Inside Metals

INSIDE METALS

COMPILED ON THURSDAY, SEPTEMBER 08, 2011

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CHART OF THE DAY FEATURE Barrick outlines new Nevada gold discoveries Barrick Gold has made two major gold discoveries on its Cortez property in Nevada, highlighting the miner's increased emphasis on exploration to expand its resource base and sending its shares higher. The world's top gold miner said on Wednesday the new discoveries, known as Red Hill and Gol- drush, are located about 6 kilometers (3.6 miles) southeast of its Cortez Hills mine and are geologically similar to the deposit it is currently mining on the property. Click here to read the rest of the story

MARKETS (Click on the sections below to jump to the full story)

CLICK HERE FOR LME CHARTS BASE METALS: Copper prices edged down, tracking a TRADING PLACES downturn in Asian equities and the euro as worries about  S.Korea says seeks 5,000 T aluminium ingot for Nov the euro zone debt crisis and faltering U.S. economy under-  China probes some steel imports from Japan, Europe mine confidence. "I think there is a cautious optimism that  LME approves Erus as metals warehousing company Obama could announce greater plans to boost jobs. If he GENERAL NEWS does, I think that could be positive for risk assets in gen-  Chinalco Yunnan Copper to partner Rio Tinto in Chile prospect eral," said Phillip Futures analyst Ong Yiling.  Iraq faces rocky road in mining investment hunt  Indonesia may impose tax or quota on ore ex- PRECIOUS METALS: Gold prices rebounded more than 1 ports percent following a drop of 3 percent in the previous ses-  Philippines says H1 metals output value up 31 pct y/y sion, as sharply lower prices attracted bargain hunters, but

METALS improved risk appetite is likely to cap gains. "Some investors, speculators and physical buyers have shown a lot of COPPER: buying interest at current prices, as they are much lower  Peru mine strike not to affect Freeport's output  Freeport dismisses Peru strike production compared to a few days ago," said a dealer at a Tokyo- impact based bullion house. NICKEL/STEEL:  China probes some steel imports from Japan, Europe FOREX: The euro slipped in Asia and faces headwinds from  Mexican steel output growth seen slowing in suspicions that Europe's efforts to fix its debt crisis may not 2012 be fast enough to keep markets happy, while the Austra-  Steelmaker Aperam ready to talk to rivals lian dollar was knocked by a surprise decline in the coun-  China nickel ore imports to slow in H2 vs H1 - Jinchuan exec try's employment levels. "If Trichet makes cautious re- TIN/MINORS: marks on bond buying, Italian and Spanish spreads could  EU to develop rare earth substitutes with US, rise again and hurt investor sentiment," said Junya Tanase, Japan chief strategist at JPMorgan Chase.  Top China antimony plant 2011 output flat or up slightly - parent

FEATURE Barrick outlines new Nevada gold discoveries EXPLORATION FOCUS TORONTO, Sept 7 (Reuters) - Barrick Gold has made two "These two discoveries highlight the potential value and major gold discoveries on its Cortez property in Nevada, opportunities that can be created through a well- highlighting the miner's increased emphasis on exploration structured and disciplined exploration program," said to expand its resource base and sending its shares higher. Chief Executive Aaron Regent in a statement. The world's top gold miner said on Wednesday the new Given Barrick's size and scale, costly takeovers typically do discoveries, known as Red Hill and Goldrush, are located little to move the needle in terms of its gold resources. Re- about 6 kilometers (3.6 miles) southeast of its Cortez Hills gent has long argued that expanding its resource base mine and are geologically similar to the deposit it is cur- through a more cost effective exploration program is the rently mining on the property. best way forward for the company. "The mineralization in both deposits remains open in mul- Over the last two decades, the company's global explora- tiple directions," said head of exploration Rob Krcmarov. tion program has added about 140 million ounces of gold "We have more work to do, but these discoveries have the reserves, at an average discovery cost of about $16 per potential to become truly world-class deposits." ounce. Barrick has outlined a 3.5 million-ounce inferred resource Barrick plans to spend between $370 million and $390 mil- at Red Hill, and it is drilling at the site to upgrade and ex- lion on its exploration program this year. pand the resource. The company has yet to outline a re- Gold has had a dream run this year. Spot prices touched a source for the Goldrush discovery. record high of $1,920.30 an ounce on Tuesday, as the In a note to clients, Dundee Capital markets analyst Paul global economic recovery has spluttered and concerns Burchell said Barrick would likely use its existing facilities about sovereign debt issues on both sides of the Atlantic at Cortez Hills to tap the new deposits, have risen. "Given the size of the current resource, we expect the new Despite the 4 percent pullback in the price of gold on discoveries to be additive to Cortez Hills, rather than repre- Wednesday, Barrick's New York-listed shares ended the senting a new stand-alone operation," said Burchell. day up 1.7 percent at $54.48. Barrick's Toronto listed shares ended the day up 1.1 percent at C$53.71. Burchell, who has a "buy" rating at a C$60 price target on the stock, said the brokerage firm would review its valuation after Barrick finished presentations to investors on Wednesday.

