Tiny Cyprus had an outsized impact on global markets this week as a controversial deal to tax Cypriots’ bank accounts in exchange for a bailout raised fresh concerns about the European economy. That added to gold’s safe-haven appeal, but hurt oil and copper prices.
The agreement, which according to Bloomberg proposed a 6.75-percent levy on bank deposits above 20,000 euros and 9.9 percent on those over 100,000 euros, was rejected by the country’s parliament. Cyprus is now scrambling to negotiate new terms with the European Union and International Monetary Fund. If there is no deal by Monday, the European Central Bank could stop financing Cypriot banks. However, the euro rose on Friday morning on investor optimism that a deal can still be made.
“The euro has priced in a fair amount of bad news already and there’s still some underlying hope they will stitch something together,” currency economist Simon Smith told Reuters. “But even if we do see Cyprus remain within the euro zone, it’s not going to be a massive positive for the euro.”
In the meantime, Cyprus has declared an ongoing bank holiday to prevent account holders from making mass withdrawals, which could collapse the country’s banking system.
Gold also found support from the latest Federal Reserve meeting, after which the central bank said it will continue its $85-billion-a-month bond-buying program despite recent signs of improvement in consumer spending and the housing market. Investors are concerned that the program could spark inflation, favoring gold’s role as a hedge against rising prices.
The Fed also revised its 2013 growth forecast downward: it now feels US GDP will expand by 2.3 to 2.8 percent, down from its December forecast of 2.3 to 3 percent. However, the central bank does see a continued decline in the jobless rate, to 7.3 to 7.5 percent in the fourth quarter of 2013, down from its earlier prediction of 7.4 percent to 7.7 percent.
In morning trade Friday, Brent crude is up 0.28 percent, at $107.76 a barrel, while copper is up 0.99 percent, at $3.47 a pound. Gold is down 0.38 percent, at $1,607.70 an ounce.
Franco-Nevada (TSX:FNV,NYSE:FNV) reported its latest financial results this week. Fourth-quarter revenue declined nearly 4 percent from a year ago, to $114.1 million. On an adjusted basis, Franco earned $0.32 a share, up slightly from $0.31 a year ago, but still below the consensus forecast of $0.34. The gold streaming and royalty company also said that it expects to receive 215,000 to 235,000 gold equivalent ounces this year, down from roughly 230,000 in 2012. However, revenue from its oil and gas assets should rise to $55 to $65 million from $40.9 million.
Osisko Mining (TSX:OSK) discovered two new gold-copper zones at its Upper Beaver gold project in Kirkland Lake, Ontario. The two areas, which Osisko calls the East Basalt Zone discovery and the North Q Zone discovery, were revealed by new drilling. Highlights include 9.3 g/t gold with 1.7-percent copper over 18.1 meters at East Basalt and 11 g/t gold with 1.6-percent copper over 2 meters at North Q.
Orsa Ventures (TSXV:ORN) received approval from regulators for its joint venture purchase agreement with Americas Bullion Royalty (TSX:AMB) to acquire a 50-percent joint venture interest in the Angel’s Camp claims in Oregon, near Orsa’s Quartz Mountain claims. Orsa already holds the other 50-percent joint venture interest through an option agreement with Seabridge Gold (TSX:SEA,NYSE:SA).
Oil and gas
The US Energy Information Administration said the country’s oil output will surpass imports later this year for the first time since 1995, Reuters reported. Thanks to rising shale oil production, US production is up from under 6 million barrels per day (bpd) in early 2011 to over 7 million bpd presently. That has cut imports from 10 million bpd in late 2010 to under 8 million.
Anadarko Petroleum (NYSE:APC) announced that its Shenandoah-2 well encountered more than 1,000 net feet of oil pay in the Gulf of Mexico this week. The well, which Anadarko drilled to a depth of 31,405 feet in about 5,800 feet of water, is over a mile from the initial Shenandoah discovery well. “We are incorporating the information obtained from Shenandoah-2 into our planning and anticipate further appraisal drilling to advance this potentially giant project,” said Senior Vice President Bob Daniels in a March 19 press release.
Total (NYSE:TOT) has agreed to sell 25 percent of the Tempa Rossa field in Italy to Japan’s Mitsui & Co. (TSE:8031,OTC Pink:MITSY), Bloomberg reported. Terms of the deal were not disclosed. Tempa Rossa will have a daily production capacity of 50,000 barrels of oil, 230,000 cubic meters of natural gas, 240 tons of liquefied petroleum gas and 80 tons of sulfur. Start up is slated for 2016.
Donnycreek Energy (TSXV:DCK) completed and tested the third horizontal well at its Kakwa development in Alberta’s Montney formation. The company flow tested the well for 161 hours. During the final 24 hours, it averaged gross production rates of 1,798 barrels of oil equivalent per day, consisting of 826 bpd of condensate and 5,833 thousand cubic feet per day of natural gas.
Copper Mountain Mining (TSX:CUM), which owns the Copper Mountain mine in Southern British Columbia, released its latest financial results. In the latest quarter, the mine’s copper output rose 11.2 percent from a year earlier, to 13.8 million pounds. Gold and silver production also increased. That pushed up revenue by 12 percent, to $50.1 million. Adjusted earnings were $7.4 million, or $0.08 a share, up from a loss of $1.9 million, or $0.02. The company is now considering adding a secondary crusher at the site to increase mill throughput.
Cornerstone Metals (TSXV:CCC) announced that it will acquire privately held Copper One USA, which owns six properties in New Mexico and Arizona, for 1.5 million Cornerstone shares. The company will also pay a number of other costs tied to the development of these holdings, including an updated NI 43-101 compliant resource estimate on the Lone Mountain property in New Mexico, which will become Cornerstone’s flagship copper project in the US.
Securities Disclosure: I, Chad Fraser, hold no positions in any of the companies mentioned in this article.