Gold and silver both showed decent strength throughout the Far East and into the European trading day on Tuesday. However, a few minutes before 8:00 a.m. New York time, the boys showed up and the waterfall declines were underway.

The base metals were mostly in the red on Tuesday. Copper peaked shortly after the New York open, but sagged from there, only to rally late in the day to return from whence it came, finishing at $3.7923/lb., down two-tenths of a cent.

Nickel fell, but not that dramatically, as it closed just off its intraday low at $9.1822/lb., down less than 4¼ cents. Zinc pushed to near $0.86 in the pre-dawn hours, but faded, ending at $0.8263/lb., down just over a penny. Aluminum slipped to $1.3505/lb., also off just over a penny, while lead shot straight up in the pre-dawn hours, then held its gains, adding better than 4 cents, to $0.9708/lb.

Copper was sluggish, but held its ground amid supply worries.

Demand exceeded output by 108,000 metric tons through April of this year, as mine production fell in Australia, Indonesia and Chile, the International Copper Study Group said.

Additionally Freeport McMoRan, the second-biggest producer, said copper sales this year will be 2.4% less than projected in April, citing output declines. The company cited production delays at its new Safford mine and output at the Morenci pit that trailed expectations. Both sites are in Arizona.

Richard Adkerson, Freeport’s CEO said that the “copper market continues to be tight” and that mining companies are “challenged” to meet production targets. Adkerson claimed that higher production costs, especially for fuel, have created a “barrier” to increasing mine output.

Small wonder that analysts at Barclays Capital (BARC) in London were writing that, “The picture for copper supply growth remains bleak.”

Meanwhile lead, which had been in the doghouse for ever so long, has been showing definite signs of new life on supply concerns and some sentiment that the selloff may have been overdone. Lead inventories monitored by the LME fell 650 tons yesterday, to 91,375 tons. They’re down about 10% since July 9.

Chinese exports of refined lead dropped 96% in June and 80% over the first half. “Net lead exports to the west from China were at their lowest this decade in June,” said Nick Moore, of ABN AMRO. “China is the largest producer and consumer of lead so anything out of there tends to feed in quite quickly.”

And Alex Heath, of RBC Capital Markets noted that, “Lead consumption is growing on demand for batteries in both India and China … The car industry as a whole, in terms of western producers, is flagging, but people still need new batteries for their old cars.”

Source: Base Metals Mostly Lower, but Lead is on a Tear as Inventories Skid

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It was more of the same during Monday trading on the resource-rich Canadian markets as the big board stocks continued to recover, while the junior bourse continued to sink. For the tale of the tape, the TSX Exchange added 1.19%, while the TSX Gold Index added 1.3% and the TSX Venture Exchange, Canada’s largest junior exploration bourse, fell 0.48% with the declining issuers beating out the advancers by a 552 to 356 margin on volume of 156 million shares traded.

It was a rough day for high flying Goldsource (GXS) as the diamond explorer turned accidental coal finder released results of its first drill hole following the April discovery of coal in Saskatchewan. Having rocketed from around C$0.20 to over C$19 bucks a share on two drill holes perhaps a correction was warranted. The latest result was collared 1.3-km south of the initial holes and essentially duded. Goldsource ended the day down C$6.75 to close at C$6 even.

The area players also sold off, with Bitterroot Resources dropping C$0.175 to close at C$0.405.

On the takeover front, TransAlta (TA) received a C$39 per share takeover offer from LS Power Equity Partners and Global Infrastructure Partners. TransAlta ended the day up C$4.87 at C$37.12.

Western Copper (WRN) completed the first permitting step for its Carmacks copper project in the Yukon with the Environmental and Socio-economic Assessment Board final screening report and recommendation. Western ended the day up C$0.03 at C$1.29.

The junior board has lost ground for six consecutive weeks and based on the start of this trading week it looks like its losing streak could well remain intact. We will see what Tuesday trading has in store.

Source: Resource Stock Round Up Tuesday July 22, 2008