By Leia Michele Toovey- Exclusive to Copper Investing News
Copper futures fell more than 2 per cent Monday on worries that demand from China, the world’s biggest copper consumer, may slow. Copper for July delivery lost 5.7 cents to close at $2.0885 a pound on the Comex division of the New York Mercantile Exchange. Last Friday, Copper Futures rose as government data showing slowing job losses increased hopes for an economic recovery. Copper for July delivery gained 3 cents, or 1.4 per cent, to touch $2.1945 a pound on the Comex. After peaking at $8,940 per tonne on the LME in July 2008, copper prices plummeted, dropping below $3,000 per tonne in December. Since the start of the year the market has staged a recovery, gaining 54 per cent to hit $4,650 per tonne.
World refined copper demand is expected to fall around 10 per cent in 2009, despite the fact that Chinese demand will grow by an estimated 8 per cent. A drop in global demand exclusive of China will push demand growth into negative territory. China, the world’s largest copper consumer, just released data on its April imports of unwrought copper and semi-finished copper products. According to the results, copper imports hit a new high and rose 6.6 per cent from the last all-time record in March on arbitrage trade, state stockpiling and a pick-up in domestic consumption. Imports of copper scrap also increased 21.2 per cent on the month to 400,000 tonnes in April, easing tight domestic supplies. China imported 399,833 tonnes of unwrought copper including anode, refined and alloy, and semi-finished products in April, surpassing March’s 374,957 tonnes.
Company News
At an extraordinary general meeting held last Thursday, African Copper shareholders declined a takeover offer by Natasa Mining. In addition to the agreement reached with the bondholders of African Copper, Natasa Mining Limited had made an alternative offer to bondholders to acquire from them, 2,239,034 of the new ordinary shares to be issued for an aggregate consideration of about US$1million in cash. Natasa had also proposed to arrange for Messina Copper Limited to issue, in exchange for a subscription by bondholders, a new bond on the same terms as the existing bond issued in an amount denominated in Pula. The offer was open to acceptance either in whole or in part. The move opens way for another hunter, Zambian Copper, to come in and take over the two companies. Natasa and Zambia Copper have lately been involved in a mudslinging affair in an attempt to capture African Copper.
Canada’s First Quantum Minerals (TSX:FM) plans to restart copper production at its closed Bwana Mkubwa processing plant once it receives the go-ahead to open a new mine in central Zambia. First Quantum announced in an environmental assessment document submitted to the state-run Environmental Council of Zambia (ECZ) it intended to start mining at the Fishtie mine, but no timeline was given. Under Zambian law, mining firms must first seek the approval of the ECZ before they can start producing copper. First Quantum, which also operates the Kansanshi copper mine and has a minority stake in Mopani Copper Mines (MCM), shut down the Bwana Mkubwa plant in October 2008 after authorities in the Democratic Republic of Congo banned exports of copper ore to Zambia.The mine’s life was estimated at 27 months at an ore production rate of 100,780 tonnes per month.
Freeport McMoRan Copper & Gold Inc. (NYSE:FCX) recently filed its 10-Q report for its first quarter, which concluded on March 31. In the report, the company issued projections for 2009. Based on projected consolidated sales volumes for 2009 and assuming average prices of $2.00 per pound of copper, $900 per ounce of gold and $8 per pound of molybdenum for the remainder of 2009, Freeport’s consolidated operating cash flows will approximate $2.5 billion in 2009, net of an estimated $0.6 billion for working capital requirements. Operating cash flows for 2009 would be impacted by approximately $240 million for each $0.10 per pound change in copper prices, $75 million for each $50 per ounce change in gold prices and $30 million for each $1 per pound change in molybdenum prices.
Assuming average prices of $2.00 per pound of copper, $900 per ounce of gold and $8.00 per pound of molybdenum for the remainder of 2009, and using recent prices for commodity-based input costs, Freeport estimates consolidated unit net cash costs related to copper mining operations will average approximately $0.70 per pound of copper in 2009, compared with $1.16 per pound of copper in 2008. Estimated consolidated unit net cash costs for 2009 are lower when compared to 2008 primarily because of the effects of lower operating rates and reduced energy prices and other commodity-based input costs. Freeport cautioned that the accuracy of the projections will be affected by the fact that prices for metals were extremely volatile in Q1.
