Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Rio Tinto plc (ADR) (RIO), Freeport-McMoRan Copper & Gold Inc. (FCX): The Coming Copper Boom?

Page 1 of 2

Last Friday, gold suffered a rout of epic proportions, with its price falling below $1,450, and that continued into the start of this week, with the price of the yellow metal touching $1,400 at its intraday lows. It’s now 25% below the peak $1,920 price, and it’s possible it could sink further.

Silver is hardly faring any better, having fallen as low as $24.09 an ounce, its lowest point since late 2010. Traders and investors are abandoning precious metals as a safe haven despite being in some of the most precarious of times financially.

Seeing red
But could there be a boom coming in copper that’s not reflected in its price? Treated as a commodity because of its many industrial uses, copper is down too, but not nearly as dramatically as its yellow and gray cousins. Particularly in light of just released economic data out of China that showed that country’s GDP expanding at a slower rate than anticipated, copper has gone soft. China’s economy grew 7.7% in the first quarter of 2013, below the fourth quarter’s 7.9% expansion and well below the 8% analysts had been anticipating. Copper, corn, wheat, and oil all fell on the news.

A Deeper Look at South Africa’s Commodity IndustryAlthough a stalled global economic recovery would affect the red metal’s fortunes, there are signs we might be on the verge of a new boom. Miners around the world are intensifying their focus on copper, and even though supplies have finally reached parity with demand, a massive collapse at Rio Tinto plc (ADR) (NYSE:RIO)‘s  Bingham Canyon copper mine in Utah could tilt supply back to an imbalance.

Bingham Canyon, the world’s biggest copper mine, supplies about 1% of the global copper supply. It also supplies about 16% of total U.S. silver production and 5% of gold, suggesting that supplies are about to get significantly tighter there, too. Coupled with a port strike in Chile that’s only just been resolved, it delayed the shipment of an estimated 120 kilotons of copper, meaning it’s going to take some time for the metal to make it to market. Coming as it does after China continues to boost imports (up some 7% in March), there is enough pressure below to raise copper prices.

Mixed signals
Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX)
is looking to double its copper sales to the country within the next three years to take advantage of China’s interest in expanding concentrate imports by 17% this year. Southern Copper Corp (NYSE:SCCO), on the other hand, with the industry’s largest copper reserves, intends on holding production at the same level it realized in 2012.

All of which would be good news for BHP Billiton Limited (ADR) (NYSE:BHP), which reportedly made a substantial copper discovery in western Australia near its Babel-Nebo nickel-copper deposit. Because of its remote location, however, the site has remained undeveloped for more than a decade and would require a big investment on BHP’s part to build up the infrastructure necessary to exploit it.

Page 1 of 2
Loading Comments...