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You'll Want to Read This Living Legend's Thoughts On Copper

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Posted by Robert Friedland via Frank Holmes

on Tuesday, 23 January 2018 00:00

COMM-robert-friedland-frank-holmes-shaft-01192018Last week the U.S. Global Investors office was visited by a living legend in the junior mining industry, billionaire founder and executive chairman of Ivanhoe Mines, Robert Friedland. In case you don’t know, back in the mid-1970s, Robert was caretaker of an apple orchard south of Portland that one of his buddies from Reed College would often visit. That buddy’s name was Steve Jobs, who later went on to found a little company he named—what else?—Apple.

Before Robert and Steve Jobs began palling around, Jobs was known as shy and withdrawn. It was Robert who taught him his skills in what’s been described by many as “reality distortion.” Having seen numerous speeches by Robert over the years, I can attest to his masterful ability to utterly command a room of hundreds with his electric charisma. Some of that charisma must have rubbed off on Jobs, helping the future iPhone innovator evolve into the shrewd, larger-than-life business leader he’s celebrated as today.

Robert’s “reality distortion” was on full display during his visit. I was pleased and honored, as were my U.S. Global team members, to have the opportunity to hear his unique insights on a wide range of issues, from the debilitating smog in Delhi, India; to China’s efforts to become the world’s leading electric vehicle (EV) economy; to Ivanhoe’s development of the Kamoa-Kakula Copper Project in the Democratic Republic of Congo, independently ranked as the largest high-grade copper discovery in the world.

Robert made a very compelling case for Kamoa-Kakula, which he calls “the most disruptive Tier One copper project in the world today.” In its first year of production, its average copper grade is estimated to average an ultra-high 7.3 percent. Because the site is flat and uninhabited, and wages are paid in local currency, the cash cost for the life of the mine is projected to be a low, low $0.64 per pound of copper. As of my writing this, copper is priced at $3.20 a pound, so the margin is significant. After an initial $1.2 billion in capital costs to develop the project, the company expects a payback period of only 3.1 years.

It’s all a very attractive proposition.

Robert Friedland: You're Going to Need a Telescope



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Energy & Commodities

Crude Oil - Sharp PullBack In Progress

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Posted by Nadia Simmons & Przemyslaw Radomski

on Friday, 19 January 2018 05:31

Who Will Take Control in Oil Market? #2

Although the EIA weekly report showed that crude oil inventories dropped for a ninth straight week and distillate stockpiles fell more than expected, U.S. production outweighed positive news. But did yesterday price action change anything in the technical picture of black gold?

Yesterday’s report showed that crude inventories dropped by 6.9 million barrels easily beating expectations for a decrease of 3.5 million barrels. This significant decline was mainly led by a record drawdown of 4.2 million barrels at the U.S. storage hub in Cushing, Oklahoma. What’s interesting, it was the largest weekly draw since 2004. Despite this bullish fact and a decline in distillate stockpiles, U.S. crude oil production rose 258,000 barrels per day to 9.75 million bpd last week, which means that the barrier of 10 million bpd could be broke quite easily in the coming week.

This also suggests that we may see short-lived moves in both directions before the release of another government report as investors may want to wait for a significant fundamental factor that would sink the price of black gold before opening big short positions.

Nevertheless, such a pro-bearish signal that could trigger a move to the downside may also be today's Baker Hughes report. If it shows a bigger increase in the number of oil rigs, oil bears will likely react before today’s market closure or on Monday – similarly to what we saw in the past.

Before we see how the number of oil rigs changed in the recent week, let's check how yesterday's price action influenced the technical picture of crude oil.

Crude Oil’s Technical Picture

The long-term hasn’t changed much since our Wednesday alert was posted, therefore, if you haven’t had the chance to read about the broader perspective, we encourage you to do so today. Today, just like yesterday, we’ll focus on the daily chart (charts courtesy of http://stockcharts.com).

2018-01-19-wtic-D

From today’s point of view, we clearly see that the overall situation in the very short term also hasn’t changed much, because crude oil wavered the second day in a row, which resulted in another doji candle. Taking this fact into account, we believe that what we wrote yesterday remains up-to-date also today:



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Energy & Commodities

U.S. oil industry set to break record, upend global trade

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Posted by Reuters

on Thursday, 18 January 2018 06:01

Screen Shot 2018-01-18 at 7.07.17 AM
HOUSTON (Reuters) - Surging shale production is poised to push U.S. oil output to more than 10 million barrels per day - toppling a record set in 1970 and crossing a threshold few could have imagined even a decade ago.

And this new record, expected within days, likely won’t last long. The U.S. government forecasts that the nation’s production will climb to 11 million barrels a day by late 2019, a level that would rival Russia, the world’s top producer. 

The economic and political impacts of soaring U.S. output are breathtaking, cutting the nation’s oil imports by a fifth over a decade, providing high-paying jobs in rural communities and lowering consumer prices for domestic gasoline by 37 percent from a 2008 peak. 

Fears of dire energy shortages that gripped the country in the 1970s have been replaced by a presidential policy of global “energy dominance.”

