Weekly Round-Up: China Monetary Easing Hopes Bolster Commodities

Commodities are ending the week on a high note as China’s economic growth for the second quarter was in line with expectations, rallying stocks as well as base metal and energy prices worldwide. Investors’ hope that Beijing will press ahead with further monetary easing among other stimulus measures is expected to keep commodities demand steady. Energy prices have also been gaining ground  as concerns about access to Middle East supply heighten once again.

China’s GDP growth rate for the second quarter reached its slowest rate in three years, rising by 7.6 percent. However, the weak number was as expected, and many analysts are now expecting Beijing to step in for the third time this year to boost domestic growth before the end of the year, stimulating the still-fragile global economy.

Certainly, downside risks remain regardless of whether or not the world’s second-largest economy takes further stimulus action.  Europe’s finance sector remains opaque, with Moody’s cutting Italy’s government bond rating to Baa2 from A3 with a negative outlook as the government is expected to face higher funding costs as market confidence becomes even shakier. The country’s sluggish growth, coupled with a high unemployment rate, will increase the government’s “risk of failure to meet fiscal consolidation targets,” Moody’s stated.

In early morning trading Friday, Brent crude is up 0.4 percent at $101.44 a barrel, while copper is 1.8 percent higher at $3.47 a pound. Gold is up 1.0 percent at $1,581.30 an ounce.

Oil and Gas

The United States has stepped up its crackdown on Iranian oil exports as it identified 58 vessels by the National Iranian Tanker Company that have been used to evade sanctions imposed by the international community. Malaysia’s Noor Energy, Switzerland’s Petro Suisse, Dubai’s Petro Energy and Hong Kong Intertrade were named as acting on behalf of Tehran’s National Iranian Oil Co (NIOC), and the latest move by Washington will make it more difficult for Iran to circumvent sanctions.

Unit Corp (NYSE:UNT) acquired oil and gas assets from Noble Energy (NYSE:NBL) for $617.1 million in cash, which will increase its operations in the Anadarko basin. The deal will more than double Unit’s acreage in the Granite Wash Texas panhandle area and should close by September. Unit anticipates the acquisition to start adding to its bottom line from 2013.

State-owned PetroSA of South Africa is eyeing acquiring the Ghana assets of Sabre Oil and Gas, Reuters reported. The head of the company, Nosizwe Nocawe Nokwe said that the deal is expected to conclude “in the near-term future,” but did not offer any financial details.

Also in Africa, Tanzania will be auctioning a deep water oil and gas block near its sea border with Mozambique on September 13, when the government will open a licensing round for nine offshore exploration blocks.

ConocoPhillips (NYSE:COP), meanwhile, is facing legal action from East Timor as the government looks to recover potentially billions of dollars in unpaid taxes. ConocoPhillips, however, has challenged the government’s new tax assessment regarding the development of the Timor Sea for oil and gas, and East Timor’s Secretary of State for Natural Resources stated at the onset that its challenge to make major oil companies pay is “a David and Goliath fight.”

Next Fuel (OTCQX:NXFI) received an initial revenue of $160,000 from the coal-to-gas license agreement with China’s Future Fuel. The revenue was from license fees and payments for the initial testing units in northern China, and based on the initial agreement, more payments are expected after methane is produced.

Copper

Chile’s Codelco and Anglo American (LSE:AAL) will extend negotiations regarding shares in the Anglo Sur unit until August 24. The two companies have been disputing shareholding in Anglo American Sur since late last year, and current efforts are being made to settle out of court.

BHP Billiton (ASX:BHP) is facing protesters at its Olympic Dam project in South Australia who oppose the $30 billion expansion of the copper, gold, and uranium mine due to environmental concerns. About 500 protesters are expected to show up over the next five days from this weekend, the  Australian reported.

Vancouver-based Taseko Mines (NYSEAmex:TGB) reported second quarter copper production at its Gibraltar mine reaching 23.9 million pounds, with total copper sales reaching 26.4 million pounds. The company has a 75 percent stake in the mine, and its share of total copper sales reached 19.8 million pounds, up from 12.7 million pounds in the first quarter. Taseko said it took advantage of short-term copper price strength to purchase copper put options for the first half of 2013. The put options have a strike price of $3.00 a pound and account for about 60 percent of Taseko’s share of production.

Copper Fox Metals  (TSXV:CUU) has acquired all of Bell Copper’s (TSXV:BCU) interests in the Van Dyke copper deposit in Miami, Arizona and the Sombrero Butte property in Pinal County, Arizona for 2 million Canadian dollars in cash. Under the deal, Copper Fox will assume Bell Copper’s continuing obligations regarding the properties.

Gold

Gold is up on bargain-hunting as well as short-covering, while Commerzbank told investors in a note that “there are long-term risks of creeping inflation in view of the ultra-loose monetary policy pursued by central banks all over the world, and continue to regard gold as an attractive means of protecting one’s capital against inflation.”

Also boosting the yellow metal are increased hopes for further Chinese rate cuts, as well as a slight rebound in the euro. Interest among Indian investors for gold has weakened as a result of the price increase, analysts said.

NovaGold Resources (NYSEAmex:NG) reported second quarter net income reaching $94.2 million compared to $24.6 million during the same period a year ago. The surge was largely due to a $71.6 million realization on the transfer of its Upper Kobuk mineral project in Alaska’s Ambler district as a result of spinning off NovaCopper, the company reported. Looking ahead, NovaGold will be focusing on developing its Donlin Gold site in Alaska, which has a total project budget of $3.2 million. The company has a 50 percent stake in the development, or about $18.7 million, which includes expenditures for permitting activities and community development. The remaining 50 percent share in the site is held by a wholly owned subsidiary of Barrick Gold (NYSE:ABX).

Junior mining companies have been struggling so far this year as gold prices sag, according to Five Star Equities. The investment group said that speculation abounds of more mergers and acquisitions among junior companies after Yamana Gold (NYSE:AUY) acquired Extorre Gold Mines for $414 million.

Nonetheless, Renaissance Gold’s (TSXV:REN) CEO Richard Bedell remains upbeat about the industry’s outlook as Renaissance plans to press ahead with its 15 projects in exploration and joint venture agreements.

“The summer season is traditionally slow for the markets, but is the core of our field season and these activities should produce significant results for the Company. The company’s July 11, 2012, press release on Trinity Silver is an example of an asset that is growing through exploration,” Bedell told investors in an update.

Securities Disclosure: I, Shihoko Goto, hold no direct investment interest in any company mentioned in this article.