GENERAL NEWS Chinalco Yunnan Copper to partner Rio Tinto in Indonesia may impose tax or quota on ore Chile prospect exports SYDNEY, Sept 8 (Reuters) - Chinalco Yunnan Copper Re- JAKARTA, Sept 7 (Reuters) - Indonesia may impose a tax or sources , an Australian affiliate of Yunnan Copper Industry quota on mineral ore exports ahead of a planned regula- (Group) Co, has teamed up with Anglo-Australian miner tion to ban all exports of raw minerals by 2014, the industry Rio Tinto to explore for copper in Chile. ministry said on Wednesday. Chinalco Yunnan Copper Resources said on Thursday it The industry ministry has proposed this as a transition be- had signed an earn-in agreement with an option to joint fore the export ban, in a move that could hurt nickel firms venture with Rio Tinto at copper porphyry exploration INCO and Antam and copper miners Freeport McMoRan property Candelabro, northern Chile. Copper & Gold and Newmont Corp . "Some of the options for transitional regulations are taxes as high as possible on mining products like iron ore, baux- Iraq faces rocky road in mining investment hunt ite, and other metals like nickel and copper," the ministry's LONDON, Sept 7 (Reuters) - High-level Iraqi government spokesman Hartono said. officials converged in London on Wednesday for the first This could also take the form of an obligation to sell part of ever Iraq Mining conference to show how determined the firms' output to the domestic market, he said, without giv- oil-rich country is in trying to secure investors into its long- ing further details or timing. neglected mining sector. New government regulations are regularly mooted in Indo- However, the conference heard Iraq will need to resolve a nesia but often take a long time to be approved or fail to number of issues, such as security and the introduction of a materialise. mining law, before it can start to attract foreign investment into its non-oil resources sector. The planned 2014 export ban is part of a mining and coal law introduced in 2009 that requires miners to process "Iraq is rich in various types of mineral resources...and has coal and minerals into higher value products before export- many promising shows of lead, zinc, copper and chromium ing them, as the country seeks to boost revenue from the in Kurdistan," Sami al-Araji, chairman of Iraq's National mining sector. Investment Commission, told the conference. Indonesia, the world's largest tin and thermal coal ex- Iraq is trying to shake off the legacy of years of violence, porter, said last month it is looking to revise its royalty pay- sanctions and economic decline by opening up its financial ments made on all domestic tin shipments, to close a tax and industrial sectors and luring foreign investment and loophole and bring these in-line with existing charges on expertise to help it rebuild, however security issues still exports. remain a big concern for potential investors. Analysts have said a string of recent comments by politi- Deputy Prime Minister Rozh Nouri Shawis said the govern- cians to increase resource royalties suggested a rising tide ment was reviewing the mining law. of nationalism aimed at shoring up domestic political sup- While its autonomous region of Kurdistan has the greatest port. potential for metal resources, it has no mining code. The mountainous region of Kurdistan also throws up addi- Philippines says H1 metals output value up 31 tional challenges for mining investors. pct y/y Shawis told reporters that a company that already invests in Iraq won't enter Kurdistan because of the terrain. MANILA, Sept 7 (Reuters) - The value of the Philippines' metallic mineral output in the first half of 2011 jumped 31 "What's in a meadow is easy, but what's on a mountain is percent from a year earlier as miners ramped up produc- difficult," he said. tion to take advantage of higher prices, a senior govern- The lack of infrastructure and power is another problem. ment official said on Wednesday. However, Shawis said mining was less complicated than oil With the first half output, the Southeast Asian country was and gas, where transportation through various countries on track to hit an estimated 24 percent rise in value of me- can be an issue. tallic mineral produce to 137.6 billion pesos ($3.3 billion) this year, the highest in at least four years. In an attempt to encourage investment, Iraq is offering companies a 10-year exemption from taxes, extended to 15 The country produced metals valued at 63.9 billion pesos years if a project is developed with a local partner. in January to June, compared to 48.7 billion pesos a year earlier, Mines and Geosciences Bureau (MGB) director Leo Iraq has one of the largest phosphate reserves in the world Jasareno said. and is rich in many construction and industrial materials, such as sulfur and limestone, but the size of its metal po- "Higher prices are encouraging miners to increase their tential is unclear until further exploration work is carried output," Jasareno told Reuters in a phone interview. "For out. 2011, we are still looking at a 24 percent rise in output value from last year."

