Metal Minings News

Base metals ended mixed today, with tin the biggest mover on the day. The market reversed early significant gains late in day, as market participants bunkered down on news that the New York Federal Reserve and JP Morgan had rescued US bank Bear Sterns with an emergency bail out. The New York Fed has apparently agreed to provide financing through JP Morgan for up to 28 days, as Bear Stearns admitted that its cash position had ’significantly deteriorated’. The Fed is taking on the credit risk from
collateral supplied by Bear Stearns. Industry news was mixed. Newswires reported that Brazil’s Vale had agreed to raise its offer to acquire Xstrata, from $78 billion to $90 billion. Economic data was bearish. Fixed-asset investment in China’s urban areas rose 24.3% in January/February from a year ago, down from 25.8% in December. The Eurozone core CPI rose by 2.4% in February from 2.3% in the previous 3 months. The US core CPI was unchanged in February, well below expectations of a 0.2% rise.
The data will give the US Fed comfort to cut rates when it meets next week: the meeting seems sure to result in a US rate cut of at least 50 basis points. The Reuters/University of Michigan preliminary index of US consumer sentiment decreased to 70.5 in March from 70.8, a 16-year low. The measure compares with an average 85.6 in 2007. Record gasoline prices and the loss of 85,000 jobs so far this year are undermining consumer sentiment, pointing to weaker spending (see graph below). There are some important US data releases next week, including February industrial production, the NAHB housing index for March, housing
starts and building permits for February. Germany releases its February manufacturing PMI.

Aluminium dropped 1% to $3,088. An Athens court reversed an earlier court decision, which now means that Public Power Corp, Greece’s biggest power supplier cancel a contract to sell power to aluminum smelter Aluminium of Greece at a reduced rate. LME stocks rose by 19,275 tonnes: it appears to be material moved back into LME warehouses in what is rumoured to be a
financing deal. Copper ended with minor losses, after pushing as high as $8,545 in the middle part of the day. Workers at Ok Tedi returned to work after 4 days on strike. The market ignored a sizeable rise in Shanghai stocks, but rallied on news of another considerable fall in LME stocks. Codelco said that it will spend $250mn to boost output at one of two mines in its Norte division to make up for reduced amounts of the metal in the ore. The development at the Radomiro Tomic mine will take 2 years and produce an extra 100K tonnes of ore a day. Zinc fell in early Asian but then made a gradual recovery before getting hosed early in the afternoon as copper sold off. Stocks rose by 925 tonnes on the LME, and by 2,641 over the week in Shanghai. Lead suffered the same fortunes as zinc, ending down 0.5% at $3,085. Nickel benefited from a fall in stocks and the ongoing strike at the Cerro Matoso mine, up 1.2% at $32,550. BHP Billition announced that, contrary to union claims, it was meeting contractual deliveries despite the ongoing strike. Tin pushed decisively through the $20,000 mark as stops were triggered.

Another choppy day in the metals complex saw both copper and aluminium finish more or less where they opened despite achieving impressive trading ranges. Indeed, anything less than a $100 range on aluminium is now considered relatively quiet. The only genuine performer was tin, which finally posted a new record above the $20,000 resistance. Early trading
pushed copper and aluminium lower, with buying on these dips once London came in taking markets higher once more.
Overnight news was focused on unimpressive production data from China, with the Hang Seng shedding a miserable 4.9% on
the London open. The effect of winter snowstorms on the output of metals was perhaps not as severe as initially expected,
with January to February aluminium output declining only 0.5% for example. Nevertheless, there was considerable pressure on metals in early trading.
As the markets gathered momentum, attention turned to continued dollar weakness, with the Euro setting a new high and the Japanese Yen dipping below 100 yen to the dollar for the first time in 12 years. Equity markets picked up where Asia left off, with the FTSE, CAC40 and Dax all quickly dropping 2% lower, and Dow Futures predicting a similar scene in New York.
Once again, this Euro strength and lacklustre performance of equities gave most commodities a big lift, as gold steamrollered it’s way towards $1000 and crude comfortably trading above $111 for some time in the afternoon.

