The spot price of uranium was likely to remain steady for the next two years, averaging between $40/lb and $60/lb, an analyst has said. The price enjoyed a strong rally between 2003 and 2007, rising from about $10/lb to more than $130/lb, before retreating to $45/lb in October of 2008, as the global financial meltdown took hold. During 2009, uranium price traded sideways, averaging around $46/lb.
However, 2010 holds some promise of a modest recovery, as utilities - especially from Asia, where nuclear-energy programmes were on the rise - came back into the market. The price is expected to rise to between $55/lb to $65/lb in the longer term.


Analyst sees copper price rising to
record highs

UK-based Barclays Capital is bullish on the copper outlook,, expecting the commodity’s price to increase to $8,000/ton in the first half of 2010, before hitting record highs in the next couple of years. They were anticipated to average $6,875/t this year, rising to $7,000/t next year and a high of $8,500/t in 2012.

The optimistic price forecast is seen against a very low base of $3,200/ton, experienced in 2009. Although copper demand was down 10% year-on-year in 2009, global copper demand was growing again. In fact, demand for the commodity had been growing robustly every month in 2009.

The improvement in the copper price would be supported by limited supply and increased demand from China and countries within the Organisation for Economic Cooperation and Development (OECD). Chinese demand for copper was still robust but it was expected that China would import one million tons less copper this year as it cut back on purchases of refined copper because of expanded domestic refinery capacity. The decrease in Chinese imports would be offset by strong demand from OECD.

While demand was increasing robustly, supply would be constrained in the future. Mine output was growing, but there were few major mine projects coming on stream, and the seven top copper producers’ forecasts showed a decrease in capital spending on copper production from a peak of $40 billion in 2008.


Zambia’s copper earnings boost trade surplus, but earns less for State
 
Zambia is Africa’s top producer of copper and its economy is like Mongolia’s in that the mineral is its mainstay, accounting for more than 60% of the country’s foreign currency earnings. Its copper export revenue climbed sharply in the fourth quarter of 2009, helping  swell the surplus on the trade account but a change in the tax regime saw the Government earn less revenue from mining.

Despite higher export earnings, revenue from the mining sector fell after the Government changed tax rules and some mining companies scaled down operations. Zambia last year abolished a 25% mineral windfall tax and its Mines Minister has said there are no plans to reintroduce it despite domestic political pressure to do so.

       
The lure of gold unlikely to leave
investors

World investment demand for gold jumped from 885 tons at the end of 2008 to 1,820 tons at the end of 2009, accounting for a year-on-year gain of 105%. The yellow metal, generally seen as a safe haven investment, has been luring investors looking for insurance against uncertainty during these unpredictable times.
This high demand for physical gold and gold-backed exchange-traded funds (ETFs) was initially spurred when the economic crisis first hit more than a year ago. Investors wanted to secure some safer assets, away from other unstable investor vehicles, such as property, equity, bonds and shares. The aim was to increase the existing holding of gold in company portfolios.
In the longer term, prudence alone could keep investors in gold. People are concerned about the loss of integrity in financial markets. A weaker USD encourages investors to stay or even increase their investment in gold, taking into account that most commodities are dollar-priced. Physical gold provides liquidity and is seen universally as the ultimate form of insurance against financial woe.
An alternative scenario sees demand for physical gold starting to fall off in 2010. The launch of platinum- and palladium-backed ETFs on the New York market has given US investors their first opportunity to invest in the physical metals. These novel investment vehicles are seen as a precursor to a wave of investment buying in anticipation of a recovery in industrial demand.


Korean firm signs agreement on mine reclamation in Mongolia

South Korea’s Mine Reclamation Corp. (MIRECO) has signed an environmental protection and clean-up deal with Mongolia that could fuel bilateral business tie-ups. The memorandum of understanding involves Mongolia’s Ministry of Mineral Resources and Energy and a consortium of South Korean construction companies operating in Mongolia, and could allow Korean businesses to be involved in proposed reclamation works at the Oyu Tolgoi and Tavan Tolgoi mines.
Large scale development projects slated to take place in the two regions in the near future threaten to cause soil and water contamination that Ulaanbaatar wants to prevent. The Mongolian Government has announced a plan to inject USD200 million into preventive and reclamation efforts from 2010 through 2015 with funds coming from the sale of natural resources.

