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Positive news out of the US and reassuring words from Europe helped resource prices this week while Greece looked to a potential natural gas bonanza to ease its fiscal woes.
Gold and base metals moved higher this week while oil declined in the wake of a positive jobs report out of the US and a decision by the European Central Bank (ECB) to leave its key interest rate unchanged.
According to the Department of Labor, the US created 114,000 new jobs in September, above the 110,000 that analysts were expecting. The department also revised the figure from August up to 142,000 from 96,000 and July’s result to 181,000 from 141,000.
The country’s unemployment rate fell to 7.8 percent from 8.1 percent, its lowest level since January 2009. However, most analysts still viewed the results cautiously given that the gains were largely the result of increases in part-time work and self-employment.
“The bottom line is that the data are still too weak for the Fed to even consider ending its unconventional [stimulus] policy,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.
The improved unemployment rate is seen as a plus for President Barack Obama’s re-election chances after he was criticized for a weak performance in the first presidential debate with challenger Mitt Romney this week.
On Thursday, the ECB left interest rates unchanged at 0.75 percent, even though the Eurozone’s inflation rate remains at 2.7 percent. That’s above the bank’s 2 percent target, though bank President Mario Draghi did say that he feels the rate will drop next year. The move followed the Bank of England’s decision to keep its rate at 0.5 percent.
Draghi also reiterated that the bank stands ready to buy bonds of sovereign countries in a bid to keep their borrowing costs down as they struggle to rein in their budget deficits. Spain is seen as the next likely recipient of aid, but the country’s government has not yet made a formal request.
“We are ready and have a fully effective backstop in place,” Draghi said.
In morning trade Friday, Brent crude is down 0.91 percent at $111.18 a barrel, while copper is down 0.24 percent at $3.78 a pound. Gold is down 0.78 percent at $1,782.50 an ounce.
Gold
The government of Kyrgyzstan announced that it will not nationalize Centerra Gold’s (TSX:CG) Kumtor mine, which has produced over 8.4 million ounces of gold in the last 15 years. Kumtor is of vital importance to the central Asian nation: in 2011, its output accounted for about 12 percent of Kyrgyzstan’s GDP and over half its exports.
The state holds a 33 percent stake in Centerra, which owns 100 percent of the mine. Calls for nationalization grew louder after a government report accused the company of stealing gold and damaging the environment. However, President Zhantoro Satybaldiyev, who aims to attract more foreign investment to the country, has now decided against a state takeover. “Kumtor will not be nationalized,” he said. “Problems will be resolved. I asked [Kumtor] to keep up its output.”
Oil and gas
Greece’s dire financial situation could get some long-term help thanks to a potentially huge jump in the country’s natural gas reserves. According to Reuters, a study presented to the country’s president in June indicates the potential for up to 3.5 trillion cubic meters of gas in undersea deposits off the island of Crete. The authors peg the reserve’s total value at around $600 billion.
“We feel this is a very conservative figure,” said Elias Konofagos, one of the study’s authors. The Greek government has now commissioned a seismic study to get a clearer sense of the size of the deposits. Results are expected in the middle of next year.
Elsewhere, Athabasca Oil (TSX:ATH) has received regulatory approval for its Hangingstone Project 1 in the Alberta oil sands, about 20 kilometers from the city of Fort McMurray. The company has now completed the engineering and design work for the 12,000 barrel per day project and has ordered long-lead-time equipment so it can be ready for its forecast start-up in the second half of 2014.
Athabasca now plans to file the necessary applications for the second and third phases of the project, which could boost its total output to 80,000 barrels per day.
Copper
BHP Billiton (NYSE:BHP,ASX:BHP,LSE:BLT) said that it expects its copper production to rise 10 percent annually through the end of its 2015 fiscal year. The company, which is the world’s third-largest producer of the metal, said it feels confident that demand will be strong thanks to ongoing urbanization in China and India. Copper has a wide range of construction and industrial uses, such as in wiring and piping.
The company is looking to its operations in Chile to provide the additional production. “Substantial mineralisation totalling 27.1 bt [billion metric tons] and a significant commitment to Andean copper belt exploration will ensure BHP Billiton remains a leading and highly competitive producer in the long term,” BHP said.
Australia-based copper miner Discovery Metals (ASX:DML) has received an unsolicited AU$829 million takeover offer from Cathay Fortune, a Chinese private equity firm owned by billionaire Yu Yong. Discovery is currently developing its Boseto copper mine in Botswana, which is slated to start up by the end of the year.
Under the proposal, Cathay Fortune will pay $1.70 for all of Discovery’s outstanding shares. That’s 17 percent more than the company’s closing price before the deal was announced. The company is now reviewing the bid and will respond to the offer after further evaluation.
Securities Disclosure: I, Chad Fraser, hold no positions in any of the companies mentioned in this article.