Copper price extends rally as Beijing catches hedge funds short

Copper price extends rally as Beijing catches hedge funds short
Newmont up on Q1 results while Barrick blasts company's culture
Centerra digesting law prohibiting activities which affect glaciers
Gold price retakes $1,300 on Ukraine tensions
Watch a sandstorm in China turn day into night
PIC OF THE DAY: 785B hits concrete bridge, splits

Posted: 25 Apr 2014 12:55 PM PDT

Copper has been out of favour with hedge funds for a long time.

The red metal is the ONLY commodity in a list that includes everything from lean hogs and NY Harbor Ultra-Low Sulfur Diesel to cocoa and gold, that so-called managed money investors have placed in a net short position.

Hedge funds on the New York Comex have placed bets to the tune of 375 million pounds of copper that the price will go down according to CFTC data.

This year those bets have paid off big time with copper falling to a near four-year low of $3.92 a pound mid-March.

After a steady recovery, the price of the metal dipped below $3.00 again last week.

Copper price extends rally as Beijing catches hedge funds short

Source: FT, 10-year Front Month Future Contract Comex

But when a new report surfaced Wednesday indicating that the Chinese State Reserves Bureau has bought up to 350,00 tonnes of copperbetween March and April to move into state warehouses it lit a fire under the price.

Orders from Beijing to buy when prices fall below $3.15 and to pick huge loads should copper go below $3.00 immediately put a floor under the price.

That sent managed money scrambling for July contracts to cover their positions.

After a jump yesterday, Friday saw copper consolidating its gains trading at a seven-week high just above $3.10.

The last time the SRB intervened in base metals markets was in June 2013 when the copper price turned around before hitting $3.00 after sliding from a $3.70 high in February of that year.

The Chinese government, which naturally doesn't disclose purchases publicly, was also believed to be a big buyer during the height of the 2008 financial crisis when it made the most of prices as low as $1.30.

At the time of the 2013 reports, one metals trader told the FT the SRBs purchases "may be interpreted as a bullish sign," adding:

"If you had bought copper every time the SRB bought copper you would have made a fortune"

Fresh data about hedge funds' short and long positions as at Tuesday this week will be released by the US Commodities Futures Trading Commission after the markets close Friday.

It should reveal whether managed money anticipated the Beijing-inspired rally or blew their copper bets.

Judging by Thursday and Friday's action they may have left things a little bit late.

Copper price extends rally as Beijing catches hedge funds short

Image of Captain Copper, a superhero teaching Chilean kids about the metal, courtesy of Codelco

Newmont up on Q1 results while Barrick blasts company's culture

Posted: 25 Apr 2014 10:16 AM PDT

newmont q1

Despite rocks being thrown by Barrick chairman, Newmont gained 2.71% today after filing its Q1 on an increased production outlook and lower cost.

Newmont said in its Q1 outlook that its all in sustaining cost will increase by 13 percent, and production in Africa should go up two percent. It also said that Reduced spending on exploration, advanced projects, and sustaining capital also led to $82 million in lower gold AISC this quarter.

Yesterday Barrick Gold's chairman Peter Munk told the Financial Post that Newmont is not shareholder friendly and bureaucratic.

Barrick Gold and Newmont are trying to make a deal on merging. In a conference call announcing its Q1 resuts Newmont's CEO Gary Goldberg deferred on discussing the rumoured merger stating only that Newmont is "always open to opportunities."

Newmont's Q1 was not all good. The company's net income from continuing operations was down, $117 million or 23 cents per basic share, compared with $314 million or 63 cents per share in 2013. The decline was due a fall in the average realized gold and copper prices of approximately 21 percent and 20 percent respectively.

Here are the company's highlights:

Generated cash from continuing operations of $183 million;
Generated cost savings of $82 million in gold all-in sustaining costs2 ("AISC"), which equates to $1,034 per ounce, down 8 percent from the prior year quarter;
Realized costs applicable to sales ("CAS") of $751 per ounce of gold and $2.71 per pound of copper, a decrease of 1 percent and an increase of 19 percent, respectively, over first quarter last year;
Delivered 1.2 million ounces and 24 thousand tonnes of attributable gold and copper production, with higher gold production coming from our Australia/New Zealand and Africa operations;
Improved AISC outlook3 by 13 percent, and production outlook by 2 percent in Africa; and
Declared a second quarter dividend of $0.025 per share in accordance with the Company's gold price-linked dividend policy4.

