As Nickel nears $ 1 / oz. the following is prudent reading IMO
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Mineweb:
S&P: Gold, copper and nickel price forecasts
By: Dorothy Kosich
Posted: '21-AUG-06 09:01' GMT © Mineweb 1997-2006
RENO, NV (Mineweb.com) --In their recently published U.S. metals and mining companies report card, Standard & Poor’s analysts said they expect gold to trade between $450 and $700 per ounce this year.
The analysts also predicted 12-month base case prices of $620/oz for gold, $6/lb. for nickel, and $2.25/lb. for copper.
Standard & Poor’s credit analyst Thomas Watters warned that, “although fundamentals remain sound for most metals, there exist some significant medium-term risks.” Among these risks are an unexpected drop in Chinese industrial production, and rapid investments flows in and out of metals by speculative investment funds, “which compound potential volatility and can seriously exacerbate short-term price declines.”
Other risks can include operating-cut inflation especially from higher energy costs, high currencies relative to the U.S., and scarcer materials and labor, according to S&P.
Meanwhile, Standard & Poor’s forecast that the “factors that fueled the escalation in gold prices likely will persist through 2006 and 2007, thereby underpinning prices. In the medium-to-long term, we remain positive about prices and industry fundamentals.”
Nevertheless, the analysts noted that gold production is declining as output drops from mature mines in Australia, North America and South Africa. “There are too few projects that could reverse the expected decline in production because permitting and building new mines usually takes several years,” they added.
“The fundamental strength of base metals is expected to persist for at least the next several quarters as demand remains solid and supplies continue to decline to critical levels,” said Standard & Poor’s. Nevertheless, the analysts added, this will be tempered by higher spending to replenish reserves, increased production, enhancing efficiency, and rewarding shareholders.
“The event risks associated with large-scale M&A activity add a dimension of complexity that will likely constrain further upward pressure on rating,” according to the analysts.
Standard & Poor’s said it is using “relatively conservative copper prices” of $2.25 per pound for this year, $1.70/lb. for 2007, $1.40/lb. for 2008 and $1.10/lb for 2009.
S&P anticipates that the tight nickel supply-demand balance will continue through next year. The analysts’ 12-month base-case price for nickel is $6 per pound. The analysts concluded that the “price outlook for nickel through 2007 remains favorable, assuming continued strength in Asian demand, although some concern exists about the potential for a decline in demand, as marginal stainless steel capacity shifts to lower nickel-containing grades to protect against exceptionally high prices.”
Voisey’s Bay will continue its ramp up this year, and BHP Billiton’s Ravensthorpe project and Inco’s Goro project are expected to begin production in late 2007. However, the analysts cautioned that both Ravensthorpe and Goro “are facing markedly higher capital costs and potential delays in achieving commercial production, thereby maintaining the tight supply-demand balance in nickel through 2007.”
Standard & Poor’s analysts said intermediate-term fundamentals for coal “look good, despite recent weaknesses. …Despite recent weaknesses, good omens for intermediate-term fundamentals are the announcement of a significant amount of coal-fired electric generation capacity, a lack of economically feasible substitute fuels, and long lead times to bring on new coal production capacity.”
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