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Speculation that the US Federal Reserve will loosen its monetary policy helped copper rally to a new high on Monday. Shanghai copper touched a 27-month peak, with copper for January delivery reaching its highest intraday level since July 2008.
By Leia Michele Toovey- Exclusive toCopper Investing News
Fed policy makers will meet on Nov. 2-3; if they issue another round of quantitative easing, we could expect another rally for raw materials. Monetary easing would accomplish this feat by both boosting the U.S. economy, and providing more liquidity to the markets.
Adding further impetus to copper’s rally was a declining greenback. While the Fed announcement could prove positive for copper in the long run; in the short-term uncertainty over the U.S. economy is proving negative to the greenback’s value. Last week, the U.S. dollar posted a fifth weekly retreat as measured by the U.S. Dollar Index, a six-currency gauge of the greenback’s strength. A weaker dollar stokes demand for commodities as an alternative investment and makes raw materials priced in the currency cheaper in terms of other monies.
Tuesday’s decline was a result of China’s unexpected announcement that they would hike interest rates, and the Finance Minister reiterated concern on the local currency’s strength. China’s rate hike added to fears that a global slowdown is on the horizon, while at the same time it caused the greenback to gain back some lost footing. I spoke with Wayne Atwell, Managing Director at Casimir Capital, regarding the China side of the copper demand equation. Mr. Atwell is optimistic when it comes to the copper market, and claims that the news out of China’s economy is just influencing sentiment, not fundamentals. He was quick to mention the tight copper stockpiles, which will be roughly balance demand through this year, however, next year a deficit is anticipated.
LME copper stockpiles slipped 0.1 percent to 369,950 tonnes, the lowest level since Oct. 26, 2009. Canceled warrants, eased 2.2 percent to 22,200 tonnes.
Company News
Xstrata (NYSE:XTL) has increased its copper output by 10 percent, year on year, in the third quarter of 2010. Total mined copper output increased to 233,647 tonnes in the three months ended September 31, 2010, compared with the 212,173 tonnes produced in the third quarter of 2009. Output was, however, up 11 percent on that produced in the second quarter of the year.
Nevada Copper has received approval for a Special Use Permit to conduct Advanced Exploration on its Pumpkin Hollow Project. Advanced Exploration entails construction of an 18-foot by 18-foot decline tunnel to access high grade underground deposits in the East and E-2 zones of the property. Nevada Copper has worked over the last few years with both Lyon County and the City of Yerington to inform them of the company’s activities at the Pumpkin Hollow Project. Both the Planning Commission and the Board unanimously approved the applications. The City previously entered into a water service agreement to provide water to the project. Advanced Exploration will allow Nevada Copper to conduct more cost effective drilling from underground drill stations and to better understand the geological, geotechnical, geochemical, hydrological and metallurgical characteristics of the resource zones. It will also help to accelerate development of mining once project construction begins. Presently, the Nevada Division of Environmental Protection is in the final stages of technical review for the decline. Nevada Copper expects to receive those permits by the first quarter of 2011.
Castle Resources Inc. (TSXV:CRI) has acquired a 100 percent interest in the past producing Granduc Copper Mine located near Stewart, B.C. from Bell Copper Corporation The acquisition supersedes the previously announced option agreement between the company and Bell Copper. Pursuant to the acquisition, Castle paid to Bell Copper consideration consisting of $2 million and issued 2,750,000 Castle common shares. Together with consideration previously paid under the option agreement, Castle will have paid an aggregate of $4,500,000 and issued an aggregate of 3,000,000 Castle common shares to Bell Copper in connection with the Granduc Copper Mine. “We are very excited to close the Granduc transaction with Bell Copper,” said Mr. Mike Sylvestre, President & COO of Castle Resources. “The Granduc has the potential to become a significant Canadian copper, gold, silver mining operation. Our objective is to commission a preliminary NI 43-101 resource estimate based on the results of this year’s program which we hope will confirm the presence of a large and potentially mineable copper and precious metal resource at the Granduc.”
With help from Assistant Editor Vivien Diniz