Centerra digesting law prohibiting activities which affect glaciers

Posted: 25 Apr 2014 09:30 AM PDT

Centerra Gold says it is still unclear how a law prohibiting activities which affect glaciers in the Kyrgyzstan will affect its operations.

The glacier law was passed on Wednesday by the Parliament of the Kyrgyz Republic. It still needs to be signed by the president before it takes effect.

The company says it has not received the official version of the law and its provisions are unclear. The law does require payment of compensation for damages to glaciers.

Despite the law, Centerra believes it has protection from punitive actions.

"Nevertheless, Centerra believes that the stabilization and non-discrimination provisions contained in the agreements governing the Kumtor project and the law of the Kyrgyz Republic which implemented the Kumtor Project Agreements support the view that the Glacier Law would not apply to Kumtor mining operations," said the company in a statement.

"In addition, Centerra believes that any disagreement in relation to the application of the Glacier Law to Kumtor would be subject to the dispute resolution (international arbitration) provisions of the Kumtor Project Agreements."

Centerra is up 5.66% over the week to $5.66 a share.

In February Centerra announced that the company had made peace with the country's parliament after the creation of a joint venture that evenly splits control of the Kumtor gold mine.

Full news release below.

Kyrgyz Parliament Passes Law on Glaciers

TORONTO, ONTARIO–(Marketwired – April 24, 2014) – Centerra Gold Inc. (TSX:CG) announces that it understands that on Wednesday, April 23, 2014 the Parliament of the Kyrgyz Republic passed a law prohibiting activities which affect glaciers in the Kyrgyz Republic (the "Glacier Law"). The Glacier Law must be signed by the President of the Kyrgyz Republic before it will take effect.

Centerra has not yet received the official version of the Glacier Law and notes that several of its provisions are unclear. The Glacier Law also contains provisions for the payment of compensation for damages to glaciers, at rates to be determined by the Government. Nevertheless, Centerra believes that the stabilization and non-discrimination provisions contained in the agreements governing the Kumtor project (the "Kumtor Project Agreements") and the law of the Kyrgyz Republic which implemented the Kumtor Project Agreements support the view that the Glacier Law would not apply to Kumtor mining operations. In addition, Centerra believes that any disagreement in relation to the application of the Glacier Law to Kumtor would be subject to the dispute resolution (international arbitration) provisions of the Kumtor Project Agreements.

Limited measures to manage glaciers and ice have been a feature of mining operations at Kumtor from the beginning of the project in 1994 and have been the subject of frequent Kyrgyz regulatory oversight and approval as well as review by international technical and environmental experts, including experts retained by the European Bank for Reconstruction and Development in connection with the extension of a credit facility to Centerra. Such measures are necessary to ensure that mine operations can be carried on safely in the open pit. The continuation of mining at Kumtor depends on Centerra's ability to carry on such activities throughout the life of the mine.

In view of the strategic importance of the Kumtor project to the Kyrgyz Republic, we believe that the Glacier Law is unlikely to be enforced in a manner that would require the project to suspend mining activities. We also note that in all our dealings with successive governments of the Kyrgyz Republic, such governments have consistently and emphatically stressed the strategic importance of Kumtor to the Kyrgyz Republic and that mining operations at the project continue uninterrupted, notwithstanding any disagreements that may arise between Centerra and the Government regarding the project. We also note that the President of the Kyrgyz Republic has the discretion to reject the Glacier Law and return it to Parliament for further consideration.

However, there can be no assurances that Kyrgyz regulatory authorities will not enforce the Glacier Law, with the potential for mine operations to be suspended or terminated, or that the Government will not make substantial claims for damages for past or future activities affecting glaciers. Any such enforcement action or claims would have a material adverse impact on the Company's operations, future cash flows, earnings, results of operations and financial condition.
Cautionary Note Regarding Forward-looking Information

Information contained in this news release and the documents referred to herein which are not statements of historical facts, may be "forward-looking information" for the purposes of Canadian securities laws. Such forward looking information involves risks, uncertainties and other factors that could cause actual results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward looking information. The words "believe", "expect", "envision", "target", "intends", "estimate", "may", "will", and similar expressions identify forward-looking information. These forward-looking statements relate to, among other things, the possible effect of the Glacier Law on mining operations at Kumtor and the enforcement thereof by relevant Kyrgyz Government authorities, the legal effect of the Glacier Law given the provisions of the Kumtor Project Agreements and the Kyrgyz law implementing those agreements, the need to continue mining ice throughout the life of the Kumtor mine, statements regarding the Company's plans to discuss outstanding issues relating to the Kumtor project with the Kyrgyz Government and the Company's understanding of the position of the Kyrgyz Government on the importance of continuing mining operations at Kumtor.

