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Worries about Spain’s outlook and Europe’s economy in general may put a damper on the commodities market looking forward. For now, though, energy and metals demand are solid, and hopes are regaining for China.
By Shihoko Goto – Exclusive to Resource Investing News
Energy and base metals are ending the week in positive threshold, as US economic data continues to buoy investors. But the latest US jobs data was not as strong as many investors had hoped for, and may certainly not be enough to offset growing concerns about Europe once again. This time, it is the financial state of Spain that is beginning to rattle market confidence, and that unease has reinvigorated interest in buying gold.
Early morning Friday, the US Department of Labor reported 120,000 jobs added in March, the fewest increase in five months, considerably lower than expected. Unemployment, however, fell to 8.2 percent, its lowest level since January 2009.
Turning to Europe, Spanish Prime Minister Mariano Rajoy said this week at his People’s Party meeting that the country is now “facing an economic situation of extreme difficulty,” adding that “anyone who doesn’t understand that is fooling themselves.” Meanwhile, European Central Bank President Mario Draghi warned that “given the present conditions of output and unemployment, which is at historical high, any exit strategy talking for the time being is premature,” thus quashing any expectations that the ECB would start retreating from providing emergency relief.
In China, Beijing’s efforts to develop a corporate bond market is seen as a positive sign for the country’s longer-term growth prospects and lead to a potential boom in the commodities market as well. The People’s Bank of China, the National Development and Reform Commission, and the China Securities Regulatory Commission have joined forces to develop the debt market, which is expected to decrease the country’s reliance on bank loans for credit.
Financial markets in the United States are closed Friday in observance of Good Friday. Brent crude ended Thursday up 0.9 percent at $123.43 a barrel, while copper was up 0.1 percent $3.80 a pound, and gold rose 1.0 percent at $1,630 an ounce.
Oil
Despite the continued rise in energy prices, oil consumption in the United States remains strong as gasoline demand rose 0.8 percent in the latest week to 8.78 million barrels a day, its highest level since December 23, according to the Department of Energy.
Apache (NYSE:APA) will abandon a project to explore for natural gas in the Gulf of Mexico together with Energy Partners. Energy Partners is also postponing its search for gas under the sea over two miles from the coast of Louisiana as natural gas prices continue to slide.
The Argentinian province of Santa Cruz announced that it is considering revoking three licenses from YPF (NYSE:YPF) as the company is unlikely to invest adequately to stave off a fall in production. The three fields accounts for 11 percent of crude output for Argentina’s largest oil producer.
BP (LSE:BP) has appointed Scott Sloan as president of its Russian operations to replace Jeremy Huck. Sloan is currently a board member of BP’s Russian joint venture TNK-BP.
Calgary-based Tamarack Valley Energy (TSXV:TVE) filed a preliminary prospectus with the Alberta Securities Commission in connection with the $16.5 million bought deal financing announced late March 26. After Tamarack announced its acquisition of Echoex , the TSXV halted trading in Tarmack’s common shares pending review of the acquisition. Tamarack expects the TSXV will resume trading TVE common shares within the next day.
Copper
Appetite for the red metal is on the rise as the US jobs market continues to shine and a rosier outlook for China.
Curis Resources (TSX:CUV) signed an agreement for a $40 million senior secured loan facility and copper off-take deal with RK Mine Finance Trust of Red Kite. Red Kite will provide a $40 million loan. The funds will be used to advance the development of the phase 1 production test facility and related engineering, infrastructure, as well as permitting-related activities of the Florence copper project in central Arizona.
Japanese copper smelter Pan Pacific Copper plans to produce 278,000 tonnes of refined copper during the April to September period, up 4.7 percent from the same period a year ago. The increase is largely a result of low production last year, as Japanese smelters cut back on output following the March 2011 earthquake and tsunami.
Camino Minerals (TSXV:COR) signed a definitive option agreement with Arcelia Gold which will allow Camino to acquire up to 80 percent of Arcelia’s interest in the El Secreto gold, silver and copper project in Mexico’s Sinaloa state.
Gold
Renewedworries about Europe’s financial situation, most recently in Spain, are driving up demand for gold once again.
Lake Shore Gold (NYSEAMEX:LSG,TSX:LSG) resumed operations at its Timmins West mine in Ontario after a worker was killed in an accident earlier in the week. The company also reported a decline in its quarterly production. In the first quarter, Lake Shore resold 18,400 ounces of gold at an average price of $1,690 per ounce, compared with 34,000 ounces at an average price of $1,387 per ounce, a year ago. It produced 16,680 ounces of gold for the quarter, down from 22,300 ounces, a year ago. For the full year, Lake Shore reiterated its production guidance of 85,000 to 100,000 ounces, and projects cash operating costs to reach between $825 and $875 per ounce.
Luna Gold (TSXV:LGC) announced its gold production reached record levels in the first quarter, totalling 16,000 ounces from its Aurizona gold mine. The company focuses on exploring and developing gold in Brazil, and detailed results of its first quarter performance will be released mid-May.
Securities Disclosure: I, Shihoko Goto, hold no direct investment interest in any company mentioned in this article.