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GENERAL NEWS Jasareno said the first half output was also boosted by The MGB expects investments in the mining sector this nickel production of Marcventures Mining and Develop- year to reach $1.4 billion, 40 percent above earlier esti- ment Corp, a unit of diversified group Marcventures Hold- mates and the biggest since the sector was opened fully to ings Inc . foreigners in 2005. "The new player shipped nickel ore worth 1.4 billion pesos The Southeast Asian country sits on about $1 trillion worth to China," he said, referring to Marcventures. mineral resources, based on government estimates, but mining made up only about 2 percent of the country's gross Gold's record-setting rally in the world market helped domestic product in 2010, from around 1.2 percent in 2005. boost the value of local output in the first half, with gold rising 66.1 percent to 42.2 billion pesos, accounting for Last year, the Philippines was the third-biggest producer of two-thirds of total output. nickel ore behind Russia and Indonesia. Its main buyers are Copper output rose 14.4 percent to 9.2 billion pesos and China and Japan. nickel was up 17.3 percent at about 11 billion pesos. ($1 = 42.280 Philippine Pesos) Other metals accounted for the balance of 1.4 billion pesos, up 2.2 percent.

TRADING PLACES S.Korea says seeks 5,000 T aluminium ingot for In an announcement on its website, the ministry said it Nov would evaluate the impact of such imports on the Chinese steel industry. SEOUL, Sept 8 (Reuters) - South Korea is seeking 5,000 tonnes of high-grade London Metal Exchange (LME) registered primary aluminium ingot via tenders to close at 2 LME approves Erus as metals warehousing p.m. (0500 GMT) on September 16, state-run Public Pro- company curement Service said. LONDON, Sept 7 (Reuters) - The London Metal Exchange The procurement agency said on its website that it would said on Wednesday it has approved UK-based Erus Metals buy the metal of western and non-western origin with 99.7 as a warehousing firm for metal traded on the exchange. percent purity. Investment bank Barclays and steel trading house Metal- loyd will both be equal majority partners and Alec Gunn, who will act as the CEO, will take a smaller stake in the China probes some steel imports from Japan, company. Europe Erus Metals Limited will be used by companies in the BEIJING, Sept 8 (Reuters) - China has begun an anti- physical metals market, providing them with a fully- dumping investigation of some stainless steel tubes im- integrated trading and warehousing facility, it said in a ported from Japan and Europe, the Ministry of Commerce statement. said on Thursday.

