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Rebounding steel markets in India and China, Chilean labour conditions, Australian mining taxes and African mining reclamation developments combined for a very interesting week for resource investors. All of the six main metals traded on the LME retreated as fears that the European bailout would only provide a band-aid fix permeated the global markets, with nickel suffering the biggest loss.
On Tuesday, copper futures retreated from Monday’s gains, as fears that the European bailout would only provide a band-aid fix permeated the global markets. Copper for delivery in three months slid $184, or 2.6 percent, to a mid morning range $6,936 a metric tonne on the London Metal Exchange. That wiped out the previous session’s 2.5 percent gain, the biggest in six weeks. Copper futures for July delivery fell 2.7 percent to $3.14 a pound on the COMEX in New York. All of the six main metals traded on the LME retreated, with nickel suffering the biggest loss.
Adding to the metal’s downside were resurrecting concerns of falling demand in China. Despite previous attempts to curb inflation, China faces more pressure to slow economic growth after inflation accelerated at the fastest pace in 18 months.
Strikes may hit several of Chile’s mines this year with many labor contracts up for renewal. Recently, subcontractors at the Collahuasi mine went on strike. Operation at the mine, which produces 3.3 percent of the world’s mined copper, were halted on Saturday after hundreds of subcontractors blocked roads with burning tires and rocks to demand better working conditions. Historically, copper prices have been inversely correlated with Chilean labour conditions.
On May 2, Australia announced its plan to impose a 40 percent mining tax. As a result, miners in the region have announced that they will suspend exploration. Most recently, Xstrata Plc, (LSE: XTA) the world’s fourth- largest copper producer, said today its North Queensland unit suspended its regional exploration program. BHP Billiton Ltd. (NYSE: BHP) and Rio Tinto Group (NYSE: RTP) have previously announced that they will review projects while they study the effects of the tax.
Canadian copper miner First Quantum Minerals (TSX: FM) announced on Monday that its first-quarter profit soared on higher copper prices. Revenue more than doubled to $562.8 million and the company said estimated production for 2010 is 385 000 tonnes of copper and 220 000 ounces of gold.
Rebounding steel markets in India and China have manganese producers ramping up production. Mining giants BHP Billiton and Vale S.A. have increased production of manganese ore in the first quarter. Chinese companies have been funding manganese projects, as well as buying as much of the metal as they can get their hands on. From a supply side perspective, the cost of producing manganese ore is rising.
Southern Hemisphere Mining Limited (TSX-V: SH) has released information on their Los Pumas Manganese Project in Chile. The company is completing its feasibility study on the project and expects production to commence in the second half of 2011.
The government of Gabon, a manganese-rich West African country, is looking to buy a stake into the French mining company Eramet SA (EPA: ERA). This is the latest in developments from African nations looking to reclaim the mineral wealth of the continent from foreign companies, as recently South Africa has imposed governmental regulations for increased African ownership on mining companies.
Quantum Rare Earth Developments Corp. (TSX-V: QRE) demonstrated interest in developing a rare earth property when it acquired 100 percent of Elk Creek Resources Corp. last week.
Elk Creek Resources holds the mining rights to the coveted Elk Creek carbonatite in southeastern Nebraska, which potentially holds one of the largest global deposits of niobium and rare earth elements approximately 150 meters underground.
Niobium is the major element at the site and is of strategic domestic importance for the United States as a resource used in producing high-strength, low-alloy steel for gas pipelines, automobile components, jet engines, and structural steel. Superconductors and electronics are other uses for niobium, however, green technologies’ growing dependence on the mineral that may put the most strain on supply.
The US Department of Energy signaled it is in the early stages of developing its first-ever strategic plan for rare earth metals when it issued a Request For Information (RFI) from industry leaders, research labs, academics, and any other organizations with an interest or stake in rare earth metals. This announcement is just the latest in a series from the US Government after China announced they may divert more of its rare earth resources to its domestic market, further squeezing the rest of the world’s supply.
The world’s largest integrated zinc and lead producer, India-focused mining group Vedanta Resources (LON:VED) solidified its top position on May 10 announcing the purchase of Anglo American’s (OTC: AAUKY) zinc assets in Africa and Ireland. The $1.34 billion deal will give Vedanta, 11 percent of the global zinc industry, increasing capacity by 37 percent and the company expects to make a positive return on its investment within 3 years.
For Anglo American, the disposition benchmarks an important transitional stage in the transformation of the company. Chief Executive Officer, Cynthia Carroll, indicated last October that the miner would sell its non-core assets, including the zinc business, after investors rejected a merger approach from Xstrata. The markets have responded positively to the agreement, with both companies’ shares rising by more than 10 percent on the news.
With help from Assistant Editor Vivien Diniz
