Bloomberg reported that Output at Collahuasi mine in Chile, the world’s largest producer, will likely be cut following an “incident” that involved electrical equipment, according to a union leader. This comes at a time when China’s imports of the metal surged to record levels for a fifth month in June.

“A lot of fund money has been flowing into the copper market in China,” Wang Zhouyi, analyst at China International Futures (Shanghai) Co., said yesterday. “Many investors are very optimistic about economic recovery and so any news about potential output shortfall is good news for the market.”

The damage at Collahuasi, which is controlled by Xstrata Plc (LON:XTA) and Anglo American Plc (NASDAQ:AAUK), is being assessed, a Xstrata spokeswoman said yesterday. The mine produced 415,000 tons of copper last year.

In company specific news, Reuters reported that a Chinese firm plans to invest about $3.6 billion in copper exploration and mining in Zambia, reflecting growing Chinese interest in the country’s mineral wealth, a senior investment official said yesterday.

Zambia Development Agency (ZDA) Spokeswoman Margaret Chimanse said Zambia and Zhonghui Mining Group signed an investment agreement on Tuesday.

“The $3.6 billion will be invested by Zhonghui in the first five years (from 2009) and it is likely to be increased depending on economic factors affecting the copper industry,” Chimanse told Reuters.

Source: Copper Hits New High for Year

Fresnillo PLC has withdrawn its offer to buy Mag Silver. Fresnillo has not been able to conclude the independent valuation of Mag required under applicable Canadian securities laws in order to permit the offer to proceed and it is not clear to Fresnillo when or if this will happen. Mag ended the day down C$0.23 at C$5.32.

Victoria Gold bucked the downward trend after reporting a drill intercept of 2.5 grams gold per tonne over 274.3 metres at is Helen zone on the Cove project in north-central Nevada. Victoria added C$0.01 to close at C$0.39.

Shares of Andean American Mining fell C$0.055 to C$0.235 after the company reported that its Invicta project has a projected capital cost of $65.3 million with a net present value at an 11 per cent discount rate of the five-year free cash flow net of debt amortization of $159-million. All this using a gold price of $900 per ounce and copper price of $2 per pound.

Worries that the global economic recovery will be slower than some had been anticipating put pressure on resource stocks. Will we get the usual rebound on Tuesday or will the selling continue? We will see.

Source: Resource Stock Roundup: Tuesday, June 23rd, 2009

Nickel peaked above $5.50 before it too declined, but it managed to eke out a gain late, closing at $5.3206/lb., up just over a penny. Zinc traded mostly sideways, ending at $0.6744/lb., up less than a half-cent. Aluminum also wound up at $0.6744/lb., down less than a quarter-cent, while lead posted a modest gain to $0.6362/lb., up just under a penny.

Copper backed off its gains, falling from a 2-week high as declining equities and a strengthening dollar were the main drivers of the day, along with perhaps a bit of profit taking after several days of higher prices. The metal had moved up12% in the previous four sessions on speculation that manufacturing will rebound.

As one trader commented, “We’ve moved up for the last couple of days and I’d say it’s probably profit taking. But I don’t think the selling was based on anything too noteworthy.”

Volume was light, and with London closed on Monday, some traders see a market mood where holiday mode persists for a few more days.

In any event, the supply situation continues to be supportive. Copper inventories monitored by the LME dropped again yesterday, falling by 3,775 metric tons, to 394,925 tons.

But, “Prices have reached a top,” wrote Eliane Tanner, an analyst at Credit Suisse Group (NYSE:CS) in Zurich. She predicted a drop “in the weeks ahead.”

Citigroup analysts agreed, writing that, “Copper has run way ahead of its fundamentals.”

In company news, Xstrata (LON:XTA) reported that copper output in the first quarter of 2009 fell 1.3% percent from the same period a year earlier, to 217,092 metric tons, while production of coal, nickel, platinum and zinc in concentrate all rose.

Source: Traders Await Inventory Figures

Nickel started down earlier, but was off as sharply, closing at its intraday low of $4.9872/lb., down almost 16 cents. Zinc followed a similar path, shedding 2 cents, to $0.6247/lb. Aluminum was modestly lower, ending at $0.6408/lb., down less than a half-cent, while lead fell to its intraday low of $0.6478/lb., down 2 cents.

Copper led the other industrial metals deep into the red, as the unemployment numbers out yesterday had traders questioning the possibility of economic resurgence anytime soon, and many decided to cash out recent gains.