METALS Peru mine strike not to affect Freeport's output China probes some steel imports from Japan, By Caroline Stauffer and Teresa Cespedes Europe LIMA, Sept 7 (Reuters) - Workers at Cerro Verde in Peru BEIJING, Sept 8 (Reuters) - China has begun an anti- launched a two-day pay strike on Wednesday but no im- dumping investigation of some high-grade stainless steel pact on output was expected at the mine that produces seamless tubes imported from Japan and Europe, the Min- around 2 percent of the world's copper, union and com- istry of Commerce said on Thursday. pany representatives said. In an announcement on its website, the ministry said it The 1,100 workers started the strike after last-minute talks would evaluate the impact of such imports on the Chinese with the company broke down on Tuesday and they threat- stainless steel industry. ened to lay down their tools indefinitely on Sept. 14 if their Two major Chinese stainless steel mills -- Jiangsu Wujin demands for higher wages are not met. Stainless Steel Pipe as well as Changshu Walsin Specialty But Freeport McMoRan , which has a controlling stake in Steel -- represented its domestic peers including Baosteel the mine, said it expected output to remain unaffected. in filing the complaint. "Cerro Verde does not anticipate that the strike will have a The anti-dumping probe will examine imports between material impact on production," spokesman Eric Kinneberg July 1, 2010, and June 30, 2011, and the ministry will con- said. "We will continue negotiating a new labor contract to duct an industrial injury investigation for imports between replace the one that expired on August 31, 2011." Jan. 1, 2008, and June 30, 2011, the statement said. Kinneberg did not provide details, but the Cerro Verde un- The move came after China in April decided to scrap anti- ion's leader told Reuters the company had copper stock- dumping duties that had been in place since late 2001 on piled and had temporarily contracted outside workers. cold-rolled stainless steel sheets from neighboring Japan and South Korea. "Usually they have stocks that can support five to eight days without affecting output," said the union's secretary- China, the world's biggest steel producer and consumer, general, Leoncio Amudio. "They have also hired people for has been repeatedly cited by major trade partners for al- three months, about 400 workers." leged dumping during its massive exports of steel products before financial crisis in 2008. Meanwhile, China still relies Supply worries caused by the strike, combined with a on imports of some high-grade steel products. planned walk-out on Sept. 15 at Freeport's mine in Indone- sia, helped push copper prices up to $9,092 per tonne ver- The United States last August imposed preliminary duties sus $8,933 a tonne from Tuesday's close. of up to 429 percent on more than $100 million worth of steel drill pipe from China. Workers at mines throughout the developing world have gone on strike in recent months, demanding a greater In addition to steel products, China was the target of com- share of mining profits at a time of record-high metal plaints by the United States, the EU and Mexico, for curbs prices. on exports of some raw materials including coke, bauxite and magnesium for discriminating against foreign manu- Shougang Hierro Peru , Peru's only iron producer, declared facturers and giving an unfair advantage to domestic pro- force majeure on its deliveries last week due to an ongoing ducers. strike. The World Trade Organization later ruled that China broke Cerro Verde produced 312,336 tonnes of copper in 2010. international law in a landmark case that also threatens Peru is the world's No. 2 producer of copper and silver and Beijing's defense of similar exports quotas it had set on the No. 6 gold producer. Minerals account for 60 percent of rare earths. its exports.

Mexican steel output growth seen slowing in Freeport dismisses Peru strike production 2012 impact MONTERREY, Mexico, Sept 7 (Reuters) - Growth in Mexi- LIMA, Sept 7 (Reuters) - Miner Freeport-McMoRan does can steel production will probably ease to 3 percent in 2012 not anticipate "a material impact on production" from a as a U.S. economic slowdown drags down the local econ- two-day strike at its Cerro Verde copper mine in Peru, a omy, the country's iron and steel industry association said company spokesman said on Wednesday. on Wednesday. The 1,100 workers at Peru's No. 3 copper mine started the In 2011, the association, known as Canacero, expects steel two-day strike on Wednesday and have threatened an in- output to grow by around 3.6 percent to some 17.3 million definite walkout later this month after last-minute talks tonnes. with Cerro Verde broke down. The workers want higher salaries, according to union leaders. Canacero director Octavio Rangel told Reuters he expected the pace of economic activity in the United States to ease in Freeport McMoRan did not provide further details on how the second half of 2011. the company had averted an impact on production. "If there's a slowdown at the end of the year, we're obvi- ously going to suffer as a result," he said. (Continued on page 7)

