The US central bank sent commodities into a tailspin with talk of easing monetary stimulus, while ExxonMobil received approval for a key acquisition.
The main catalyst was the release of minutes from the Federal Reserve’s latest meeting, at which some members of the central bank’s Federal Open Market Committee favored slowing or ending the Fed’s current quantitative easing (QE) program. Under QE, the Fed is attempting to stimulate the economy by purchasing $85 billion of securities a month on the open market.
The news sent gold tumbling on Wednesday, though it regained much of that ground on Thursday. Ending or moderating the program would be the latest indicator of a continued rebound in the US economy. That’s bearish for gold, which is traditionally seen as a safe haven in stormy economic times. At the same time, investors worry that slowing QE will weaken the recovery, lowering demand for oil, as well as copper and other base metals.
“The economy is in a holding pattern. It’s not going to strengthen sufficiently to justify an end of the current program,” TD Senior Economist Millan Mulraine told Reuters on Thursday.
Meanwhile, the European Commission predicted that the Eurozone’s economy will contract by 0.3 percent in 2013, down from its earlier forecast of 0.1-percent growth. If that forecast comes to pass, it will mark the first time that the area’s output has shrunk for two consecutive years, according to Bloomberg. The Commission also cut its growth forecast for the region’s largest economy, Germany, to 0.5 percent from 0.8 percent.
However, in a positive sign, Germany’s business climate index rose to 107.4 in February from 104.3 in January. That marks the fourth consecutive month of gains and the biggest increase since 2010, suggesting that investor sentiment continues to improve in the country.
In morning trade Friday, Brent crude is up 0.18 percent, at $113.70 a barrel, while copper is down 0.53 percent, at $3.53 a pound. Gold is down 0.31 percent, at $1,573.70 an ounce.
AngloGold Ashanti (NYSE:AU), the world’s third-biggest gold producer, reported adjusted earnings of $924 million, or $2.39 a share, in 2012. That’s down from $1.3 billion, or $3.36 a share, in 2011. The decline was largely due to strikes at the company’s South African mines, which lowered its production to 3.94 million ounces in 2012 from 4.33 million ounces in 2011. This year, the company expects its output to rise to 4.1 to 4.4 million ounces.
Detour Gold (TSX:DGC) poured its first gold bars at its 100-percent-owned Detour Lake mine in Ontario this week. The company produced four bars containing approximately 2,000 ounces of gold, according to its press release. Detour expects the project to produce an average of 657,000 ounces annually over its 21.5-year life.
Oil and gas
ExxonMobil (NYSE:XOM) received approval from the Canadian government for its takeover of Celtic Exploration (TSX:CLT), according to a Celtic press release. The $3.1-billion deal, which was originally announced on October 17, 2012, gives Exxon 545,000 acres in British Columbia’s Montney shale gas field and 104,000 acres in Alberta’s Duvernay shale. These properties currently produce 72 million cubic feet of natural gas per day and 4,000 barrels per day of condensate and natural gas liquids. Once the purchase closes, Imperial Oil (TSX:IMO), which is 70-percent owned by Exxon, will buy 50 percent of Celtic for $1.55 billion.
Anadarko Petroleum (NYSE:APC) expects to spend between $7.2 and $7.6 billion expanding and upgrading its projects this year, including its onshore holdings in the US, such as the Eagleford shale and Permian Basin; appraisal wells in the Gulf of Mexico; and overseas development projects in Ghana, Algeria and Mozambique. In all, Anadarko expects to sell 279 to 285 million barrels of oil equivalent this year, including oil, gas and natural gas liquids. Anadarko sold 268 million barrels in 2012, according to the company’s latest results.
Elsewhere, a Brazilian judge has dropped criminal charges against Chevron (NYSE:CVX) and Transocean (NYSE:RIG) over a November 2011 offshore oil spill in that country, Reuters reported. However, a civil suit against the companies remains open. That action, which seeks as much as $40 billion reais (US$20.4 billion), is the largest environmental lawsuit in Brazil’s history.
Inmet Mining (TSX:IMN) reported its latest quarterly results this week. The company 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, which is expected to start up in 2016.
In the fourth quarter, Inmet produced 111,700 metric tons (MT) of copper and 66,300 MT of zinc, both of which topped the company’s targets. The increased production helped push up Inmet’s sales by 11 percent from a year earlier, to $259.9 million. However, net income fell 18 percent, to $38.2 million, or $0.56 a share, mainly due to foreign exchange losses.
The company continues to be the target of a hostile takeover offer from First Quantum Minerals (TSX:FM). This week, Inmet said it will not enact its shareholder rights plan because the offer’s February 27 expiry date “provides sufficient time for the full review and potential execution of all strategic alternatives being evaluated by the Inmet board and its special committee.” Shareholder rights plans typically make it harder for an acquirer to gain a large stake in a company, often by letting current shareholders buy stock at a discount after a bid is launched.
Peru’s Antamina mine is forecast to produce 450,000 MT of copper in 2013, Mineweb reported. That would roughly match the project’s 2012 output. Antamina, which is in the Andes mountains about 270 kilometers northeast of Lima, is the world’s third-largest zinc and copper mine. Xstrata (LSE:XTA) and BHP Billiton (NYSE:BHP,ASX:BHP,LSE:BLT) each hold 33.75 percent stakes. Teck Resources (TSX:TCK.B,NYSE:TCK) owns 22.5 percent and Japan’s Mitsubishi (TSE:8058) holds the remaining 10 percent.
Securities Disclosure: I, Chad Fraser, hold no positions in any of the companies mentioned in this article.