Weekly Round-Up: Commodities Markets Eye US Economic Talks

The rising threat of a US economic recession pushed commodities lower this week. Thursday marked the first day of normal trade for North American markets, which closed on Monday, Christmas Eve. Globally, investors are eyeing the outcome of the year-end deadline for US lawmakers to take action against tax hikes and spending cuts that could push the world’s largest economy over the fiscal cliff.

Democrats and Republicans are embroiled in a partisan gridlock, with neither party willing to make the first move, but there was a general sense of optimism amongst market watchers earlier in the week that the stand-off would result in a last-minute agreement before the new year. But that hope is quickly fading.

If a deal can’t be reached by the close of 2012, markets worldwide could be in for a sharp dive at the start of the new year. That’s because a US recession in all likelihood would spell trouble for many other major economies. Fear of such a recession, along with Senate Majority Leader Harry Reid’s confirmation that negotiations remained stalled just four days before tax hikes and $600 billion in spending cuts are scheduled to commence, led to a sharp fall in US stock indexes on Thursday.

On Friday morning, US stock markets continued their downward slide, but there is some hope for a rally if any good news comes out of today’s congressional meeting ahead of Sunday’s House of Representatives session. In Europe, investors were sitting on the sidelines Friday morning, awaiting news from the US, while their more optimistic Asian counterparts extended gains.

In morning trade Friday, Brent crude is down 0.55 percent, at $110.16 a barrel, while copper is down 0.26 percent, at $3.56 a pound. Gold is down 0.42 percent, at $1,655.90 an ounce.

Gold

Bellhaven Copper & Gold (TSXV:BHV) reported results from eight recent drill holes at its La Mina project in Colombia. Five of these drill holes were aimed at testing new soil geochemical targets associated with the El Limon mineralized porphyry, where a 2011 drill hole (LMDDH-21) encountered 67 meters of 0.25 g/t gold. Highlights from this year’s drill program include LME-1084, which encountered 78.95 meters of 0.31 g/t gold.

Randgold Resources (NASDAQ:GOLD,LSE:RRS) announced that production at its Tongon gold mine in Cote d’Ivoire was impacted by a fire in the mill. Both milling circuits are expected to be operational again shortly after the new year. Revised annual production at Tongon is anticipated to be approximately 208,000 ounces.

Angkor Gold (TSXV:ANK) announced the delivery of a third medical supply container to Eastern Cambodia’s Pursat province. The supplies will support eight health centers, as well as the province’s referral hospital, and the delivery is part of Angkor’s Sustainable Community Development Program. The company has three major exploration projects in Cambodia.

Oil and gas

Statoil (NYSE:STO) acquired a 25-percent stake in drilling license BM-ES-22A, located in the Espirito Santo Basin offshore Brazil, from Vale (NYSE:VALE). The acquisition gives Statoil a position in an appraisal well on the Indra discovery. The company also holds a 40-percent stake in the BM-ES-32 license on the Indra discovery.

Chevron (NYSE:CVX) agreed to take over the minority positions that Encana (TSX:ECA,NYSE:ECA) and EOG Resources (NYSE:EOG) hold in the Kitimat LNG project, giving it a 50-percent share in the British Columbia-based endeavor. With Chevron taking over the operational responsibilities of the now-ailing project, it is more likely that Kitimat will be able to secure much-needed offtake agreements and move the project forward to construction.

Changfeng Energy (TSXV:CFY) signed its first natural gas sales contract with a major ceramic manufacturer in the district of Xiangdong, where its Xiangdong project is located. The company will supply a total of 1 million cubic meters of natural gas annually to the customer. Changfeng expects to start commercial operations at Xiangdong in January 2013.

Carrizo Oil & Gas agreed to sell its wholly owned subsidiary, Carrizo UK Huntington, and all of its interest in the Huntington Field, located in the UK’s North Sea, to a subsidiary of Iona Energy (TSXV:INA) for $184 million. The Huntington Field project is nearing first production.

Copper

Southern Copper (NYSE:SCCO) resumed operations at its Cuajone and Toquepala mines and Ilo smelter in Peru following a two-day strike. There are no reports yet on the effect that the work stoppage had on copper production.

BHP Billiton’s (NYSE:BHP,ASX:BHP,LSE:BLT) mine contract offer was rejected by unionized workers at its Escondida copper unit in Chile. The mine is a joint venture between BHP (57.5 percent), Rio Tinto (NYSE:RIO,ASX:RIO,LSE:RIO) (30 percent) and a Japanese consortium led by Mitsubishi (TSE:8058) (12.5 percent). BHP is planning a $4-billion expansion of the project, and its goal is to increase production to about 1.3 million metric tons by 2015. The possibility of a strike at Escondida is bullish for copper prices as the mine accounts for 6 percent of global copper production.

Discovery Metals (ASX:DML) resumed development operations at its Boseto copper mine in Northwestern Botswana after the Botswana Department of Mines, Minerals, Energy and Water Resources lifted restrictions on the deepening of the Zeta open pit. The company can now continue mining high-grade ore to supply to the mill.

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