineralized zones are mostly exposed over only a few meters on strike, or discontinuously over a few tens of meters. Located 40 km south of Salluit in Nunavik, the Nanuq property is in the lake sediments, which were discovered by the Ministry of Natural Resources and Fauna of Quebec in a large sampling survey of close to 3,000 lakes covering the entire Ungava region.
Securities Disclosure: I, Shihoko Goto, hold no direct investment interest in any company mentioned in this article.