METALS Mexico's industry is heavily dependent demand in the ThyssenKrupp, Germany's biggest steelmaker, is seen as United States, as companies send 80 percent of their ex- the natural consolidator in Europe's stainless market not ports there. only because of its output but also due to its 40 percent market share in the region. Analysts have begun revising down their forecasts for Mexican growth in 2011. Earlier in the year, a number of Analysts said one hindrance to consolidation was lack of economists had seen Mexican growth of close to five per- valuation of company assets. cent, though many believe it may now even fall short of "With the spin-off of Aperam and the intended separation four percent. of ThyssenKrupp Stainless Global, the question of valuation should become clearer, as the market capitalisation of the quoted companies should provide an objective indica- Steelmaker Aperam ready to talk to rivals tion of the value of the respective assets," Moody's analyst By Marilyn Gerlach Matthias Hellstern said. MUNICH, Sept 7 (Reuters) - Stainless steel maker Aperam , Hellstern said any mergers among the sector players would spun off by Arcelor Mittal this year, is open for consolida- also come under intense scrutiny from the EU antitrust au- tion talks with rivals in Europe, its chief financial officer thorities, which usually frown on market shares of more told Reuters on Wednesday. than 40 percent. "There's some movement in the industry; the companies ThyssenKrupp's Heinrich Hiesinger, the former Siemens are spinning off their businesses," Julien Onillon said on executive who became the steelmaker's chief executive this the sidelines of a stainless steel conference sponsored by year, said in May that cartel issues could be resolved if the Metal Bulletin. EU included Asia's exports to the region as part of the market. "We are open for consolidation, so that means you can come and talk to us," he added. "There has been no significant consolidation in the last decade," said Pascal Payet-Gaspard, Secretary General of In Europe the stainless steel industry is suffering from over- Belgium-based International Stainless Steel Forum (ISSF), capacity, and producers are grappling with lower-priced at the Munich event. imports from China. Payet-Gaspard said governments could help the industry Onillon said, however, that underlying demand in the mar- restructure itself in Europe and in Asia by looking at it ket "is not so bad" now, and inventory "not so high". globally rather than by region. He said Aperam has about a quarter of the market share in Europe's stainless industry has annual output capacity of Europe, if Asian imports are excluded. around 8-9 million tonnes but demand is only around 5-7 "To do a merger you need to be two. If everybody has not million. made up their mindset, it's difficult to make a movement The good news, Onillon said, was the "unprecedented cor- further (towards consolidation)," he said. porate activity" in the industry. Europe's stainless steel producers -- ThyssenKrupp , Aceri- "There's a lot of new things going on ... Acerinox, Outo- nox , Aperam and Outokumpu -- have all started the re- kumpu, they are internally restructuring themselves. structuring process. ThyssenKrupp is looking at all options," he added. ArcelorMittal listed Aperam early this year and ThyssenK- "You see the industry is starting to move, and we hope rupp announced plans in May to sell its Global Stainless those movements will accelerate in the coming years or division in 12 to 18 months. months." Acerinox said in June it was restructuring into regional divi- ArcelorMittal , the world's largest steelmaker, listed sions, creating a separate operating unit, Acerinox Europa. Aperam in January, hoping to profit from surging emerging Mika Seitovirta, who took over as Outokumpu's chief ex- market demand, but its share price has since dropped ecutive in April, has launched a restructuring plan includ- about 60 percent from the 28 euros original reference ing cuts of up to 350 jobs and sales of stakes in miner price. Talvivaara and distributor Tibnor. Onillon said the current market value was a reflection not Outokumpu Executive Vice President Kari Parvento, also of the company balance sheet, which he said was worth 5 speaking to Reuters on Wednesday on the sidelines of the billion euros ($7.02 billion), but of the sector weakness. conference, said: "Our official view is that we support the "Our value is reflecting that we are a new company ... Be- consolidation in Europe." hind that also is the problem of the stainless steel industry. Asked if companies are now talking with each other infor- That is something which the industry has to address." ($1 = mally, both Parvento and Onillon declined to comment. 0.713 Euros) A source at Aperam said the company was still waiting for ThyssenKrupp to decide which option it would take for its stainless steel business.