Copper’s strength mid session can be attributed to these factors, and perhaps also the ongoing strike at OK Tedi in Papa New Guinea. Talks to reach a swift agreement failed, and as such the strike continues. The mine is losing approximately 470mt of copper and 1800 troy ounces of gold per day. Toronto based Inmet Resources (which owns 18% of the mine) initially
expected the strike to last no more than 24 hours, but hopes remain a compromise can be reached before the week’s end. On the economic front, some poor US retail sales figures, with mm change coming in down 0.6% against expectations of a .20% rise reminded investors of the slowdown that is now spilling over into the wider US economy.

Aluminium followed a similar pattern, with the fundamental and technical picture remaining intact. No decisive direction for the grey metal, as with the others, saw a relatively neutral close on the day. Nickel however, finished up almost one percent, with BHP Billiton’s Cerro Matoso nickel mine in Columbia halting all deliveries after the 22 day strike there has depleted all stockpiles. Although this was by and large predicted and priced into the market, fundamental support is always welcome in the current trading environment. Figures out today though, showed that Nickel production outpaced demand by 6000mt, over three times the surplus, in January 2007, which may paint a clearer picture of the actual demand/supply for the metal. Tin stocks remain very tight, with various supply disruptions in Indonesia and Africa probably pushing the market towards a small deficit for the year to date. LME registered stocks have now declined by over 35% since August 2007.

Inmet Mining Corp said a strike over wages at its partly owned Ok Tedi mine in Papua New Guinea would reduce its copper production by 85 tonnes, and gold by 330 ounces, for each day the strike continues.

The Canadian company, which owns 18 percent of the mine, said on Wednesday the strike by members of the Ok Tedi Mining and Allied Workers Union was illegal.

Work there came to a halt on Tuesday when workers walked off the job. Ok Tedi Mining Ltd, the mine’s operator, said on Wednesday it hoped the wildcat strike would end by Thursday.

Mine workers are striking after they were excluded from a 100-percent pay increase management awarded to the mine’s engineers in a bid to retain them.

Government labor negotiators were on site meeting with the company and workers on Wednesday, Ok Tedi Mining told Reuters.

Inmet said in a statement the mine’s management “is taking appropriate steps to address the strike action.”

The company’s stock fell C$1.75, or 2.1 percent, to C$81.50 amid a broader decline among miners on the Toronto Stock Exchange.

Last year, Ok Tedi produced 169,184 tonnes of copper in concentrate and 498,790 ounces of gold.

Bulgarian Government and Dundee Precious have entered into an agreement-in principle concerning the proposed expansion of the Chelopech copper-gold mine. Under the terms of this agreement-in-principle, DPM will pay a higher royalty for all the metals that can be mine. economically at the Chelopech site. This new royalty will be calculated in accordance with the existing Ordinance on Royalty Computation on a sliding scale. It will be between 2% and 8% at a profitability ratio of between 10% and
60%. This new royalty will replace the one entered into in good faith by DPM in 2004 and that was set to expire in 2010. As well, DPM will provide a full environmental reclamation bond covering the Chelopech mine, which will be one of the first of its kind in Europe. In addition to a higher royalty, Bulgaria and DPM have agreed-in-principle to enter into a public private partnership
(PPP) for the state-of-the-art metals processing facility to be built at the Chelopech mine site. Under the terms of this PPP, Bulgaria’s Silver Fund will own 25% of this new facility. The new smelter will cost approximately US$155 million to build and take close to 18 months to complete, from receipt of all permits. Once it is complete, the new smelter is expected to add - directly and indirectly - 150 new jobs to the Bulgarian economy. The operation of this new smelter will be in compliance with all local and international requirements. DPM’s proven track record of management and financial success will mean Bulgaria’s pensioners will receive a direct financial benefit from this new smelter for many years to come.

