Weekly Round-Up: US Election Shakes Up Commodities

Oil is ending the week roughly where it closed last Friday, while copper moved lower in the wake of US President Barack Obama’s re-election. Gold initially declined in response to the result, but has since rallied to close the week higher.

Stock markets also fell sharply: on November 7, the day after election, the Dow Jones Industrial Average ended the session at 12,932.73 points, down 2.4 percent from Wednesday’s close. It has since declined to around 12,830.

Many analysts now feel that gold will move higher, at least in the short term, due to uncertainty about the approaching “fiscal cliff” — an array of tax hikes and spending cuts that are set to kick in on January 1 unless Congress and the president can strike an agreement to avert them. The ongoing Eurozone debt crisis will also play a role.

“Now, with the certainty of the election results and four years of economic and monetary policy similar to the past four, higher gold prices seem both inevitable and imminent,” Brien Lundin, editor of Gold Newsletter, told MarketWatch.

In morning trade Friday, Brent crude is up 0.76 percent at $108.07 a barrel, while copper is down 1.11 percent at $3.43 a pound. Gold is up 0.33 percent at $1,731.70 an ounce.

Gold

Centerra Gold (TSX:CG) reported revenue of $68.8 million in the latest quarter, down 75.3 percent from a year ago. The company lost $46.8 million, or $0.20 a share, compared to a profit of $83.7 million, or $0.35 a share, in the third quarter of 2011. Excluding unusual items, Centerra lost $0.10 a share, which was still ahead of the consensus forecast of a $0.21-a-share loss.

The company produced 42,723 ounces of gold in the quarter, down sharply from 154,936 ounces a year earlier. The decline reflects a seven-week shutdown for scheduled and unscheduled maintenance at the mill at the company’s Kumtor mine, as well as lower grades and recoveries. As a result, the company’s total cash cost per ounce of gold produced rose to $1,401 from $556 a year ago.

On a positive note, Centerra said it has expanded Kumtor’s reserves by 58 percent, to 9.7 million ounces. That will add five years to the mine’s life.

Geologix Explorations (TSX:GIX,OTCQX:GIXEF) announced initial results from its drilling program at its Tepal gold-copper project in Mexico. The company designed the program to test the potential of several new zones on the property.

In Target Area #3, results include hole TEP-12-134 which returned 30 meters grading 0.46 g/t gold, 26.8 g/t silver and 0.43 percent copper. Another highlight was hole TEP-12-132, which returned 8 meters grading 0.92 g/t gold, 39.1 g/t silver and 0.11 percent copper.

In light of these results, the company said it will return to the area for further drilling.

Eagle Hill Exploration (TSXV:EAG) announced additional assay results from drilling at its Windfall Lake property in Quebec.

The company’s drilling included hole EAG-11-311, which was extended to a length of 1,037 meters to test gold mineralization below the known Red Dog intrusion. The hole returned 24.46 g/t gold over 7.4 meters at a vertical depth of 785 meters. The company interprets this intercept as the western extension of a similar zone intercepted by hole EAG-12-320, located 150 meters to the east. That hole returned 16.3 g/t gold over 2.5 meters.

Nearer to the surface, in the eastern section of the deposit, hole EAG-12-423 intersected 2.82 g/t gold over 14 meters at a depth of only 15 meters. That result included 10.49 g/t over 3.5 meters.

Oil and gas

The Organization of the Petroleum Exporting Countries (OPEC) released its annual World Oil Outlook this week. In its report, the cartel forecasts that global oil demand will rise from 87.8 million barrels per day (bpd) in 2011 to 92.9 million bpd in 2016. Even with the rise, the 2016 figure is down over 1 million barrels from last year’s outlook. By 2035, OPEC sees demand rising to 107.3 million bpd — down 2 million barrels from last year’s report.

Rising North American shale oil production is playing a bigger role in OPEC’s forecasting. The cartel sees oil supplies from outside OPEC countries rising from 52.4 million bpd in 2011 to 56.6 million bpd in 2016.

OPEC expects its benchmark basket of the crude oils it exports to remain around $100 a barrel in the medium term, rising to $120 by 2025 and $155 by 2035.

TransCanada (NYSE:TRP,TSX:TRP) won a contract to build a 530-kilometer pipeline for the Comisión Federal de Electricidad (CFE), Mexico’s federal power authority. The line, which will be capable of carrying 670 million cubic feet per day, will feed the country’s growing number of natural-gas-fired power plants. TransCanada expects the project to cost roughly $1 billion, with start up slated for 2016. The company has also signed a 25-year gas transportation service contract with the CFE.

“This project is a response to a CFE invitation to bid,” said TransCanada’s president and CEO, Russ Girling. “As Mexico makes the transition from fuel oil to cleaner-burning natural gas, there will be additional opportunities for TransCanada. These opportunities are consistent with our strategy to build long life infrastructure underpinned with long-term contracts.”

Copper

Yellowhead Mining (TSX:YMI) announced that it has completed the first part of a previously-announced non-brokered private placement. The company issued 7,692,307 common shares to one investor for $0.65 each, for gross proceeds of roughly $5 million. The company also paid a $250,000 finder’s fee.

Yellowhead is focused on exploring and developing its 100-percent-owned Harper Creek copper-gold-silver property in British Columbia. “The management team will now continue with the critical path items, permitting, BC Hydro initiatives and continued resource development through an aggressive drilling program to commence immediately,” said Yellowhead’s chairman and interim CEO, T. Greg Hawkins.

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