Peru set to become world’s second largest copper producer in 2016

Peru is on track to double its current copper production by 2016 and so recover the second position among the world’s largest production of the industrial metal, the Minister of Energy and Mines said.

The country’s total production will hit 2.8 million tonnes in 2016, up from 1.4 million tonnes in 2013, thanks to five major projects slated to begin operations that year

During a visit to Freeport-McMoRan Copper & Gold’s (NYSE:FCX) Cerro Verde copper complex, about 30 km southwest of Arequipa, minister Eleodoro Mayorga Alba said the country’s total production will hit 2.8 million tonnes in 2016, up from 1.4 million tonnes in 2013, thanks to five major projects slated to begin operations that year, OutletMinero (in Spanish) reported.

Freeport-McMoRan’s Cerro Verde’s $4.6 billion expansion, scheduled for completion during the first quarter of 2016, is one of those key projects, Mayorga Alba noted.

Work at Cerro Verde is 22% complete and the extended mine will start initial production in the second half of 2015, the minister added.

Another card up Peru’s sleeve is Southern Copper’s (NYSE:SCCO) controversial $1 billion Tía María mine, which is expected to begin production in March 2016.

Currently China is the second largest producer of the red metal, with an annual output of about 1.6 million tonnes per year, well below the nearly 5.8 million annual tonnes produced by Chile, the world’s leader, based on data provided by CRU Consulting.

Global copper producers —being Chile's Codelco the largest, followed by Freeport-McMoRan, Glencore (LON:GLEN) and BHP Billiton (ASX:BHP)— plan expansions of mine capacity that would add between 1.1m tonnes and 1.3m tonnes of copper per year to the market until 2016.

Such increases would be roughly equivalent to the annual output of Chile's Escondida, the world’s largest mine, which provides about 5% of the world supply.

Peru’s steady growth in recent years has been largely driven by mineral production. Last year the country injected $9.7 billion to the local economy coming from mining, jumping 14% when compared to 2012.

Authorities have said they expect to reach similar levels by the end of this year, as there is still there is plenty for everyone to get a descent piece of the resources pie. Peru holds13% of the world's copper reserves, 4% of gold, 22% of silver, 7.6% of zinc, 9% of lead and 6% of tin reserves, official figures (in Spanish) show.

A Significant Decline is Coming to The Stock Market

Last week we wrote that a trend turn is coming to stocks. Stocks immediately declined sharply. However, we believe there is a much larger decline coming and that it could start soon. Didn't it already start this past week? Maybe, maybe not. This past week's decline has several "corrective" characteristics that suggest it is not the big decline we expect to start. There could be more upside before that large sell-off begins. What we can ascertain this weekend is that a significant decline is not far away. If it started last week, a much deeper decline is on its way. If it did not start last week, it could start very soon. Here is some of the evidence why we believe a significant decline should be underway within a few weeks:

Above we see that there is a Bearish Divergence between the S&P 500 and Demand Power. The Divergence is maturing, suggesting a top is close at hand and a significant decline should begin soon.

Above we see that there is a Bearish Divergence between the NASDAQ 100 and its Demand Power Measure. The Divergence s maturing, suggesting a top is close at hand and a significant decline should begin soon.

Above we see that there is a Bearish Divergence between the S&P 500 and the NYSE 10 Day Average Advance/Decline Line Indicator. The Divergence is maturing, suggesting a top is close at hand and a significant decline should begin soon.

Above, we see similar Bearish Divergences with their 10 Day Average Advance/Decline Line Indicators and prices for the small cap Russell 2000 and also the NASDAQ 100. These divergences are maturing, suggesting a top in stocks should arrive over the next two weeks, with the start of a strong decline.

Robert McHugh

CME / Thomson Reuters win race to replace London silver fix

As anticipated earlier this week, the race to replace the London silver price fix is finally over, as the London Bullion Market Association (LBMA) has chosen the joint Chicago Mercantile Exchange/Thomson Reuters bid to replace the current 117-year-old price process, which formally ends on August 14.

The LBMA said the joint tender met the requested criteria, in that it was electronic, auction-based and auditable, while remaining tradeable with an increased number of direct participants.

In a statement Friday, the LBMA said the joint tender met the requested criteria, in that it was electronic, auction-based and auditable, while remaining tradeable with an increased number of direct participants.

At present, the silver fix is set each day at noon by three large banks, which are Deutsche Bank, HSBC and Scotiabank by way of a daily conference call.

The CME Group will provide a price platform and methodology, while Thomson Reuters will be responsible for administration and governance, it added.

Thomson Reuters already works with the LBMA to administer Gold Forward Offered Rates (GOFO), a rate used in swap deals.

The association will develop a process of accreditation for silver price participants, with the legal aspects of this division of responsibilities to be finalized prior to the new price mechanism going live.

Financial benchmarks have come under strong scrutiny from regulators around Europe and the United States since 2012, when it became public that British banks had rigged the London Interbank Offered Rate (Libor).

Gold near 3.5-month high on Portugal bank worries

Gold fell for the first time in three days Friday but continued trading near a 3.5-month high with demand steady on investor concern about Portugal's biggest bank.

Spot gold changed hands at $1,336.00 an ounce around 2:20 p.m. Eastern Standard Time, up 70 cents from Thursday's close of $1,335.30. Earlier Thursday it reached $1,345, its highest level since mid-March.

Meanwhile on Friday, gold futures for August delivery traded around $1,337 per ounce on New York's COMEX.

