The copper price may have dipped during Wednesday trading hours, but there were fresh worries over the situation in Peru as miners in the country began a two-day strike.
A state of emergency was declared in the Peruvian state of Arequipa on Friday following two months of violent protests at Southern Copper's (NYSE: SCCO) Tia Maria copper project. Development at Tia Maria was put on hold for two months beginning on May 15. Now, unions and other organizations in a number of states are supporting farmers who oppose the project through a 48-hour strike. MetalBulletin reported that unions and other organizations in Arequipa, Moquegua, Tacna and Ayacucho will strike in support of the protest, while those in Cusco and Puno will hold demonstrations, but won't strike. According to Carlos Galvez, president of Peru's National Society of Mining, Petroleum and Energy, and SFO of Cia. de Minas Buenaventura, Peru's largest precious metals producer, violence in the country could stymie Peru's goal to move up the list of top copper-producing countries as investment in the country is threatened and new projects are delayed. "These people have a clear objective — no economic development — and they're achieving it," he told Bloomberg. "They're opposing projects approved by the state. What's most worrying is that the next step is opposing existing operations." Copper price under pressure While market watchers may have expected conditions in Peru to provide support for the copper price, spot copper fell 0.31 percent on Wednesday, to $2.76 per pound. Meanwhile, the LME copper price dipped 0.4 percent, to $6,083 per tonne, marking the lowest price for the metal since late April, according to Reuters.
A strong US dollar and an uninspiring economic outlook from China are to blame for LME copper's woes. The dollar hit another eight-year high on Wednesday, and Reuters notes that while industrial sector profits in China rose in April, things are still looking fairly lukewarm overall. "Even if you get some early signs which show you some improvement ... the macro story in China doesn't look good," UBS Wealth Management analyst Dominic Schnider told the news outlet.However, Schnider added that UBS is still calling for copper to hit $6,350 in three months. "The only area that is more debatable is the supply side," he said. "Here copper gives you a little bit of an edge." UBS isn't alone in its call for a higher copper price. Five of the world's biggest mining companies have been positive on copper as of late, and Thomson Reuters (TSX:TRI,NYSE:TRI) sees the price moving above $7,000 in the next two years. In any case, copper investors will be watching to see if developments in Peru begin to have an effect on the copper price. Bloomberg notes that protests over Tia Maria are likely to affect other mining investments in Peru, according to a poll conducted by a Lima-based firm. Company news Last Wednesday, Foran Mining (TSXV:FOM) reported on three of six final drill holes at its Bigstone deposit in Saskatchewan. Results include 2.5 percent copper over 53.6 meters; that includes 4 percent copper over 12.3 meters and 2.5 percent copper over 58 meters, including 3.8 percent copper over 15.3 meters. Also last week, Alexandria Minerals (TSXV:AZX,OTC Pink:ALXDF) released an updated resource estimate for its WIM project in Manitoba. The company notes that relative to 2008 estimates, indicated resource tonnages increased by approximately 40 percent, while inferred resource tonnages rose by 64 percent. The indicated resource now stands at 3.9 million tonnes grading 1.71 percent copper, 1.57 g/t gold, 6.81 g/t silver and 0.26 percent zinc, while the inferred resource comes in at 0.732 million tonnes grading 1.03 percent copper, 1.76 g/t gold, 4.65 g/t silver and 0.37 percent zinc.
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article. Related reading: Southern Copper's Tia Maria Project: Social License and the Copper Market Bruce Alway of Thomson Reuters GFMS Talks Copper Prices Copper Price Dips as Peruvian Miners Begin Two-day Strike from Copper Investing News