Forward-looking information is necessarily based upon a number of estimates and assumptions that, while considered reasonable by Centerra, are inherently subject to significant political, business, economic and competitive uncertainties and contingencies. There may be factors that cause results, assumptions, performance, achievements, prospects or opportunities in future periods not to be as anticipated, estimated or intended. These factors include Kyrgyz Republic resource nationalism, the impact of changes in, or to the more aggressive enforcement of, laws, regulations and government practices in the Kyrgyz Republic, the impact of any actions taken by the Kyrgyz Republic Government and Parliament as a result of the Kyrgyz State Commission on Kumtor, the impact of the enactment, changes to, or the increased enforcement of, environmental laws and regulations relating to the Company's operations, including the Glacier Law; risks relating to the Company's ability to enforce its legal rights, risks associated with having a significant shareholder, and possible director conflicts of interest. See also "Risks that can affect our business" in the Company's Annual Information Form for the year ended December 31, 2013, available on SEDAR at www.sedar.com.
There can be no assurances that forward-looking information and statements will prove to be accurate, as many factors and future events, both known and unknown could cause actual results, performance or achievements to vary or differ materially, from the results, performance or achievements that are or may be expressed or implied by such forward looking statements contained herein or incorporated by reference. Accordingly, all such factors should be considered carefully when making decisions with respect to Centerra, and prospective investors should not place undue reliance on forward-looking information. Forward looking information is as of April 24, 2014. Centerra assumes no obligation to update or revise forward-looking information to reflect changes in assumptions, changes in circumstances or any other events affecting such forward looking information, except as required by applicable law.

About Centerra

Centerra Gold Inc. is a gold mining company focused on operating, developing, exploring and acquiring gold properties primarily in Asia, the former Soviet Union and other markets worldwide. Centerra is the largest Western-based gold producer in Central Asia. Centerra's shares trade on the Toronto Stock Exchange (TSX) under the symbol CG. The Company is based in Toronto, Ontario, Canada.

Additional information on Centerra is available on the Company's web site at www.centerragold.com and at SEDAR at www.sedar.com.

Gold price retakes $1,300 on Ukraine tensions

Posted: 25 Apr 2014 09:22 AM PDT

The price of gold jumped to a two-week high on Friday as safe-haven buyers returned to the market on growing fears of an escalation in the conflict in Ukraine.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery in midday trade exchanged hands for $1,301.30 an ounce, up more than $10 from Thursday's close.

Gold is now at its highest since April 14. Earlier in the day the metal touched $1,305.20, bringing its year to date gains to 9%.

Gold was supported by a weak dollar and investors seeking the relative safety of gold as a hard asset after news of renewed clashes between Ukrainian security forces and pro-Russian activists.

Western leaders accuses Russia of failing to live up to the terms of the Geneva deal cut a week ago, by not doing anything to restrain rebel activity in the east of the country while at the same time amassing its troops at the border.

Ukraine officials said rebels who have seized the town of Slavyansk in the east of the country will be removed through military action and that any incursion by Russian forces will be deemed an invasion.

Ukraine's prime minister Arseniy Yatsenyuk accused Russia of wanting to start World War 3, while Russian president Vladimir Putin warned of "consequences" should Kiev eject pro-Russian militias by force.

Watch a sandstorm in China turn day into night

Posted: 24 Apr 2014 08:58 PM PDT

The worst sandstorm since 1996 blanketed Gansu Province in Northwest China this week.

Visibility was reduced to less than 65ft.

"Suddenly it became dark and I can't tell whether it's day or night," said one resident.

Michael Allan McCrae

Email: mike@mccrae.ca

Michael Allan McCrae on

Michael McCrae is executive editor of MINING.com. Before coming to InfoMine, Michael worked as a reporter and editor for newspapers throughout British Columbia. He also worked in pre-sales for various software firms and banks. (DISCLAIMER: The author may hold securities in the articles mentioned. Nothing written should be construed as a solicitation to buy or sell any securities. Seek the advice of a broker-dealer first.)