By Jim Williams
The largest copper mine in the United States is a Senate vote away. That news wasn’t enough to sway copper prices to start the week.
More on the copper mine in a moment, but first, an update on the current copper prices. The price of the red metal declined on Monday, as disappointing data from China added to concerns over the global economic outlook.
Data released earlier showed that China’s exports climbed 4.7% from last November, missing expectations for a 7.9% increase, while imports fell 6.7%, compared to forecasts for a gain of 3.5%.
China’s trade surplus widened to $54.5 billion last month from $45.4 billion in October, compared to estimates for a surplus of $43.2 billion.
Investors hope the downbeat data will add to hopes that policymakers in Beijing will implement more stimulus to shore up its economy.
“Unless you get a formidable increase in demand in China, I think copper prices are going to stay on the defensive for the near term,” states Adam Klopfenstein, a senior market strategist at Archer Financial Services Inc. “We’re not looking for China export growth, we’re looking for more domestic consumption growth.”
The Largest Copper Mine in the US Hinges on a Defense Contract
A bill to approve a ‘land swap’ that would create the largest copper mine in America sits inside the 1,600 page Defense contract waiting for Senate approval this week.
The controversial bill, quietly attached as a provision to the National Defense Authorization Act (NDAA), would authorize Resolution Copper, a subsidiary of Rio Tinto, to acquire 2,400 acres of the federally protected Tonto National Forest in southeast Arizona in exchange for 5,000 acres in parcels scattered around the state.
The Resolution Copper project is 55 percent owned by Rio Tinto and 45 percent owned by BHP. The two mining giants have been lobbying for 12 years to take possession of this property, reportedly the world’s largest untapped copper resource.
If the project receives final investment approval from the Rio and BHP boards, as expected, Resolution Copper would become the largest copper producer in North America, supplying more than a quarter of US copper demand.
Environmental groups and local Indian tribes had rallied against a land exchange in the southeast of Arizona. Conservationists and American Indian groups say the massive underground copper mine project could threaten sacred land. “I don’t like our ancestral lands being raided by the U.S. Congress,” said Phil Stago, a member of the White Mountain Apache tribe.
US Representative Paul Gosar said previous archaeological and historical investigations have not turned up any documented proof that the area was ever sacred to the tribe. US Representative Ann Kirkpatrick said the Apache Leap, a cultural landmark, would not be part of a land exchange. The bill requires that a federal environmental study take place before any deal is approved, she added.
If the Resolution Copper project does happen, it is expected to create 3,700 jobs and bring more than $6 billion in economic benefits to the state over its 66-year life span.
“Copper is once again king in Arizona, and our military and our manufacturing base will be assured of critical domestic copper supplies,” Gosar said after the bill passed.
Under the legislation, other new land will be added to the federal wilderness register in exchange for land to be developed for oil, natural gas, coal, timber and copper.
Resolution Copper has an inferred mineral resource of 1,737 tons and could be mined for more than 40 years. The first shaft has been completed and production is likely to begin around 2020. Rio and BHP have already invested more than $1 billion in exploratory activities at the Resolution Copper deposit, which lies about a mile and a half underground.
“This legislation would provide up to 25 percent of the annual US demand for copper, which is critical to US competitiveness and economic security,” said US Chamber of Commerce executive vice-president of government affairs, Bruce Josten.
Rio Tinto’s Outlook on Copper Market
In a bit of an ironic twist, just last week, Rio Tinto’s head of copper, Jean-Sebastien Jacques, told investors he sees the copper market over supplied in the medium term.
“As we move into 2015 the copper industry will continue to be oversupplied in the medium term which will drive continued volatility in price.” The copper market is expected to swing into a deficit from 2018, he added.
Jacques said that in addition, Rio’s copper business will be affected by operational challenges in 2015, which will curb production next year.
The timing appears to be perfect for Rio and BHP – as stated above, production in their new mine in Arizona is expected to start in 2020. However, legal hurdles and opposition could derail the massive project.
We will keep you posted as this story as it develops.
A little more info on Rio Tinto and BHP BillitontED