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Positive economic news and hints of interest rate cuts in Europe supported oil and copper prices this week, while central banks and buyers of gold bars and coins gave the yellow metal a much-needed lift.
Resource prices are ending the week higher, with oil and copper gaining strength on the back of evidence of a continuing recovery in US housing and labor markets.
Meanwhile, gold prices rose on strong sales of physical gold, more purchases by central banks and rising sentiment that the yellow metal is oversold after last week’s sell off, which was the biggest in 30 years.
Gold’s safe haven appeal was also helped after the Obama administration said that it has seen some evidence that the Syrian government used chemical weapons against its own people, Bloomberg reported. That raised concerns about renewed tensions in the Middle East. Gold jumped 2.7 percent on Thursday, its biggest rise since June 29, 2012, and has now recovered about half the value it lost in the recent plunge, according to CBS News.
Elsewhere, oil prices gained ground after the US Energy Information Administration (EIA) said crude inventories rose by 900,000 barrels last week, smaller than the expected increase of 1.2 million barrels, The Wall Street Journal reported. At the same time, the EIA said that gasoline demand rose 4.4 percent last week, to 8.75 million barrels a day.
Commodity prices also found support from speculation that the European Central Bank will cut interest rates after Germany’s manufacturing purchasing managers’ index slipped to 47.9 in April from 49 in March. Any figure below 50 indicates contraction.
On Friday morning, all eyes were on the US GDP report, which followed the release of positive new-home sales figures on Tuesday as well as Thursday’s Department of Labor report of a larger-than-expected decline in the number of Americans filing new jobless claims.
The US economy grew at a 2.5-percent rate in the first quarter. That’s up sharply from 0.4-percent growth in the fourth quarter of 2012, but below the 3 percent economists were expecting. Consumer spending gained 3.2 percent — its biggest gain since the end of 2010, according to MarketWatch — and business spending on software and equipment rose 3 percent. However, these gains were partly offset by other factors, such as a 4.1-percent decline in government spending; that includes an 11.5-percent plunge in military outlays.
In morning trade Friday, Brent crude is down 0.59 percent, at $102.80 a barrel, while copper is down 1.41 percent, at $3.19 a pound. Gold is up 0.47 percent, at $1,468.80 an ounce.
Gold
Agnico-Eagle Mines (NYSE:AEM,TSX:AEM) earned $53.6 million, or $0.31 a share, excluding unusual items in the first quarter. That’s down from $78.5 million, or $0.46 a share, a year earlier. Revenue fell 10.7 percent, to $423.2 million. The company produced 236,975 ounces of gold in the quarter, down from 254,955 ounces a year ago. Gold prices also declined, and the company’s cash costs increased. Agnico-Eagle said its full-year guidance remains unchanged at 970,000 to 1,010,000 ounces.
Eagle Hill Exploration (TSXV:EAG) reported final results from its 2012 drill program at its Windfall Lake property in Northwestern Quebec. The program is designed to increase the size of Eagle Hill’s mineral resource estimate of 1.665 million metric tons (MT) grading 10.05 g/t gold in the indicated category and an inferred 2.9 million MT at 8.76 g/t gold. Highlights of the latest program include 6.18 g/t gold over 40 meters and 19.14 g/t gold over 12.2 meters. Eagle Hill recently completed an additional 4,100-meter drill program at the property.
Oil and gas
ExxonMobil (NYSE:XOM) reported that its earnings rose 1 percent in the first quarter, to $9.5 billion from $9.45 billion a year ago. The company spent $5 billion on share repurchases during the quarter. Due to fewer shares outstanding, per-share profits rose 6 percent, to $2.12, topping the consensus forecast of $2.05. Revenue declined 12.2 percent, to $108.8 billion. Exxon’s oil-equivalent production fell 3.5 percent from a year ago. The company also said its capital expenditures for the quarter were $11.8 billion, up 33 percent from the first quarter of 2012.
Imperial Oil (TSX:IMO) reported earnings of C$798 million, or $0.94 a share, in the first quarter, down 21.4 percent from a year ago and just shy of the consensus forecast of $0.95. Production fell 1.7 percent, to 284,000 barrels of oil equivalent per day. The company saw lower average selling prices for conventional crude and spent more on maintenance at its refineries and Syncrude oil sands operations. It also paid higher expenses related to its Kearl oil sands project, a 50-50 joint venture with ExxonMobil. The start up of Kearl, which Imperial expects to produce 110,000 barrels a day starting later in 2013, “is imminent,” according to the company’s press release.
Encana (NYSE:ECA,TSX:ECA), Canada’s leading natural gas producer, also reported its latest results this week. In the first quarter, Encana reported a net loss of $431 million, down from a profit of $12 million a year ago. On an operating basis, which excludes most unusual items, Encana earned $179 million, or $0.24 a share, down from $240 million, or $0.33. The latest earnings were well ahead of the consensus forecast of $0.09 a share. Gas production fell 12 percent, to 2,877 million cubic feet per day, while oil and natural gas liquids output rose 48 percent, to 43,500 barrels a day. Encana’s selling prices for oil and gas also declined.
Magnum Hunter Resources (NYSE:MHR) closed the sale of its properties in the Eagle Ford shale region to Penn Virginia (NYSE:PVA). The purchase price of $401 million consists of $361 million in cash and 10 million Penn Virginia common shares. In an April 24 press release, Magnum Hunter said it will use the proceeds to pay off all outstanding debt under its senior revolving credit facility and for general corporate purposes.
Copper
Lundin Mining (TSX:LUN) earned $50.1 million, or $0.09 a share, in the first quarter, down from $58.3 million, or $0.10 a share, a year ago. Sales fell 11.6 percent, to $188.2 million. In its earnings release, the company said profits declined on lower realized metal prices and increases in depletion, depreciation and amortization expenses. Lundin, which operates in Portugal, Sweden and Spain, produced 17,016 MT of copper in the quarter, compared to 17,145 MT a year ago. The company said it remains on track to meet its 2013 production targets.
Nevada Copper (TSX:NCU) announced that it will develop its Pumpkin Hollow project in Nevada in two stages. The first stage will consist of an underground operation that the company believes it is capable of financing without bringing in a strategic partner and reducing its 100-percent stake. Nevada Copper expects this phase to go into production in 2015. It will then use the cash flow from Stage 1 to help finance a larger, open-pit operation, with production targeted for 2016, depending on project funding.
PolyMet Mining (TSX:POM,AMEX:PLM), which is developing its NorthMet copper-nickel–platinum group metals project in Minnesota, has reported results for its 2013 fiscal year, which ended January 31. During the year, PolyMet lost $6.6 million, compared to a $3-million loss in 2012. Investments in NorthMet totaled $18.4 million, up from $16.1 million, and the company ended the year with cash of $8.1 million, down from $17.5 million a year ago. However, since January 31, PolyMet has received a $20-million loan and plans to issue a $60-million rights offering. On a pro forma basis, accounting for the rights offering and repayment of the loan, PolyMet said it would now have $67 million of cash and equivalents.
Securities Disclosure: I, Chad Fraser, hold no positions in any of the companies mentioned in this article.
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