Copper Fluctuates on Chinese Manufacturing Data and Codelco, Xstrata Statements

Copper prices fell Thursday in the wake of signals from Codelco and Xstrata (LSE:XTA) that increased production may cause a drop in prices later this year. News of Chinese manufacturers’ accelerated production, however, brought about a recovery.

“Despite the still tepid external demand, the domestic-driven restocking process is likely to add steam to China’s ongoing recovery in the coming months,” HSBC’s chief economist, Hongbin Qu, said in HSBC and Markit’s Flash China Manufacturing Purchasing Managers’ Index (PMI) survey. The PMI rose to 51.9 from 51.5, a 24-month high, according to the survey. The manufacturing output index also rose, hitting a 22-month high.

Additionally, Morgan Stanley analysts predict that copper prices will rise 7.6 percent, to $8,554 per metric ton (MT), or $3.88 per pound, from $7,952 in 2012. The forecast is based on anticipated demand increases from China, the US and even Europe, Bloomberg reported.

But both Chile’s Codelco, the world’s largest copper producer, and Xstrata (LSE:XTA) said this week that increases in copper production could result in lower prices at the end of this year. “Maybe there will be a certain element of downward pressure, albeit very slight, toward the end of the year when there will be a small surplus,” Codelco’s CEO Thomas Keller told Bloomberg, echoing remarks made by Xstrata’s chief operating officer, Steve de Kruijff, to ABC News.

On the London Metal Exchange, copper for three-month delivery rose 0.1 percent, to $8,108 per MT, from the $8,103 closing price on Wednesday. COMEX copper for March delivery was down 0.4 percent, at $3.6705 per pound, in mid-afternoon trade in New York.

Company news

Grupo Mexico (OTC Pink:GMBXF) plans to spend $2 billion on its mining division this year, a portion of which will go towards the company’s Buenavista mine in Northern Mexico, which has the world’s largest copper reserves. The company wants to produce 1.4 million MT of copper per year by 2015, Reuters reported.

BHP Billiton (ASX:BHP,NYSE:BHP,LSE:BLT) expects its copper production to increase in 2013 and 2014 by a 10-percent compound annual rate, largely driven by its Escondida mine in Chile, which is on track to increase its production by 20 percent in the current year.

Freeport-McMoRan Copper & Gold’s (NYSE:FCX) fourth-quarter net income rose 16 percent, to $743 million, as sales in the previous year were depressed by labor disruptions in Indonesia. The company aims to grow its annual copper production to over 5 billion pounds per year in 2015 from 3.66 billion pounds in 2012, and expects its $20-billion acquisition of Plains Exploration & Production (NYSE:PXP) and McMoRan Exploration (NYSE:MMR) to close in the second quarter of this year.

Union workers at two of Southern Copper’s (NYSE:SCCO) properties in Peru may go on strike if they don’t reach an agreement with the company within 15 days, Fox Business reported, citing a union leader.

China’s Jiangxi Copper (SSE:600362) and Japan’s Pan Pacific Copper said mining companies will pay “at least 10 percent more in fees” to process copper this year, China Daily reported.

Newmont Mining (NYSE:NEM,TSX:NMC) expects attributable gold and copper production in 2013 of approximately 4.8 million to 5.1 million ounces and between 150 and 170 million pounds, respectively. The company plans to spend up to $2.3 billion on various projects this year.

Sierra Metals (TSXV:SMT) announced that in 2012 its copper production rose 51 percent, to 15.9 million pounds, from the year before. For 2013, it expects copper production of up to 23.1 million pounds.

Lundin Mining (TSX:LUN) reached the high end of its own production guidance in 2012. “All of our assets are very well positioned to deliver a solid performance again this year,” CEO Paul Conibear said in a press release.

Orocobre (ASX:ORE,TSX:ORL) appointed Neil Kaplan as its chief financial officer and David Hall as its business development manager.

Junior company news

Volta Resources (TSX:VTR) nearly tripled inferred resources at its Gaoua copper-gold porphyry deposit in Southern Burkina Faso to 282 million MT at 0.53-percent copper equivalent for 2.01 billion pounds of copper and 3.17 million ounces of gold.

Transition Metals (TSXV:XTMexpanded the size of its Janice Lake copper property. The company wants to spend about $2 million on exploration at the project this year and is looking for a “suitable partner” to fund it.

Copper Fox Metals (TSXV:CUUclosed a $1.5-million financing deal with an insider.

Euromax Resources (TSXV:EOX) plans to raise up to $8.8 million in a non-brokered private placement to help fund the development of its Ilovitza gold and copper project in Macedonia.

Catalyst Copper (TSXV:CCY) announced that its La Verde copper-gold-silver project in Mexico is expected to produce 211 million pounds of copper per year over a 20-year mine life. Altogether, the pretax net present value of the mine is estimated at $617 million, according to the preliminary economic assessment study.

Crazy Horse Resources (TSXV:CZH) is still seeking to sell, or find a partner for, its Taysan copper-gold property in the Philippines. The estimated mine life is 24 years and the net present value of the mine (at 10 percent after tax) is $512 million, according to the company’s website.

Oracle Mining (TSX:OMN,OTCQX:OMCCF) appointed Rod Campbell as its president. Campbell was previously the president and CEO of investment bank Clarus Securities.

 

Securities Disclosure: I, Ragnhild Kjetland, hold no investment interest in any company mentioned in this article.