       
Platinum at multi-month highs; dollar crimps gold

Platinum and palladium prices have struck their highest levels since mid-2008, with investment demand fuelled by the recent launch of exchange-traded funds in the United States. By contrast gold struck a subdued note, with upside progress restricted by currency fundamentals.

Analysts said appetite for ETFs was having a disproportionate effect on the platinum and palladium markets, which are much smaller in volume terms than gold. In addition, signs the global economy is steadying and expectations central banks may start draining ample funds from the banking system or raising interest rates later in the year are also prompting investors to buy the strategic platinum group metals.

Platinum’s rise may soon stall as the market consolidates its overbought position, but the technical uptrend is likely to eventually carry prices to record highs, according to analysts who study past price moves to determine future price moves. Gold prices were steady, with a rise in the dollar capping gains. Strength in the US unit curbs gold’s appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.


New gold highs foreseen in 2010, with some ‘vulnerability’

GFMS Consultancy Chairperson Philip Klapwijk feels the price of gold will likely rise above 2009’s record of $1,226/oz this year, and could even climb as high as $1,300/oz if the global economic recovery proves sufficiently sluggish and new investment money continues to enter the market. However, he cautioned that the big role being played by investment demand leaves the gold market vulnerable to a major correction if and when investors start looking elsewhere.

Investors have been buying gold as a safe haven investment, as a hedge against inflation and in the expectation that the metal’s price will continue to rise. While investment inflows into gold remain significant, and look likely to continue that way, the market reliance on investment is “somewhat worrying” in the longer term.
Because of the market’s dependence on investment, the biggest threat to the gold price will obviously be the eventual shift to “business as usual” in the world’s economies, Klapwijk said. “The honeymoon won’t last forever. At some point, the scenario does change, and then the investment case for gold becomes less appealing.” Once gold’s appeal begins to dim, all it will take is a halt or a deceleration in the flow of money into gold to have a big impact on prices, Klapwijk cautioned.

For now, however, the outlook for the yellow metal remains rosy, with investment demand forecast to grow robustly through 2010. GFMS believes the likelihood of a slow road to economic recovery is high, with the potential for a “double dip” this year in the US, Europe and Japan. “We continue to be in an environment of zero or negative real interest rates, there are still very significant question marks being placed against the US dollar [and] inflation expectations continue to rise. This is creating a backdrop which remains pretty positive for gold investment,” Klapwijk said. “And I think in the second half of the year we could see prices increase above the $1,300-level quite easily.”


Asian coal demand turns ‘red hot’ 

US miner Peabody Energy has seen already-strong Asian markets become “red hot”, as demand for metallurgical and thermal coal strains supply. Its president, Rick Navarre, has said demand for met and thermal coal from the industrialisation of developing countries will continue to outpace the supply for the foreseeable future.
Navarre described the mood in Pacific coal markets as “bullish”, while the domestic US market is “brightening”, as inventories are drawn down. Metallurgical coal supplies are tight, and customers are pulling forward shipments where possible, and paying premiums for prompt deliveries.
China’s total coal imports more than tripled in 2009, reaching 125 million tons, while India reached record coal import levels of 80 million tons. The company’s projection is  that the strong demand levels from China are sustainable and that China will remain a significant importer based on domestic needs and strategic intent even as it takes aggressive actions to acquire resources beyond its borders.
In 2009, Peabody sold 243.6 million tons of coal, compared with 255 million tons in 2008. For 2010, Peabody is targeting total sales of 240 million to 260 million tons, including trading and brokerage volumes.


Australian miners worry about new tax proposal

Australian miners will face billions of dollars in new taxes that threaten to slash productivity and put at risk billions of dollars in new investment. Treasury chief Ken Henry has recommended scrapping state royalty taxes on mining projects and replacing them with a uniform national resource rent tax, injecting billions of extra dollars into government coffers.

This will have a detrimental impact on the ability of the mining sector to attract investment and expand at a time when it is most needed. The so-called “rent” tax could be introduced as early as May if approved by Prime Minister Kevin Rudd, placing levies of up to 40% on iron-ore, coal, copper zinc and other minerals mined in Australia each year.

Three of the world’s biggest mining houses, BHP Billiton, Rio Tinto and Xstrata have drawn up plans to dig hundreds of millions more tons of iron-ore and coal this decade, based on the current state-only royalty system, and would face some of the heftiest tax bills.

Australia’s 30% corporate tax rate is the eighth highest in the OECD. Mining is the chief employer in some rural regions and miners are expected to argue they are already required to provide social welfare to communities with little government assistance.