Gains in European shares following declines Thursday put some downward pressure on the yellow metal. But market participants remain worried about the euro zone's financial health as trading in Banco Espirito Santo's stock has been suspended.

In times of political or financial turmoil, investors seek a safe haven in gold, whose price was pushed up sharply during the European debt crisis.

Escalating violence in Israel and the US Federal Reserve's benign stance on interest rates are also supporting gold.

Indian duty

Also Thursday, India maintained a 10% duty on bullion imports. That prompted jewellers awaiting a reduction of the duty to resupply.

India raised the duty last year sparking a dramatic increase in gold smuggling, which yesterday's move may exacerbate.

Precious metals have outperformed other commodities this year with double digit gains for gold and palladium and a strong performance for silver and platinum.

‘Both STT, CTT rates are already very low’ says Revenue Secretary

Cannot understand the expectation to lower them further, says Revenue Secretary

The stock and commodities market seem to be disappointed as the Budget has not revised the Securities Transaction Tax (STT) and the Commodities Transaction Tax (CTT). What was the reason behind this decision?

I don’t know what is the expectation? Because the current rates, of both STT and CTT, are very low. And we have also prescribed that if you have paid the CTT, income from such a transaction will not be treated as speculative income. This, by itself, is a very strong signal. There has to be a tax and rates are very low.

People were also expecting some relief on gold — of import duty being lowered from 10 per cent. Since duty revision can happen outside the Budget, can we expect something during the current fiscal?

The current account deficit, like the fiscal deficit, had been a matter of concern. Things have improved. CAD came down at the end of the last fiscal.

But we need to be cautious, considering the volatility in international markets. International crude prices are rising due to the Iraq problem. So, we have to wait and see how that plays out.

Does this mean there will be no immediate relief on gold?

I cannot say about the future. As of now, all I can say is that there is no decision to reduce the duty. The position is constantly changing, we will see.

Commex trades not speculative if commodity transaction tax's paid

Traders and business houses which traded commodities exempt from commodity transaction tax (CTT) on recognised commexes and adjusted losses or gains arising from such transactions against business income or losses will not be allowed to offset such transactions any longer.

This is because the Budget spells out that such offsetting of transactions can be done only in respect of commodities traded on recognised associations (by CBDT) and on which CTT has been paid. This will be applied retrospectively from April 2014. Such transactions have been declared as non-speculative or eligible ones for offsetting.

Earlier, if CBDT recognised a commex that collected CTT, all transactions done on it were deemed non-speculative. But the government has now modified the previous rule, in line with a notification in January this year, that only transactions done on a CBDT recognised exchange and on which CTT has been paid are not speculative, explained Anil Mishra, MD & CEO, Ahmedabad-based commex NMCE.

However, another commex official on condition of anonymity, said a trader will also continue to be able to adjust business loss/profit against that from non-CTT commodity futures contract so long as these transactions result in delivery.

Section 43(5) of the income tax deems transactions in commodity, including stocks and shares, but excluding derivatives on recognised stock bourses, as speculative if they do not result in delivery.

Speculative loss/gain can be offset only against speculative loss/gain and carried forward for 4 years, while non-speculative gain/loss can be offset against speculative loss/gain and business loss/gain and carried forward for 8 years.

CTT was announced by the UPA government in the Budget for FY14 and began to be imposed from July last year.

Commodity investors get the cold shoulder, No relief from transaction tax, 80:20 rule too not eased

No relief from transaction tax, 80:20 rule too not eased

Participants in the commodity market had given a long wish list, but they have been left disheartened by the Finance Minister.

Their request for removing commodity transaction tax on non-agricultural commodities has not been granted.

Also, gold jewellers who have been long lobbying for lifting of gold import restrictions and reduction in gold import duty have been left high and dry.

Stocks of Tribhovandas Bhimji Zaveri (TBZ), Titan Company and Rajesh Exports traded in the green when the market opened, but pared their gains after the Budget was table in Parliament.

TBZ and Titan ended five per cent lower for the day.

Markets in a tizzy

This has been as bad year for commodity trading like 2013, when turnover at the commodity bourses dropped 28 per cent.

MCX, the largest commodity futures bourse with large chunk of the volumes from bullion and energy contracts, has seen its turnover nosedive.

Now, the monthly turnover on MCX is just a third of what it used to be in 2013. Average monthly turnover in gold and silver contracts has more than halved.

Industry observers say the levy of CTT is the major reason for fall in volumes on the commodity bourses as it has hit margins of arbitrage traders.

Introduced in July last year, the Commodity Transaction Tax was being levied at the rate of 0.01 per cent on the sell side and is applicable on all non-agricultural commodities including gold, silver, industrial metals and energy and a few agricultural commodities.

Though the levy is just 0.01 per cent of the contract value, the new tax has increased the cost of trading by 18-20 per cent.

Losing sheen

Jewellers have nothing to celebrate either.

As the Government announced the 80:20 rule giving all gold importers an export obligation, the premium on gold bars in the spot market in Mumbai touched a high of $110/ounce in January. But since then domestic jewellery demand has not been great.

The Government also lifted some curbs on gold imports, so much of the premium has evaporated.

However, gold jewellers wanted the Government to reduce import duty and go easy on the 80:20 rule and free them from export obligations in the Budget.

But, both these haven’t happened. Official gold availability in the country may thus continue to be tight, warranting premium. Currently, the premium in the market is around $5-10/ounce.