ThyssenKrupp has said it was studying all options -- public flotation, spin-off, or outright sale -- and has appointed three banks to help it make a decision. (Continued on page 8)

METALS China nickel ore imports to slow in H2 vs H1 - "In addition to ensuring availability and access to these Jinchuan exec materials, research is needed to develop substitutes for, or reduce, the use of raw materials which bring new uncer- SHANGHAI, Sept 7 (Reuters) - China's nickel ore imports tainties in terms of their supply security, toxicity or environ- are expected to slow in the second half compared with the mental burden," the proposal said. first, an executive at the country's top nickel producer China produces more than 95 percent of global rare earth Jinchuan Group told Reuters on Wednesday. minerals -- used to make fibre optic cables and wind tur- Wu Jun, vice president of Jinchuan Group Ltd, which is also bines among other high-tech goods -- and its efforts to China's third-largest copper producer, said the company limit production, citing resource depletion and environ- expects to achieve its 2011 output targets of 130,000 ton- mental degradation, have alarmed its overseas customers. nes of nickel and 500,000 tonnes of copper. Adding to tensions, Chinese state media on Tuesday an- "It's hard to specify the forecast but imports are seen lower nounced plans to halt production at three major mines. from the first half as the global economy is so uncertain, The EU will "propose a trilateral initiative with Japan and but we are still expecting to achieve this year's production the U.S. on research on critical materials for energy appli- plan," Wu said. cations, particularly in areas of major technological chal- China imported 21.21 million tonnes of nickel ore and con- lenge such as the substitution of rare earths," the plan centrate for the first seven months this year, surging by 72 said. percent from a year earlier, customs data showed. The EU proposal needs approval from EU states and the Indonesia and Philippines, which are rich in laterite re- European Parliament, a process that may be held up by sources for the production of nickel-pig-iron and ferro- opposition to other parts of the plan that would hand nickel, were the top two exporters of nickel ore and concen- greater powers to the EU's Brussels-based executive to vet trates to China. and coordinate energy deals between the bloc and coun- NICKEL MARKET IN BALANCE tries such as Russia. China is expected to produce 440,000 tonnes of nickel this Fearful of falling supplies from China, the EU has begun year, while consumption may rise 13 percent to 650,000 stockpiling rare earths and is conducting geological sur- tonnes from last year, Wu told an industry conference on veys in hopes of identifying new sources of the minerals Wednesday. and other raw materials within the 27-nation bloc, an EU spokesman said. Customs data showed that China imported 118,302 tonnes of refined nickel and alloys from January to July, up 16 percent year-on-year. Top China antimony plant 2011 output flat or up Market players, including Jinchuan and Macquarie Bank, slightly - parent believe that the global nickel market is roughly in balance HONG KONG, Sept 7 (Reuters) - China's top antimony pro- for the year. ducer Hsikwangshan Twinkling Star Co will produce simi- Macquarie Bank said in a recent note that it expected a lar or higher output of antimony in 2011 from last year, a global surplus of 35,000 tonnes for the second half of the top executive at parent Hunan Nonferrous Metals Corp Ltd year. said on Wednesday. "Assuming steady growth in production from the new pro- Executive Director and General Manager Li Li also said jects (and no further growth in Chinese nickel pig iron) in Hsikwangshan, based in Lengshuijiang, Hunan province, 2012, global production should grow by 12.2 percent year- would maintain normal output and had no plan to halt pro- on-year and a much larger surplus could emerge," it duction for environmental checks. added. Antimony smelters in Lengshuijiang were halted in prepa- ration for a new round of environmental inspections or- dered by the local government, Chinese media reported EU to develop rare earth substitutes with US, last week. Japan "I have not heard that all antimony producers have By Juliane von Reppert-Bismarck stopped production for checks," Li told Reuters, adding BRUSSELS, Sept 7 (Reuters) - The European Union, United that Hsikwangshan was operating normally. States and Japan will work together to find substitutes for Hunan Nonferrous' production of antimony rose 11.8 per- coveted rare earth minerals whose exports China controls cent on the year to 32,496 tonnes in 2010, according to the and has been cutting back, under an EU plan published on company's annual report. The bulk of output came from Wednesday. Hsikwangshan. Under the proposal, which centres on how the EU can se- "(Hunan Nonferrous metals') antimony production this year cure reliable supplies of energy from outside the bloc, re- should be flat or slighter higher than last year," Li said. searchers from the three countries will coordinate their efforts to cut down their dependence on the Chinese miner- Official data showed that China, the world's top antimony als to make goods from catalytic converters to battery producer and exporter, produced 114,899 tonnes of anti- cells. mony in the first seven months of 2011, up 5.9 percent from a year earlier.