....continue reading HERE

also from Reuters:

Strong China data cranks up pressure on bond markets - Global Borrowing Costs at 10 month High

 



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Energy & Commodities

Recipe Calls for a Broad Commodities Rally in 2018

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Posted by Frank Holmes - US Global Investors

on Wednesday, 17 January 2018 05:05

COMM-equities-vs-commodities-01112018

Ed Note: With US Dollar breaking to multi-year lows and the 37 Year old Bull Market in Bonds set to go bearish there is going to be dramatic changes in where money flows. Based on previous booms and busts, the S&P GSCI Total Return Index-to-S&P 500 Index ratio above is now at its lowest point since the dotcom bubble, meaning commodities and mining companies are highly undervalued relative to large-cap stocks. I think its highly likely that in the Stock Market the more glamorous sectors like Biotech, Cannabis, Cryptocurrencies and the FANGS, etc. will likely give way stocks that have significant exposure to commodities. Money Talks Ed. 

Recipe Calls for a Broad Commodities Rally in 2018

At the beginning of every year, we update what’s typically one of our most popular pages, the Periodic Table of Commodity Returns. I encourage you to explore 10 years’ worth of data on basic materials such as aluminum, zinc and everything in between. A word of warning, though—the interactive feature makes the table highly addictive. Please feel free to share it with friends and family!

COMM-periodic-table-commodity-ia-2018

 

Click For Larger Image

It was a photo finish for commodities in 2017. The group, as measured by the Bloomberg Commodity Index, barely eked out a win for the second straight year, edging up 0.7 percent. Spurred by a weaker U.S. dollar and strengthening materials demand from factories, the index headed higher thanks to a breathtaking rally late in the year that lasted a record 14 consecutive days.

The annual return might not look too impressive, but I believe the economic conditions are ripe for a broad commodities rally in 2018. I’m not alone in predicting they’ll be among the best performing asset classes by year end, perhaps even beating domestic equities as quantitative tightening threatens to put a damper on the nine-year bull run.

Analysts at Goldman Sachs, for instance, are overly bullish commodities, recommending an overweight position for the next 12 months. Bank of America Merrill Lynch is calling for a $7,700-a-tonne copper price target by mid-2018, up from $7,140 today. In last Friday’s technical market outlook, Bloomberg Intelligence commodity strategist Mike McGlone writes that the “technical setup for metals is similar to the early days of the 2002-08 bull market.” Hedge fund managers are currently building never-before-seen long positions in heating oil and Brent crude oil, which broke above $70 a barrel in intraday trading Thursday for the first time since December 2014. It’s now up close to 160 percent since its recent low of $27 a barrel at the beginning of 2016.

Few have taken such a bullish position, though, as billionaire founder of DoubleLine Capital Jeffrey Gundlach, whose thoughts are always worth considering.

Commodities Ready for Mean Reversion?



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Energy & Commodities

Base Metals off to a strong start in 2018

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Posted by Haywood Research

on Tuesday, 09 January 2018 06:20

Highlights:  

Base metals had a strong finish in 2017, a year when the copper and zinc prices increased by over 30%, the highest in over 3 years for copper and in 10 years for zinc. Nickel also outperformed, rising by 28%. The performance in 2017 was underpinned by supply disruptions for copper, lack of production growth for zinc, and declining global inventories, within the context of a positive outlook for Chinese, and global growth. 

 

  • Strong copper demand in 2018. It is estimated that China’s copper demand (which accounts for around 50% of global copper demand of 23.5Mt) could grow by up to 3% in 2018, from around 2% in 2017. Codelco, Chile’s state-owned copper miner, sees a sustained increase in copper deficits, supported by growing copper deficits. As a result, the company says the copper price may test records above $10,000/t ($4.50/lb) in 2018. 
  • Potential for supply tightness. Over 30 labour contracts, covering 5Mt of mine supply of copper are due to expire in 2018, mostly in Chile and Peru. Notably, the Escondida contract expires in June. In China, scrap import restrictions and closures related to winter pollution will contribute to tightness in the copper market. 
  • Zinc continues to have the best fundamentals among the base metals. Global zinc stocks were down 59% in 2017, ending the year at 8.2 days of consumption. Chinese zinc imports increased by 43% in the first 11 months of 2017, and continue to be strong. 
  • Outlook is positive. We expect strong global manufacturing output, supported by resilient European and U.S. PMIs, as well as sustained metals demand from China to provide further impetus for a metals rally in 2018Weekly Performance. 

Screen Shot 2018-01-09 at 6.34.38 AM

Precious metals had a strong start to the year, with the price if gold rising above the $1,300 on December 29th amid a falling U.S. dollar and the prospects of another interest rate hike less following worse-than-expected payroll data this morning. This follows a positive 2010 for precious metals with gold (up 11%) and silver (up 4%) finishing at $1,3XX and $17.XX per ounce respectively. Palladium soars. Platinum prices rose almost 50% on the back of robust demand for catalytic converters and limited supply. Palladium prices tested the $1,100 per ounce level on Thursday, with some commentators speculating it could overtake gold, before settling at $1,090 (up X%) on Friday. In contrast, platinum prices finished the year where they began at $907 per ounce

....click here for the full report  

 



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