Weekly Round-Up: Japan Imitates Europe

Commodities are ending the week mostly lower, with gold having dropped particularly sharply to hit a six-month low.

The declines came amid reports of negative growth from two of the world’s biggest economies: Japan and the Eurozone. That hurt prices for both base metals and gold as recessions both cut demand and lower the risk of inflation — reducing the yellow metal’s appeal as a hedge against rising prices.

The gold market was also quiet due to the Chinese Lunar New Year and rising interest in stocks after the S&P 500 rose to its highest level since 2007, Reuters reported.

The Japanese economy contracted by 0.4 percent on an annualized basis in the fourth quarter, according to The New York Times, defying expectations of growth and marking its third straight quarter of contraction. The result was particularly disappointing in light of the decline of the Japanese yen, which has fallen 20 percent against the US dollar since October, making the country’s exports more attractive to foreign buyers. The yen’s decline came as Prime Minister Shinzo Abe, who was elected in November, promised more stimulus spending and monetary expansion, which would likely devalue the currency.

The yen’s devaluation has focused attention on the G20 meeting that is underway in Moscow, at which officials are expected to discuss currency rates; other nations have accused Japan of actively devaluing its currency to gain an advantage in export markets.

“As far as Japan’s position is concerned, all I can say is that the new administration is carrying out monetary and fiscal policy appropriately, with the goal of ending Japan’s long period of deflation,” Finance Minister Taro Aso was quoted as saying in a February 12 Financial Times article.

Meanwhile, the Eurozone economy slipped deeper into recession, contracting 0.6 percent in the quarter, which was worse than the 0.4-percent decline that economists expected, Reuters reported.

In morning trade Friday, Brent crude is down 1.09 percent, at $116.67 a barrel, while copper is down 0.21 percent, at $3.73 a pound. Gold is down 1.93 percent, at $1,604 an ounce.

Gold

McEwen Mining (NYSE:MUX,TSX:MUX) resumed production at its 49-percent-owned San Jose mine in Argentina. The company was forced to suspend operations at the project for two days due to a gastroenteritis outbreak among its employees. McEwen doesn’t expect the shutdown to have a material impact on its full-year output.

Newcrest Mining (ASX:NCM,TSX:NM) saw its profits drop to AU$320 million in the last six months of 2012 from $659 million a year earlier. The company, which is the world’s fourth-largest gold miner by market value, said that its gold production fell 18 percent during the period, largely due to lower grades and a drop in mill throughput. Despite the decline, Newcrest’s latest results still beat the consensus forecast of $299.8 million. The company sees production rising this year due to expansions and upgrades at two of its projects.

Unigold (TSXV:UGD) reported results from five holes that it drilled at the Candelones extension at its wholly-owned Neita concession in the Dominican Republic. Highlights included hole LP 62, which intercepted 102.9 meters grading 1.45 g/t gold. That includes 38.9 meters grading 2.43 g/t gold and 0.78 percent copper, as well as 8 meters at 5.14 g/t gold, 1.05 percent copper and 1.7 percent zinc.

Oil and gas

CNOOC (NYSE:CEO,HKEX:0883) received approval from US regulators for its $15.1-billion purchase of Canadian oil firm Nexen (NYSE:NXY,TSX:NXY). American regulators had a say in the deal because Nexen has operations in the US. The approval is the last requirement the Chinese state-owned company needed to meet to close the deal. The transaction should be completed in the week beginning February 25, according to the BBC.

TransCanada (NYSE:TRP,TSX:TRP) reported that its fourth-quarter comparable earnings, which exclude most unusual items, fell 13.5 percent, to $318 million, or $0.45 a share. That missed the consensus estimate of $0.51. Revenue rose to $2.089 billion from $2.015 billion. Results were held back by outages at its Bruce Power and Sundance A power plants, along with weaker contributions from certain gas pipelines. TransCanada also increased its quarterly dividend by 5 percent, to $0.46 a share.

Talisman Energy (NYSE:TLM,TSX:TLM) earned $376 million, or $0.37 a share, in the fourth quarter, up from a loss of $0.11 a year ago. That easily topped the consensus forecast of $0.16. However, much of that gain resulted from asset sales. Excluding those and other one-time items, Talisman lost $107 million, or $0.10 a share, largely due to lower natural gas prices.

Aroway Energy (TSXV:ARW,OTCQX:ARWJF) produced an average of 1,020 barrels of oil equivalent per day at the end of 2012, up from zero a year earlier. The junior oil-focused exploration and development company owns a producing property in the Canadian province of Saskatchewan, as well as interests in exploration properties in Alberta.

Copper

GoGold Resources (TSXV:GGD) announced new drilling results from its San Diego project in Mexico. Highlights include hole GGS-064, which returned 42.05 meters grading 1.9 percent copper, 190 g/t silver and 0.7 g/t gold. That includes an intercept of 24.1 meters grading 2.08 percent copper, 304.65 g/t silver and 1.03 g/t gold. The company plans to continue its drilling to define additional resources on the property.

NovaCopper (TSX:NCQ,AMEX:NCQ) reported its latest financial results. The company explores for base metals on its Upper Kobuk mineral projects in Alaska’s Ambler mining district. In the year ended November 30, 2012, NovaCopper reported a net loss of $31 million, or $0.67 a share, compared to a loss of 11.3 million, or $0.44, a year ago. The company conducted 17,209 meters of drilling (26 holes) during the 2012 season at a cost of $15.3 million. That was $1.2 million under its planned budget.

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