Weekly Round-Up: Improving Global Economy Lifts Oil, Slows Gold

Oil prices strengthened this week, while gold declined as investors shied away from the yellow metal, which is typically seen as a hedge against inflation and safe haven against economic turbulence.

In the Eurozone, consumer confidence rose to -23.9 in January, up from -26.3 in December. That topped the consensus forecast of -26. The latest figure is well below the long-term average of -13.1, but it is still at its highest level since July.

Even so, most analysts approached the news with caution. “Despite the marked rise in consumer confidence in January, the suspicion remains that euro-zone consumers will remain pretty cautious in their spending in the near term at least,” Howard Archer, an economist at IHS Global Insight, said in a January 23 Wall Street Journal article.

Meanwhile, jobless claims continue to drop in the US, with applications for unemployment benefits declining by 5,000 this week to a seasonally adjusted 330,000. That’s the lowest level since 2008. China also added to the optimistic tone: in January, the country’s purchasing managers’ index rose to 51.9 from 51.5 in December, notching its fifth month of gains and remaining solidly in growth territory (any reading over 50 indicates expansion).

As well, the US Energy Information Administration reported that the country’s oil supplies rose by 2.8 million barrels last week. That was a bigger jump than the 2 million barrels analysts expected. However, gasoline inventories fell by 1.7 million barrels, defying forecasts of a 1.6-million-barrel rise, due to higher demand and lower refinery activity.

In morning trade Friday, Brent crude is down 0.05 percent, at $113.25 a barrel, while copper is down 0.72 percent, at $3.65 a pound. Gold is down 0.50 percent, at $1,661.50 an ounce.

Gold

IAMGold (TSX:IMG,NYSE:IAG) updated its NI 43-101 compliant resource estimate for its Côté project in the Canadian province of Ontario. The new estimate includes an indicated 7.61 million ounces of gold and inferred 1.04 million ounces. The indicated resource is up 114 percent from the company’s previous estimate. As well, IAMGold said that it produced 830,000 ounces of gold in 2012 and expects its 2013 output to rise to between 875,000 and 950,000 ounces.

The company also operates the Sadiola and Yatela mines in Mali through joint ventures. Unrest in that country has not disrupted these operations, though IAMGold has scaled back exploration activity as a precaution, the company also noted.

Newmont Mining (TSX:NMC,NYSE:NEM), the world’s second-biggest gold producer, released a preliminary 2012 production report this week, along with an outlook for 2013. During 2012, Newmont estimates that it produced 5 million ounces of gold and 143 million pounds of copper, down 4 percent and 31 percent, respectively, from 2011.

For 2013, Newmont expects to produce between 4.8 and 5.1 million ounces of gold and 150 to 170 million pounds of copper. The company also plans to spend $2.1 to $2.3 billion on capital expenditures this year. Forty percent of that amount will go toward developing new mines and expanding its existing projects.

Angkor Gold (TSXV:ANK) closed its sale of a portion of its Oyadao tenement in Cambodia for $2.4 million. “The completion of this transaction strengthens our financial position and enables us to expand our 2013 exploration program,” Angkor CEO and chairman Mike Weeks said in the company’s press release.

Oil and gas

Linc Energy (ASX:LNC) shares jumped 30 percent on Thursday after the company said that two independent consultants estimate that its 100-percent-owned Arckaringa Basin property in Australia could contain 103 to 233 billion barrels of oil equivalent.

However, the consultants urge caution, and wrote in a section of the report quoted by The Age that the estimate is still highly speculative. “There is no certainty that any portion of the prospective resources estimated herein will be discovered,” they stated. “If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.”

Major oil field services firm Baker Hughes (NYSE:BHI) reported that its fourth-quarter operating profits fell 36.3 percent from a year ago to $211 million, or $0.48 a share. Revenue slipped 1.4 percent, to $5.2 billion. The company continues to struggle with low natural gas prices, which are decreasing the need for drilling rigs in North America, though that’s being partly offset by higher demand from overseas, the Financial Post noted. In response, Baker plans to cut its capital expenditures by 30 percent in 2013.

TransCanada’s (TSX:TRP,NYSE:TRP) Keystone XL pipeline received the governor of Nebraska’s approval this week after the company rerouted the line to avoid the state’s environmentally sensitive Sandhills region. Governor Dave Heineman had previously opposed Keystone due to concerns that the pipeline could leak and contaminate the Ogallala aquifer, according to the Financial Post. The US government is currently deciding whether to approve the company’s revised plan.

Copper

First Quantum Minerals (TSX:FM,LSE:FQM) reported that its copper production jumped 16 percent in 2012, to 307,115 metric tonnes (MT). Gold output gained 15 percent, to 201,942 ounces, and nickel production soared 549 percent, to 36,759 MT. For 2013, First Quantum expects to produce between 302,000 and 330,000 MT of copper, 190,000 to 215,000 ounces of gold and 40,000 to 45,000 MT of nickel.

The company continues to pursue its C$5.1-billion bid for Inmet Mining (TSX:IMN). However, earlier this week, Inmet advised its shareholders to reject the offer because it undervalues the company. Inmet produces copper and zinc at mines in Turkey, Spain and Finland. It also holds 80 percent of the Cobre Panama project in Panama, which is under construction.

Atico Mining (TSXV:ATY) shares jumped from $0.66 to as high as $1.01 on Thursday after the company said it had discovered a “significant new massive sulfide body” at the north end of known mineralization at its El Roble mine project in Colombia. This new discovery extends for 360 meters along strike and 250 meters below the mine’s production level.

The company also released results from its latest drilling at the site. Highlights include 119 meters containing 6.9 percent copper and 6.3 g/t gold.

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