By Shihoko Goto — Exclusive to Copper Investing News
A slew of major copper producers released their latest production results this week, mo st of which were lackluster. Looking ahead, many companies are cautiously optimistic about global demand, and the recent surge in the overall US stock market is raising hopes that its appetite for the red metal will increase. Worries about Chinese demand and Europe's financial future are keeping the bears at bay.
Strong earnings results from manufacturers in the US have buoyed investor sentiment and enabled market players to shrug off some weaker-than-expected economic data this week, including a fall in existing home sales. That buoyancy has in part been reflected in the copper market. Yet growing anxiety about Europe, this time regarding Spain's financial situation, is putting a damper on copper demand, as are continued worries about China's growth prospects. European copper giant Aurubis (OTC Pink: AIAGF) is nevertheless upbeat about copper's outlook. The German group stated that a rise in US demand as well as a fall in European inventories will likely drive up prices moving forward. "The improved mood regarding the US economy is also seen as a cause, as it could lead to higher copper demand," the company stated in a market report. "Although demand for spot cathodes (newly-produced copper) in North America is currently moderate, the start-up of the inventory reduction has secured quantities for later deliveries." Further, the company said that a delay in South American cathode shipments has led to a fall in European warehouses and driven up prices. However, according to research group Thomson Reuters GFMS, copper is expected to average $8,475 per metric ton in 2012 amid sluggish demand. “There is a continued negative impact on sentiment and consumption from the ongoing euro-zone crisis,” stated Sanjay Saraf, research director for base metals, in Thomson Reuters' latest outlook report. “Recent data and reports from China indicate a cooling economy and subdued demand conditions.” In late afternoon trade Thursday, COMEX copper for May delivery is slightly lower, down 0.1 percent at $3.63 a pound.
Company newsMajor mining groups, including Freeport-McMoRan (NYSE: FCX), the world's largest publicly-trader copper producer, released their latest production results this week. The Arizona-based company reported that copper sales for the first quarter reached 827 million pounds, lower than the 926 million pounds reached a year ago. For the full year, the company projects copper sales to reach 3.7 billion pounds. The company stated that its “growth projects” are expected to increase its copper production “by over 25 percent over the next three to four years,” and added that its Grasberg mine in Indonesia is now operating under normal conditions. Rio Tinto (LSE: RIO) also released its latest production results. Copper output by the mining giant fell 18 percent from a year ago to 119,500 tons, due largely to lower-grade copper from its Utah mine. For the full year, Rio Tinto expects mined copper output to reach about 600,000 metric tons, short of analysts' expectations. Still, Chairman Jan du Plessis told shareholders that the company is “somewhat more confident than six months ago," adding that “[t]he world continues to face considerable uncertainty and we believe this will contribute to ongoing volatility." Robert Friedland, CEO of Ivanhoe Mines (NYSE: IVN), resigned Wednesday to make way for Rio Tinto to take the lead on the Oyu Tolgoi copper and gold mining project in Mongolia. Rio Tinto will be providing an immediate credit facility to the tune of $1.5 billion to ensure that the Mongolian mine's development remains on track, and will also support the completion of a syndicated loan reaching between $3 billion and $4 billion, Ivanhoe stated. As for BHP Billiton (ASX: BHP), it too reported its latest production results. Copper output rose three percent to 281,400 tonnes in the latest quarter. Anglo American (LSE: AAL) reported copper output surging 21 percent from a year ago to 168,400 tonnes, largely due to an expansion of its Los Bronces mine in Chile. Junior company news StrikePoint Gold (TSXV: SKP) has acquired by staking a 100 percent interest in the Pokiok copper and gold property west of Fredericton, New Brunswick. The company reported that 27 reconnaissance rock samples contain sub-economic but anomalous concentrations of metallic minerals including gold, silver, copper, molybdenum, lead, and zinc. Aurcana (TSXV: AUN) reported selling 8,199 tonnes of copper concentrate in 2011, down from 11,891 tonnes the previous year, at the average price of $4.04 a pound, up from $3.50 a pound in 2010.