MARKET REVIEW METALS-Copper edges down, tracks fall in PRECIOUS-Gold rebounds more than 1 pct after equities sell-off SHANGHAI, Sept 8 (Reuters) - Copper prices edged down SINGAPORE, Sept 8 (Reuters) - Gold prices rebounded on Thursday, tracking a downturn in Asian equities and the more than 1 percent on Thursday following a drop of 3 per- euro as worries about the euro zone debt crisis and falter- cent in the previous session, as sharply lower prices at- ing U.S. economy undermine confidence. tracted bargain hunters, but improved risk appetite is likely Investors are waiting for price direction from a speech by to cap gains. United States President Barack Obama to the U.S. Con- Spot gold rose as much as 1.5 percent to $1,842.89 an gress on job creation. ounce after its most volatile day in two weeks, with a trad- Three-month copper on the London Metal Exchange ing band of more than $80. It had pared some gains to drifted down 0.2 percent to $9,071.25 a tonne by 0353 $1,830.72 by 0410 GMT. GMT, after rising 1.8 percent in the previous session. The most-active U.S. gold futures contract rose 1.6 percent The most-active November copper contract on the Shang- to $1,846.6, before easing to $1,833.80. hai Futures Exchange edged down 0.03 percent to 67,780 "Some investors, speculators and physical buyers have yuan per tonne by its midday close. shown a lot of buying interest at current prices, as they are much lower compared to a few days ago," said a dealer at A rebound in Asian stocks ran out of steam on Thursday, a Tokyo-based bullion house. and waning risk appetite also hit the euro . This was after risk assets rallied overnight after the Consti- Spot gold hit a record high of $1,920.3 on Tuesday. tutional Court in the southern German city of Karlsruhe Technical analysis suggested that spot gold could fall to- handed Germany's parliament greater say over euro zone wards $1,793.19 later in the day, said Reuters market ana- bailouts on Wednesday. lyst Wang Tao. The faith in gold's long-term bullish trend Despite a slight downturn in LME copper prices, sentiment remained intact as concerns about global growth still run seems to be cautious, rather than gloomy ahead of high, although the short term is likely to remain choppy. Obama's speech. "Concerns about economic growth in the United States and He is expected to offer a plan to jump-start flagging U.S. euro zone will keep supporting gold prices. Even though we may see liquidation repeatedly along the way, gold will rise jobs growth that relies on a package of tax cuts and gov- towards $2,000," the dealer said. ernment spending that could cost upward of $200 billion. "I think there is a cautious optimism that Obama could RISK APPETITE RETURNS announce greater plans to boost jobs. If he does, I think Investors abandoned precious metals for the riskier stock that could be positive for risk assets in general," said Phil- market, as Germany's top court rejected lawsuits aimed at lip Futures analyst Ong Yiling. blocking German participation in emergency loan pack- "I think (the German court ruling) caused a broadbase in- ages, but gave its parliament more say in bailouts. crease in risk appetite overnight and hence copper is hold- Further encouraging the risk appetite, Germany's industrial ing above the $9,000 level," she added. output jumped unexpectedly in July, offering hopes that Some positive news out of the euro zone on Wednesday Europe's largest economy may avoid recession. may also help limit losses in base metals. "The gold market is anticipated to maintain its downward German industrial output rose far more than expected in trend in the near-term, with a fall toward $1,750 possible July, boosted by a jump in durable goods, offering some over the next few days," Tom Pawlicki, an analyst at MF hope that Europe's largest economy may avoid recession. Global, said in a research note. The Italian Senate on Wednesday approved the govern- The direction of the market is less than certain, as an uncertain economic outlook in the United States and Europe, ment's widely criticised austerity programme aimed at mixed data, potential new stimulus moves unveiled by U.S. staving off a financial crisis. President Barack Obama and deteriorating technical indi- Greek officials were hopeful that banks would eventually cators vie for investors' attention. As a sign of caution participate in a bond swap deal as targeted, a key part of a among investors, holdings of SPDR Gold Trust and iShares bailout aimed at rescuing the euro zone member from Silver Trust have remained unchanged for a few days. bankruptcy.

