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Greece’s debt swap deal and continued strength in the US economy are giving a boost to commodities across the board. Investors are also hopeful that the easing of China’s monetary policy will drive global demand.
By Shihoko Goto — Exclusive to Resource Investing News
With Greece given the green light for its debt swap deal, the US jobs market improving still further, and Chinese inflation under control, demand for industrial commodities has risen steadily this week. Gold is also on the rise amid expectations that central banks across the globe will keep interest rates low in order to ensure the expansion’s momentum.
Greece was in the spotlight for much of the week as the country grappled until the eleventh hour to come up with a bond swap deal that would qualify the country for a second round of an international financial aid package worth 130 billion euros. Under the deal, investors will take a loss of up to 74 percent by swapping their old bonds for new ones, allowing the Greek government to reduce its debt by about 172 billion euros. Without the debt swap, Greece was expected to default on its debt.
Turning to Asia, China reported that inflationary pressure reached its slowest pace in 20 months, with consumer prices rising 3.2 percent in February. Meanwhile, factory production increased by 11.4 percent in the first two months of the year. Speculation is thus growing that China may be able to lower interest rates to stimulate further growth.
In the US, February’s jobs report pointed to an improvement in payrolls, which increased by 227,000, while the unemployment rate remained steady at 8.3 percent.
In late morning trading Friday, Brent crude was up 0.5 percent at $126.05 a barrel, while copper was up 1.7 percent at $3.85 a pound, and gold was 0.6 percent higher at $1,709.00 an ounce.
Oil
As economies across the globe pick up, oil prices are being pushed higher on expectations of increased energy demand worldwide. Investors continue to fret about the supply side. Certainly, persisting political tensions between Iran and the international community are keeping oil prices high, and market players will be closely monitoring the United Nations’ push for International Atomic Energy Agency officials to inspect Iran’s Parchin military installation.
On the corporate front, ExxonMobil (NYSE:XOM) said it would invest around $150 billion over the next five years to explore for new oil and gas projects. The company expects energy demand worldwide to rise by 30 percent by 2040 from 2010 levels.
“An unprecedented level of investment will be needed to develop new energy technologies to expand supply of traditional fuels and advance new energy sources,” said CEO Rex Tillerson to analysts at the New York Stock Exchange on Thursday.
Meanwhile, a federal court has assumed responsibility for the claims process for the BP (LSE:BP) oil spill, with a court-appointed administrator taking over from the Gulf Coast Claims Facility led by Kenneth Feinberg. Lynn Greer will be assuming Feinberg’s role as transition coordinator as details of the multibillion dollar settlement between BP and lawyers representing over 100,000 individuals and businesses are hashed out.
Calgary-based junior oil explorer Aroway Energy (OTC Pink:ARWJF) said it has acquired 12,480 acres in its Peace River Arch core area from a public intermediate competitor. The acquired lands extend the partnership’s land base to the north and east of its current acreage in the Peace River Arch in Alberta. Aroway’s cost for 50 percent of the acquisition was approximately $678,000 to obtain a 50 percent working interest in the assets.
Copper
Chinese output of refined copper rose 9.5 percent from a year ago to 437,000 tonnes, according to the National Bureau of Statistics. Meanwhile, inventories monitored by the Shanghai Futures Exchange rose by 3,294 metric tons to 224,781 tons, the highest level since at least 2003.
Chile’s Collahuasi mine, jointly owned by Anglo American (LSE:AAL) and Xstrata (LSE:XTA), is expected to increase its output this year compared to what it was a year ago. The world’s third-largest copper mine produces about three percent of the world’s total copper, and produced 453,000 tonnes in 2011. Collahuasi is looking to increase its annual output to between 800,000 and 1,000,000 tonnes a year from 2017.
Freeport-McMoRan‘s (NYSE:FCX) Indonesian Grasberg mine will be back online on March 12 after on-site violence halted operations about two weeks ago.
The Indonesian government will be issuing a ruling aimed at preventing foreign companies from owning more than a 49 percent stake in some mines. Non-Indonesian mining license holders will need to reduce their shareholding to below 49 percent from the current 80 percent limit within the next decade.
Murgor Resources (TSXV:MGR) signed an exploration and option agreement with Cartier Resources (TSXV:ECR) at its wholly-owned Benoist project located 65 km Northwest of the town of Lebel-sur-Quévillon in the province of Québec. Under the terms of the exploration and option agreement, which remains subject to regulatory approvals, Cartier will have the option to earn an interest of up to 100 percent in the Benoist project, which hosts the Pusticamica gold deposit.
Gold
A pickup in demand for physical gold is a bullish sign, according to PFGBEST’s gold and silver specialist Mike Daly.
“Every time the market takes a nice price dip, it appears that the Asian sector comes in and buys it,” he said. “One thing I look at from a trading standpoint is who the players are…[t]he Chinese and Indians are buying physical gold,” he added.
Ivanhoe Mines’ (NYSE:IVN) Australian subsidiary has begun producing its first gold and copper concentrate at Osborne in Northwest Queensland. Peter Reeve, Chief Executive of Ivanhoe Australia (ASX:IVA), said that the Osborne processing facility will lead to a “strong cashflow stream for 15 to 20 years.” In January the company approved $30 million of capital to develop the Kulthor and Osborne copper-gold operation.
Lake Shore Gold (TSX:LSG) has completed its royalty and equity investment agreements with Franco-Nevada (TSX:FNV). Franco-Nevada paid Lake Shore Gold $35 million for a 2.25 percent net smelter return royalty on the sale of minerals from Lake Shore’s Timmins West Complex, as well as $15 million Canadian dollars to acquire 10,050,591 common shares on a private placement basis.
MillenMin Ventures (TSXV:MVM.P) entered into an option agreement with Molycor Gold (TSXV:MOR) whereby MillenMin can earn up to 70 percent of Molycor’s wholly-owned undivided interest in the Windpass gold property situated on the Thompson Plateau area of Central British Columbia.
Securities Disclosure: I, Shihoko Goto, hold no direct investment interest in any company mentioned in this article.