Weekly Round-Up: Peering Over the Cliff

Commodities are ending the week mixed as talks about averting the fiscal cliff — a set of tax increases and spending cuts set to kick in January 1 unless the president and Congress can avert them — continued in Washington this week.

The see-saw nature of the negotiations also caused volatility in stock markets, though the Dow Jones Industrial Average is back to roughly where it closed last Friday.

“I’m disappointed in where we are. I’m disappointed over what’s happened in the last couple of weeks,” said Republican House Speaker John Boehner. “But going over the fiscal cliff is serious business. I’m here seriously trying to resolve it, and I hope the White House would get serious as well.”

Meanwhile, Politico reported that despite partisan bluster, the structure of a deal appears to be taking shape. The site said the agreement will likely include around $1.2 trillion worth of tax hikes — midway between the demands of Obama and the Republicans — and social programs will be cut by at least $400 billion. In all, there will be at least $1.2 trillion in spending reductions.

Separately, investment bank Goldman Sachs released its economic forecast for 2013 earlier today. The forecast notes that a solution to the fiscal cliff will be found and that the US economy will continue to strengthen, with growth of 1.9 percent in 2013 and 2.9 percent in 2014. The bank also placed a 12-month price target of 1,575 on the S&P 500 index, up about 11 percent from today’s level of 1,416.

Goldman also sees cyclical sectors, such as materials and industrials, outperforming defensive stocks next year.

In morning trade Friday, Brent crude is down 0.09 percent at $110.66 a barrel, while copper is up 0.63 percent at $3.61 a pound. Gold is down 0.72 percent at $1,714.70 an ounce.

Gold

Patagonia Gold (LSE:PGD,TSX:PAT) produced gold for the first time in its history this week after the company started production at its Lomada de Leiva project in Argentina.

The company successfully processed a total of 1,040 kilograms of loaded carbon from the Lomada heap-leach trial with a grade of 16,800 g/t of gold. It produced a 23.02 kg doré bar. Canada’s Johnson Matthey will assay and refine the bar to establish its gold-payable content.

Over the next four weeks, Patagonia will strip 18 metric tons of loaded carbon through the circuit. The company estimates that this carbon contains 4,200 ounces of gold.

Northern Vertex Mining (TSXV:NEE,OTCQX:NHVCF) closed a previously announced non-brokered private placement this week. The financing had originally been announced at $7.5 million, but it was oversubscribed, raising gross proceeds of $9.1 million. The company will use the funds to advance its Moss gold-silver project in Arizona, as well as for maintenance of its other operations and general corporate purposes.

Oil and gas

BP (NYSE:BP,LSE:BP) made further progress toward meeting its goal of selling $38 billion of assets this week. The company is using the proceeds from the sales to deal with the costs of the 2010 Gulf of Mexico oil spill, the worst in US history.

This week, BP sold $1.1 billion of interests in North Sea oil fields to state-owned Abu Dhabi National Energy (TAQA). Depending on oil prices and production from these assets, BP could receive additional future payments of $250 million. TAQA has already paid $632 million of the purchase price and will pay the rest over the next three years.

Africa Oil (TSXV:AOI) announced that its Twiga South-1 well in Kenya encountered 30 meters of net oil pay in tertiary sandstone reservoirs. The company also said that the well has encountered a “thick sequence of fractured rock section exhibiting oil and wet gas shows over a gross interval of 796 metres.” Africa Oil owns 50 percent of Twiga South-1. Tullow Oil (LSE:TLW) owns the other 50 percent and operates the project.

However, some analysts were disappointed with the find in light of the fact that drilling at the nearby Ngamia-1A well had indicated 100 meters of net oil pay. That caused Africa Oil’s shares to fall 20 percent on Monday.

Copper

Shares of Inmet Mining (TSX:IMN) jumped 17.4 percent, to $62, on Wednesday after the company said it had turned down a $70-a-share takeover offer from First Quantum Minerals (TSX:FM). The stock added another $3.50 on Thursday to close at $65.50. The company’s move comes after it declined an earlier $62.50-a-share offer from First Quantum.

Inmet produces copper and zinc at mines in Spain, Turkey and Finland. It also owns 80 percent of the Cobre Panama copper-gold-molybdenum project in Panama. Inmet expects the open-pit mine, which is expected to start up in 2016, to produce 8.2 million MT of copper, 2.7 million ounces of gold, 47.9 million ounces of silver and 90,000 MT of molybdenum over its lifespan, estimated to exceed 30 years.

Thompson Creek Metals Company (NYSE:TC,TSX:TCM) closed a previously announced $350-million financing consisting of 9.75 percent senior secured first priority notes due in 2017. The company will use the funds for general corporate purposes and to fund the development of its Mount Milligan copper-gold mine in British Columbia.

Production at Mount Milligan is expected in the fourth quarter of 2013. The mine’s costs have soared roughly 50 percent above the company’s original $915 million estimate.

Securities Disclosure: I, Chad Fraser, hold no positions in any of the companies mentioned in this article.