“Copper’s price correction was exacerbated by earlier losses in equity markets and data showing a further deterioration in the labor and housing sectors of the economy,” said Sterling Smith, of FuturesOne in Chicago.

Peter Boockvar, equity strategist at Miller Tabak & Co in New York, commented that, “The (housing) data shows a market that still remains somewhat in the doldrums. We’ve seen … purchase data [that] shows weakness outside of foreclosures.”

And from a technical viewpoint, there has been a “correction from the triple-top chart formation last week below $2.25 a lb.,” noted John Gross, publisher of the Copper Journal.

However, the stockpile data continue to be strongly supportive. Copper inventories monitored by the LME plunged again yesterday, falling by 9,625 metric tons to 440,475 tons.

RBC Capital Markets sees copper “supported near $2.00 a lb.,” citing those “steady inventory declines” along with “rising Chinese imports, expectations of higher growth prospects in China, high physical premiums in China, [and] a recent shift in London Metal Exchange (LME) spreads into backwardation.”

In company news, Xstrata (LON:XTA) said yesterday its copper-gold project in southern Philippines will require an initial outlay of $5.2 billion to develop, according to the results of its pre-feasibility study. The mine is estimated to contain 12.8 million tonnes of copper and 15.2 million ounces of gold.

And Potash Corp. (NYSE:POT) of Saskatchewan, the world’s largest fertilizer producer, said 2009 profit will be less than it previously expected after North American sales of the crop nutrient reached “a virtual halt.”

Source: Industrial Metals All Bleed

Silver Wheaton (NYSE:SLW) has stepped up to the plate and is offering up 0.185 of its shares for each share of Silverstone Resources. The proposal values Silverstone at C$1.59 per share. In return, Silver Wheaton gains Silverstone’s silver stream agreements with Capstone Mining’s Minto copper-gold-silver mine in Yukon and its Cozamin copper-silver-lead-zinc mine in Mexico. Silver Wheaton closed the day at C$8.08 for a C$0.14 gain and Silverstone closed C$0.20 higher at C$1.45.

Largo Resources came out with an updated resource model for the Northern Dancer tungsten-molybdenum project in the Yukon. The latest tally shows measured resources of 30.8 million tonnes grading 0.114% WO3 and 0.030% molybdenum, indicated resources of 192.6 million tonnes grading 0.100% WO3 and 0.029% molybdenum and an inferred resource of 201.2 million tonnes grading 0.089% WO3 and 0.024% molybdenum. Largo ended the session down C$0.005 at C$0.075.

Donner Metals discovered massive sulphide mineralization in the Daniel-1 area just 16 kilometres northwest of Xstrata’s operating Perseverance mine and 26 kilometres northwest of the Matagami mill in Quebec. The discovery hole returned 3.95 metres grading 2.20 per cent copper, 0.09 per cent zinc, 8.8 grams silver per tonne and 0.25 gram gold per tonne. Donner closed flat at C$0.16.

Optimism that the worst of the economic turmoil is over had investors bidding up equities for the third straight session. We will see what Friday trading has in store.

Source: Resource Stock Roundup: Friday, March 13th, 2009

European stocks ended higher on Friday, as buoyant pharmaceutical shares eclipsed a drop in cyclical mining and industrial sectors hit by renewed economic fears, while energy shares tumbled along with oil.

The FTSEurofirst 300 index of top European shares closed 1.1 percent higher at 862.07 points.

Although it gained 13 percent during the week, the index dropped 7 percent in November, recording a ninth month of losses in what has been a torrid 2008 for equities worldwide.

Pharma stocks made strong gains on Friday, with GlaxoSmithKline up 5.1 percent and Sanofi-Aventis up 4.5 percent. Novartis , whose CEO said the company could increase its dividend and also resume share buybacks once it has reduced its debt, gained 4.4 percent.

The sector rallied after the publication of a long-anticipated EU report on generic competition. Although Competition Commissioner Neelie Kroes said preliminary results showed competition in the pharmaceuticals industry “does not work as well as it should”, traders said the absence of specific penalties in the report brought some relief to pharma stocks.

Energy firms such as Total and BP dropped 0.7-2.6 percent as oil prices sank below $52 a barrel on signs OPEC would defer cutting production when it meets this weekend in Cairo.

Industrials were also among the biggest losers, with Siemens down 3.8 percent and Alstom down 6 percent.

Despite the market’s recovery during the week, analysts remain wary about a potential “Christmas rally” this year.

