Copper Drops with Eyes on US Jobs Data

By Shihoko Goto — Exclusive to Copper Investing News

Copper Drops with Eyes on US Jobs Data

The bears are overtaking the bulls as worries about US and European economic performance weigh down on copper prices. The European Union’s failure to come to an agreement about tightening banking regulations is also putting a damper on overall sentiment.

Market players are taking a wait-and-see approach ahead of the release of the latest monthly US jobs data. Earlier in the week, private payroll group ADP released its own numbers, reporting that US companies added only 119,000 jobs in April, the lowest number in seven months. In March, a total of 201,000 were added. On the other hand, the US Department of Labor reported jobless claims falling by 27,000 to 365,000 in the latest week, which was fewer than what most analysts had expected.

In Europe, finance ministers were unable to agree on a plan to implement capital rules, and have had to postpone further negotiations until May 15, thus adding to uncertainties about Europe’s longer-term economic outlook.

In late afternoon trading Thursday, COMEX copper for July delivery is 1.3 percent lower at $3.73 a pound.

As for Indonesia, starting this weekend the government will be imposing taxes averaging 20 percent on copper and other metal exports. Indonesia hopes to process raw metals within its borders and export higher-value metal products, but some analysts are concerned that companies may shy away from investing in Indonesia moving forward. Freeport-McMoRan (NYSE:FCX), Newmont Mining (NYSE:NEM), and Vale (NYSE:VALE) all have major mines in the country. However, Newmont’s Indonesian head, Martiono Hadianto, said that Newmont at least will not be hurt by the new tax policy as it is designed primarily to affect new mining permits and not well-established ones.

Company news

Southern Copper (NYSE:SCCO) is maintaining its 2012 copper production guidance at 640,000 tons. In the first quarter, copper output rose from a year ago to 152,906 tons. The company’s head of investor relations, Raul Jacob, cautioned, however, that “we have a big question mark related to what is going to happen with the energy market. Our main costs are power and fuel.”

Barrick Gold’s (NYSE:ABX) President and CEO, Aaron Regent, said when releasing the company’s latest financial results that “we think the fundamentals for gold and copper are strong.” The gold giant’s net income rose 2.8 percent in the first quarter from a year ago to $1.03 billion on the back of higher gold prices in particular.

BHP Billiton‘s (ASX:BHP) Escondida mine in Chile is facing worker unrest, with reports of miners blocking roads to the mine due to a dispute over bonus payments.

Also in Chile, mining giant Antofagasta (LSE:ANTOreported first quarter copper output falling 13 percent from a year ago due to increased development costs. In addition, the company raised its development cost estimate for its Antucoya mine, which is slated to begin production by the latter half of 2014, to $1.7 billion from $1.3 billion .

Junior company news

Crazy Horse Resources (TSXV:CZH) is looking to either sell off, or find a joint venture partner for, its Taysan copper, iron, and gold project in the Philippines. According to a prefeasibility study, the project has a net present value of $503 million with an internal rate of return of 49 percent. The company estimates that the site will produce 76 million pounds of copper over a 24-year mine life.

Red Eagle Mining (TSXV:RD) has finalized a deal to fully acquire the Mina Vieja past producing copper and gold mine in Colombia.

“Finalising the Mina Vieja option is a significant step to meeting our objective of consolidating the Pavo Real district,” stated CEO Ian Slater, adding that “a copper/gold concentrate was historically produced at Mina Vieja from high grade ore. However, the mine was abandoned early in its life in the 1970s due to declining copper prices.”

 

Securities Disclosure: I, Shihoko Goto, hold no direct investment interest in any company mentioned in this article.