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On Tuesday, copper fell for the first time in four sessions as the US dollar gained strength, and concerns resurrected over the economic recovery and stability in the euro-zone.
By Leia Michele Toovey-Exclusive to Copper Investing News
European shares slipped and the euro fell broadly after a recent stress test brought to light the fact that Deutsche Bank AG and other German lenders must raise about US$134 billion to reach an estimated 10 percent Tier 1 capital ratio, a key measure of financial strength. Adding to concerns over the Euro-zone’s recovery, reports surfaced that Europe’s largest economy’s recovery is losing momentum. German factory orders, adjusted for seasonal swings and inflation, declined 2.2 percent in July from June, their biggest drop since February 2009.
As concerns over Germany’s recovery spread, the greenback witnessed a rally. The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, added as much as 0.8 percent, the most since Aug. 20. Gains by the dollar make raw materials priced in the currency more expensive in terms of other monies. Benchmark copper for three-month delivery on the London Metal Exchange closed down from Monday’s close at $7,705 per tonne to $7,629 per tonne, after bouncing back from a session low of $7,496.25 per tonne. On Friday, copper had hit a four-month high of $7,750, as investors bet on improved demand following better-than-forecast data in the United States, the world’s largest economy.
Looking forward, analysts and traders foresee resilient metals prices. US demand could be supported by President Barack Obama’s promise to invest $50 billion in road, rail,and runway infrastructure as a means to boost employment. In addition, Obama plans to help businesses update their infrastructure and equipment by allowing them to write off 100 percent of their spending into plant and equipment upgrades. Another supporting factor is that the quantity of metals demanded from China may increase as the nation renews its push for energy efficiency.
Company News
Stillwater Mining Co. (NYSE:SWC) is buying Marathon PGM Corp. (TSX:MAR) for $118 million to gain control of the Canadian company’s Ontario precious metals and copper reserves, the companies announced Tuesday. Columbus-based Stillwater, with two mines in southern Montana’s Beartooth Mountains, is the only U.S. producer of platinum group metals. Marathon is headquartered in Toronto. It has been developing the Marathon PGM-Cu project near the town of Marathon, Ontario, for the last several years. The deal is expected to be completed by the end of November pending regulatory and shareholder approvals. Developing an open-pit mine and processing facility at the Marathon site will cost about $400 million, Stillwater CEO Frank McAllister said Tuesday in a conference call with investors. In addition to primary platinum and palladium reserves, the marathon reserve contains an estimated 500 million pounds of copper as well as gold reserves.
KGHM Polska Miedz SA, Poland’s sole copper producer, raised its profit and revenue forecasts for this year on higher output and a weaker-than-expected zloty. KGHM forecast net income will reach 3.91 billion zloty ($1.28 billion) in 2010, raising its previous guidance published in February by 35 percent, the company said in a regulatory statement today. Profit last year was 2.54 billion zloty. Revenue, according to the new budget, will increase to 14.4 billion zloty from 11.1 billion zloty last year. That compares with 11.7 billion zloty in the previous revenue forecast. KGHM now says it will produce 541,000 tons of copper this year, 5.7 percent more than it had earlier forecast. Revenue from KGHM’s copper exports will also be increased by the exchange rate for the zloty, earlier seen at 2.7 per dollar on average in 2010, which will probably trade at 3.1 per dollar, the company said.
China gold miner Zijin Mining Group has scrapped its proposed acquisition of African copper producer Platmin Congo, the company said Tuesday in a statement. “In view of all the conditions precedent to the agreement not being satisfied by August 31, the date on which the agreement expired, and no agreement being reached to extend the agreement, the company has decided not to proceed with the transaction,” the statement said.
Zijin, however, did not give details on the preconditions, except to say that approvals were required from both the Chinese and Congolese governments. On May 7, Zijin signed the proposed acquisition agreement that was due to expire July 30. On the same day, Zijin and CAD Fund signed an agreement to acquire 2,610,000 issued shares of Platmin Congo from Copperbelt Minerals for about $284 million. Subsequently, the parties extended the expiry date to August 31. Platmin Congo owns primary assets in the Democratic Republic of Congo including a 68 percent beneficial interest in the Deziwa copper-cobalt project and a 68 percent beneficial interest in the Ecaille copper-cobalt project.