Weekly Round-Up: Oil and Gas Outpace Other Commodities

Oil and natural gas rose this week, but gold, copper and other base metals gave up some of their recent gains.

Commodities and stock markets rose Thursday after the US Department of Labor reported that the number of Americans filing for unemployment benefits fell by 30,000 last week. However, much of the decline resulted from a significant drop in one unnamed large state — likely California.

Economists were cautiously optimistic about the gain. ‘‘Should this level hold for another week, it would flag a meaningful improvement in October [hiring]’’ wrote Sal Guatieri, a senior economist at BMO Capital Markets, in a note to clients.

At the same time, the US government reported that the country’s trade deficit widened to $44.2 billion in August from $42.5 billion in July on lower exports of oil, chemicals and industrial products. The August figure was roughly in line with economists’ expectations.

Earlier in the week, the International Monetary Fund (IMF) lowered its outlook for world economic growth. The agency now predicts that the global economy will expand at a rate of 3.3 percent in 2012, down from its July forecast of 3.5 percent. The agency sees growth picking up to 3.6 percent in 2013, but that’s also lower than its previous forecast of 3.9 percent.

Separately, the IMF said that its latest research shows that government austerity measures hurt growth more than was previously thought. In light of that, the agency advised that European states tread carefully as they seek to rein in their massive budget deficits.

“It is sometimes better to have a bit more time,” said IMF Managing Director Christine Lagarde. “That is what we advocated for Portugal; this is what we advocated for Spain; and this is what we are advocating for Greece.”

In morning trade Friday, Brent crude is down 1.57 percent at $114.82 a barrel, while copper is down 0.76 percent at $3.72 a pound. Gold is down 0.28 percent at $1,765.60 an ounce.

Gold

AuRico Gold (TSX:AUQ,NYSE:AUQ) is selling its Ocampo mine and some adjacent exploration properties, as well as a 50 percent stake in its Orion advanced development project, to Mexican miner Minera Frisco (OTC Pink:MSNFY). All of these assets are located in Mexico. AuRico will receive $750 million in cash for these properties when the deal closes in December. The company plans to use some of the proceeds to pay down debt and invest in its current operations. AuRico shares jumped 21 percent on the news.

“The sale should substantially improve the company’s balance sheet,” Canaccord Genuity analyst Rahul Paul told The Globe and Mail. “In addition, we expect that the company should have sufficient financial flexibility to initiate a dividend policy in the near-medium term.”

Meanwhile, San Gold (TSX:SGR) announced record production of 27,084 ounces of gold at its Rice Lake mining complex in Manitoba, Canada in the third quarter. The company also said that its mill on the site processed 191,105 metric tons of ore during the period. Average daily mill throughput was 2,077 MT, up 53 percent from a year ago. The company said it remains on track to meet its forecast production of 95,000 to 105,000 ounces of gold this year.

Oil and gas

Chevron (NYSE:CVX) shares fell 4.2 percent on Wednesday after the company said that its earnings in the current quarter will be “substantially lower than second quarter 2012.”

The company was hobbled by operational problems in the first two months of the third quarter: its US production fell by 19,000 barrels a day during that period, largely because Hurricane Isaac shut down its operations in the Gulf of Mexico. As well, its international output declined by 87,000 barrels per day due to planned maintenance at its operations in the UK and Kazakhstan.

At the same time, the company’s refinery business continues to recover after an August fire cut capacity at its Richmond, California refinery by 92,000 barrels a day. The company is currently making repairs, but it expects the operations that were damaged by the fire to remain offline until the end of 2012.

Copper

Vale (NYSE:VALE) has started production at its new Lubambe mine in Zambia. When it reaches full capacity, the company expects Lubambe to produce 45,000 MT of copper concentrate a year. The new mine is part of the Brazilian major’s plan to increase its copper production to 1 million MT a year by 2016.

International Enexco (TSXV:IEC,OTCQX:IEXCF) announced a big increase in the size of the deposit at its Contact copper project in Nevada. According to the company’s updated resource estimate, which it released on Wednesday, Contact contains 1.06 billion pounds of copper in the measured and indicated categories — up 49 percent from its previous estimate — as well as an inferred 340.4 million pounds. Enexco is continuing its exploration drilling on the property and is currently working on a feasibility study for a mine at the site.

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