Copper Rises on Hopes of Strike Settlement

Updated from 12:36 p.m EDT

Copper prices surged Thursday on the expectation that a major mining strike in Chile soon would be over.

Meanwhile, an $8.6 billion merger between gold miners and gains in gold prices were giving a lift to gold stocks.

Workers at Chile's massive Escondida mine, who walked off the job on Aug. 7, were set to vote Thursday on a wage package that could get the miners back to work as soon as Friday. The mine, which is majority owned by BHP(BHP Quote - Cramer on BHP - Stock Picks), is currently producing copper ore at about 50% of normal levels.

The Escondida mine is estimated to churn out 8% of the world's copper.

In theory, the potential for increased production should lead to a decline in copper prices. But industry experts attributed the rise in copper to a combination of thin trading and short-covering by speculators who had sold short in anticipation of a settlement and were now closing out their positions.

A short sale is a bet that a commodity or stock will fall in price.

Contracts for December delivery of copper jumped 3% to close at $3.45 a pound, a gain of 10.35 cents on the Comex division of the New York Mercantile Exchange.

"It really was a case of sell the rumor and buy the news," says Mo Ahmadzadeh, president of Mitsui Bussan Commodities, a New York trading company.

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