“On our part, we will do everything necessary, while abiding by all environmental standards and procedures, to make sure that the state provides full support to DPM for the implementation of this investment and for the functioning of the mining operation,” said Bulgarian Prime Minister Sergey Stanishev during a special press-conference given in Sofia today. “Both the state and the investor will do everything possible to have the plant commissioned in the fastest possible manner, ideally within 18 months.”

“We have stated all along that we want to be good partners with the Bulgarian people,” confirmed Jonathan Goodman, President & CEO of DPM. “With the resolution of this issue, both the Company and the Bulgarian people will share in the value created from our mining and metals processing activities at Chelopech, now and in the future.” In accordance with the Bulgarian constitution, the Bulgarian Council of Ministers will still have to approve any and all agreements reached between DPM and the government concerning the new royalty and the PPP. Once all of these agreements are finalized and approved, the Minister of Environment and Waters will finalize the Environmental Impact Assessment (EIA) permit for the Chelopech expansion project. In addition, DPM and the Bulgarian government have commenced negotiations with a view to implementing the Krumovgrad Gold Project, including
initiating the next stage in the EIA approval process.

With the exception of tin and lead, base metals ended lower today, with arange of influences on the complex. Measures by major central banks to ease liquidity, US$ swings weakness and industry news all impacted on the market. The US Federal Reserve announced plans to lend up to $200 billion of Treasury securities in exchange for debt including private mortgage-backed securities. The Fed set up a new tool, the Term Securities Lending Facility, to lend US Treasury bonds to primary
dealers for 28-day periods, through weekly auctions. The Fed also said in a statement that it is increasing the amount of dollars available to European central banks through swap lines. Equity markets rallied, and some of the hot money that had been pouring into commodities in recent weeks seems to have flowed out. In industry news, Papua New Guinean copper and gold
producer Ok Tedi Mining said an “illegal” strike had stopped mining and milling operations, as well as handling and shipping of concentrate at Kiunga port. The mine produced 169,184 tonnes of copper in concentrate and 498,790 ounces of gold last year. Economic data was on the bullish side. China’s consumer prices climbed 8.7% in February from a year earlier, up from 7.1% in January. Food costs soared 23%, after blizzards destroyed crops and snarled transport links, causing shortages. The German ZEW index of investor and analyst expectations rose to minus 32 from minus 39.5 in February. Consensus had expected it to fall to minus 40. The gauge reached a 15-year low of minus 41.6 in January.

Aluminium dropped more than 2.4% to $3,060. The market shrugged off a jump in LME stocks, riding higher on copper’s coat-tails until just after 11am before getting slammed in the afternoon kerb. But it was very much a case of buy the rumour, sell the fact on South African power developments: BHP Billiton announced a rearrangement of its southern Africa aluminium interests, with its Bayside smelter taking the lion’s share of the losses associated with the Eskom power cutbacks. The total annual output loss will be 120K tonnes, including 92K tonnes at Bayside. Copper rallied as the Ok Tedi news filtered out, but then seemed ot suffer from the rebound in the US$. The price ended $35 lower at $8,275. The Union at Ok Tedi have walked out until the Company agrees to a 100% pay increase for all National employees. The strike is illegal because due process wasn’t followed (i.e no attempt to use the dispute-resolution process). Management have said they will not negotiate until there is a return to
work and the Union say they aren’t returning until the pay increase they seek is granted. Zinc ended with minor losses at $2,550. Lead ended modestly higher, but the $3,000 mark is proving to have quite a magnetic force. Nickel got slapped soon after London trading commenced, recoverd all those losses and then sold off again, ending $900 lower at $31,550.
Finlaand’s Talvivaara stated that it is due to start production in October, with an initial capacity of 34,000 tonnes per year (tpy) of nickel and 66,000 tpy expected by early 2010. Tin made a fresh intra-day record of $19,400 before ending at $19225, up $225.