“The volatility is not about to come down immediately. The economic newsflow is just too horrible. It’s too early to call for a straight market rally at this point,” said Arthur van Slooten, strategist at Societe Generale, in Paris.

“With deflation fears, risky assets have been pricing in the worst. But it doesn’t mean that all of a sudden, from now on you have a straight way up. We know that the newsflow will be terrible, but we need at least some sort of indication that the bottom is maybe in sight,” he said.

“Next year’s first quarter will really look awful in terms of macro data and with analyst further downgrading their estimates and companies finally becoming realistic in their own guidance. That in itself could provide us with a sound basis to build from there.”

Miners took a beating on Friday, adding to recent sharp losses. Anglo American shed 2.4 percent and Xstrata dropped 3 percent.

Prices for copper, a key industrial metal, slipped as tumbling industrial production data from Japan highlighted bleak prospects for demand in an oversupplied market, while prices for aluminium also fell, hit by the rising fears about the health of the embattled auto sector.

“There is little doubt that the outlook for metals demand is grim for at least the next few quarters and prices have fallen to levels that reflect market expectations for further stock increases,” Barclays Capital said in a note.

Automakers lost ground, with Volkswagen down 5 percent, BMW off 3.4 percent and Renault down 4.8 percent.

“Going into the weekend, one can’t help but worry that we are only a heartbeat away from the next scare story,” said Chris Hossain, senior sales manager at ODL Securities.

“The markets appear to have been buoyed by the feeling that the U.S. will be bailing out the auto industry, but one has to wonder how much more the global governments can continue to support troubled industries,” he added.

Around Europe, Germany’s DAX index eked out a gain of 0.1 percent, UK’s FTSE 100 index rose 1.5 percent and France’s CAC 40 added 0.4 percent.

By Blaise Robinson
PARIS, Nov 28 (Reuters)

This from Taipan Daily’s Emerging Markets blog:

Right now, copper spot prices are an anemic $1.65 per pound. That’s an amazing drop from above $4 back in June.

And yet, one Chilean copper mine is actually expanding.

The mine is called Dona Ines de Collahuasi. It’s Chile’s third largest copper mine and is located in an historical copper mining area. Back in 1880, a large, high-grade copper and silver vein was found. It’s one of the world’s largest copper resources.

Right now, the mine produces roughly 440,000 tons of copper a year.

But the mine has just approved a $64 million project that will increase annual output by 30,000 tons. And that’s just the first expansion.

At the end of the first quarter of 2009, a $750 million expansion plan will boost production to 650,000 tons a year. After that expansion is complete, the mine intends to increase production to a full one million tons of copper a year by 2014.

That’s an astounding move.

And one that will need some major financial backers, particularly if copper prices don’t recover. It’s a good thing some big companies own this mine.

I’m talking about Anglo American (Nasdaq:AAUK) and Xstrata (LON:XTA), each with a 44% stake. There’s also a Japan’s Mitsui (Nasdaq:MITSY), owning 12%.

The CEO of the mine, Jon Evans, told the newspaper Diario Financiero, “The mid and long-term plans are the same, therefore our expansion plans are also the same.” Which may pay off in the long run… If it can survive depressed copper prices.

And copper prices have continued to fall, despite a huge cash injection by China to its economy. China is the largest user of many of the industrial metals, like iron ore, aluminum, zinc, and, of course, copper.

So with China’s economy slowing (albeit to 7.5%), the country will use less of those materials.

Now, China’s been part of the reason why copper prices had more than doubled since 2002. If Chinese demand continues to slow, that could mean a long time before we see copper prices begining to climb again.

Which would mean that Anglo American, Xstrata and Mitsui will have to wait for the returns on these major expansion.

But it would also mean that they’d be ahead of the game once things begin to turn around… If they can afford it.

Source:Copper: Chilean Investment Still Expanding

Three days before the Xstrata (London:XTA) bid deadline, and Lonmin (London:LMI) has rolled over into the corporate equivalent of the fetal position.

Lonmin CEO Brad Mills bowed out of his position today by “mutual consent” according to the company, which Mills led for the last four and a half years through safety stoppages, labor strikes and power outages in its South African platinum mines.

Whether culpable or not, Mills has been blamed for a 29% decrease in output at Lonmin’s mines, and the market is expecting even worse numbers coming from the miner soon. It’s fiscal year ends tomorrow, and things are looking grim.

