Copper Prices to Moderate as the Year Progresses and Average $3.50 a Pound in 2013: An Expert Analyst Discusses His Outlook on Copper with The Wall Street Transcript

Wall Street Transcript

67 WALL STREET, New York - April 12, 2013 - The Wall Street Transcript has just published its Metals and Mining Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Precious Metals, Global Iron Ore Production, Emerging Market Infrastructure Construction, Midcap and Small-Cap Consolidation Activity

Companies include: Companhia Vale do Rio Doce (VALE), Cliffs Natural Resources Inc. (CLF), Freeport-McMoRan Copper & Gold (FCX), Newmont Mining Corp. (NEM), Royal Gold, Inc. (RGLD), Teck Resources Limited (TCK), Thompson Creek Metals Company (TC), Plains Exploration & Productio (PXP), McMoRan Exploration Co. (MMR), Barrick Gold Corporation (ABX) and many more.

In the following excerpt from the Metals and Mining Report, an expert analyst discusses the outlook for the sector for investors:

TWST: For each of the other metals that you focus on, how are prices trending this year?

Mr. Nelson: Most metal prices have declined so far this year. We've seen declines in the midsingle digits for most metals year to date. Not to get into the supply/demand dynamics of why this has happened for each, but it's a bit counterintuitive for the base metals given the recent uptick in Chinese economic growth rates, and the fact that most commodities and commodity equities such as copper and iron ore are high beta, and should theoretically correlate with higher growth rates and the big stock market jump we've seen to start of the year.

But China is the key growth driver for most commodities, and it's really hard to overstate that country's importance to the metals and mining complex. China accounted for 41% of global copper demand, slightly less than half of global steel production, and an astounding two-thirds of global seaborne iron ore demand in 2012.

So I covered gold already, but let me just add that we see gold prices rising from current levels of about $1,600 an ounce to average $1,700 an ounce in 2013 and $1,850 an ounce in 2014, or up 2% and 9% respectively, year over year.

With regard to copper, a longtime industry veteran recently told me that he remembers a couple of decades back when costs actually mattered for copper producers, and margins were pretty thin, but that's before prices became "ridiculous" in his words. The global copper market has been in deficit for three straight years now where demand has exceeded production, and during that time prices have remained above the global marginal cost of production, which is generally believed to be $2.50 to $2.75 a pound. Because of these high prices, mining companies have invested a lot of money in growth projects, and the new supply should really start to hit the market in 2013 and 2014, potentially the most new supply we've seen in over a decade...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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