No impact was expected on output at Freeport McMoRan Copper & Gold's Cerro Verde mine in Peru, which produces FOREX-Euro loses momentum, Aussie stung by around 2 percent of the world's copper, after workers jobs surprise launched a two-day pay strike on Wednesday. TOKYO, Sept 8 (Reuters) - The euro slipped in Asia on Workers at the company's Grasberg mine in Indonesia are Thursday and faces headwinds from suspicions that still set to strike from Sept. 15 to Oct. 15 unless the firm Europe's efforts to fix its debt crisis may not be fast enough gives them a pay rise. to keep markets happy, while the Australian dollar was knocked by a surprise decline in the country's employment

levels. (Continued on page 10)

MARKET REVIEW Still, any zeal to sell the common currency is, at least for The euro slipped 0.1 percent to 1.2080 franc but stayed now, being countered by expectations that U.S. Federal above the minimum exchange rate the Swiss central bank Reserve Chairman Ben Bernanke might drop clearer hints imposed on Monday. on the likelihood of more stimulus later this month. "The euro is being supported by the possibility that the The market's immediate focus is on the European Central market's focus will shift back to the dollar later today," Bank, which is expected to signal a change in policy direc- said Ayako Sera, a market strategist at Sumitomo Trust tion by halting an interest-rate rise cycle as the euro zone Bank. debt crisis weighs on the region's economy. DROPPING HINTS Market players will also be looking at what the central Many market players expect the U.S. central bank chief to bank says about its buying of southern European and Irish drop more hints that the Fed will adopt further easing bonds given that the ECB is internally divided over the pro- steps in his speech due at 1730 GMT, hampering the dollar. gramme. Traders also noted that initial excitement over U.S. Presi- "If Trichet makes cautious remarks on bond buying, Italian dent Barack Obama's plan to propose new job measures, and Spanish spreads could rise again and hurt investor due at 2300 GMT on Thursday, has begun to wear off amid sentiment," said Junya Tanase, chief strategist at JPMor- doubts over how much Washington will be able to spend gan Chase. after the acrimonious debt ceiling saga in Congress just The bank's chief, Jean-Claude Trichet, will hold a news over a month ago. conference at 1230 GMT. Against the yen, the greenback stood at 77.31 yen and is Constant difficulty in getting all 17 member countries to seen stuck around that level as selling from Japanese ex- agree on policies, including whether to take collateral from porters is seen capping the pair, likely below 77.50 yen in Greece for aid, has even given rise to concerns among Thursday' Asian trade. Wariness about Japanese interven- some market players that the euro zone may eventually tion is also supporting the dollar. need to break up. The Australian dollar fell 0.6 percent to $1.0590 , after Fuelling such speculation, the Dutch government, increas- Australian employment unexpectedly fell in August while ingly critical over euro zone bailouts, said on Wednesday it the jobless rate ticked up to a 10-month high. wants countries which break the budget rules to be given The disappointing report prompted the Australian money the option to leave the single currency area. market futures to price in rate cuts of nearly 0.75 percent- The euro shed 0.2 percent in Asia to trade at $1.4065 , age points by the end of the year, even though the coun- down about a full cent from a high hit on relief after a Ger- try's economy had seen robust growth so far thanks to man court did not block the country's involvement in euro- strong demand for raw materials from China. zone bailouts on Wednesday. In Europe, the Bank of England also holds a rate meeting, Major resistance for the euro is seen at around $1.4200, the though it is expected to hold fire as inflation is stubbornly 38.2 retracement of its fall from late August to early Sep- high despite a faltering recovery in the UK economy. tember. The British pound slipped 0.2 percent to $1.5948 , not far But the currency is still holding above a seven-week low of from two-month low of $1.5919 hit on Wednesday. $1.3972 hit on Monday, having managed to recover above its 200-day moving average around $1.4015.

LME ANALYTIC CHARTS

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