The former CEO said Xstrata’s $9.1 billion bid for his company undervalued Lonmin, but the market would beg to differ. Currently, LMI shares are running around 21 pounds ($38.00) about a third less than the all-cash offer of 33 pounds ($59.51) per share.The market is certainly betting against the buyout, but it would be the best thing to happen to Lonmin. The company can’t seem to get production up without help. It’s watched the price of platinum fall 52% since March, and it’s liabilities are mounting against any possible profits.

Lonmin’s new CEO, Ian Farmer, is a chartered accountant who joined the company in 1986 and worked as a director and chief strategic officer before taking the CEO position. Doesn’t he already sound like a good subsidiary president for Xstrata?

But the real question now is not whether Lonmin will accept the offer, but whether Xstrata will make the offer at all. Will Xstrata walk away or rescue Lonmin from oblivion? We’ll have to wait and see.

Source: Will Xstrata (XTA) fill vacuum left by Lonmin (LMI) CEO?

Nickel was tightly traded within a 15-cent range for the second straight day, closing about in the middle at $8.3552/lb., down 3½ cents. Zinc featured a modest uptrend, ending at its intraday high of $0.7787/lb., up a penny. Aluminum also fared well, rebounding from a mid-morning selloff to nearly regain its intraday high at $1.1671/lb., up a penny and a quarter, while lead edged slightly higher at $0.8052/lb., up a third of a cent.

Copper managed a positive finish for the first time in five sessions as supply concerns ruled the day.

A magnitude 5.8 earthquake hit Chile’s far north, near the country’s largest copper mining areas, and whenever that happens traders tend to get nervous.

However, the big Collahuasi mine, jointly owned by Xstrata Copper (XTA) and Anglo American was apparently spared. “The mine was not affected at all,” said Hernan Farias, a union leader at Collahuasi. “Operations are running normally.”

Analysts also noted that there was a good measure of short covering in copper yesterday.

In company news, Freeport-McMoRan Copper & Gold (FCX) said it expects recent lower copper prices to result in a $100 million reduction in its third-quarter net income. At the same time, the company announced a reduced 2008 copper production outlook, due to problems at its flagship Grasberg mine in Indonesia.

Freeport said that initial estimates indicate about 150 million pounds of copper and 200,000 ounces of gold previously expected to be mined in 2008 will be deferred to future periods.

But, “Whatever they (Freeport) announce right now I don’t believe will have any dramatic impact on prices unless or until we see an impact on the global fundamentals,” said John Gross, publisher of the Copper Journal.

Source: Base metals steady - Chile quake supports copper.

Nickel pushed almost back to the $9 mark in early New York trading, but tumbled along with copper, closing at its intraday low of $8.6485/lb., down 11½ cents. Zinc moved up and, tho it hit the morning selloff, managed to end in the black at $0.8055/lb., up more than a penny. Aluminum was up and down sharply a couple of times, to little effect as it added just a tenth of a cent, to $1.1904/lb., while lead gave up substantial morning gains, shedding a penny and two-thirds, to $0.8617/lb.

Copper was hit by economic concerns as well as persistently high stockpiles. Inventories monitored by the LME now stand at 182,000 metric tons, the highest level since January.

“I think the sentiment still remains pretty vulnerable,” said analyst Sudakshina Unnikrishnan at Barclays Capital. “The concerns still remain on board about how the global economy is developing. Concerns about the slowdown and how that links back to demand are pretty much in place.”

Gerard Burg, an analyst at the National Australia Bank, added that, “There are still grey clouds over the United States and Europe … The trend for metals is down. The global economy is looking softer than in some years and supply is moving into surplus for some of these metals.”

Lead got hammered as the dollar strengthened. Prices had risen as much as 3.8% after the LME reported another 450-ton decline in inventories, to 78,700 metric tons, the lowest level since June 12.

In company news, the UK’s Panel on Takeovers and Mergers has told Xstrata CEO Mick Davis to “put up or shut up” by October 2 on the firm’s pre-conditional offer for platinum group metals producer Lonmin (LMI). Lonmin sought a ruling after Xstrata (XTA) made its hostile offer of ₤33 a share, which Lonmin rejected out of hand, on August 6.

The Panel ruled that, by 5pm on 10/2, Xstrata must either announce a firm intention to make an offer for Lonmin or announce that it does not intend to make an offer. If Xstrata does not commit to making an offer by the deadline, it will effectively be precluded from doing so for the next six months.

Source: Base metals treading water -  Still seen as highly vulnerable.