In July, the base metals have recovered from the depressed levels of early June with prices trading at 12-14 weeks high and likely to continue their upward rally on economic optimism. Similarly, oil prices rose as better-than-expected earnings from ExxonMobil Corp., Southwest Airlines Co. and others bolstered hope for an improving economy. 
    The euro climbed to $1.31 for the first time in almost three months as European confidence in the economic outlook rose to the highest level in more than two years this month and German unemployment decreased. In spite of Portugal’s two-notch downgrade by Moody’s, the euro was also supported this week as stress tests released July 23 found only seven European banks needed to raise additional capital.
    The Federal Reserve underscored yesterday in the Beige Book business survey its view that the U.S. economic recovery, while still moving forward, is progressing at a slower pace than earlier in the year. U.S. gross domestic product grew at a 2.5% annualized rate in the second quarter after expanding at a 2.7% pace in the first three months of the year, according to the median forecast of 81 economists in a Bloomberg News survey.
    The month headline is the mining and energy taxing system issues which have spread globally. Australia eventually ended a damaging dispute with global miners by dumping its planned "super profits" tax for a lower resources rent tax backed by big miners, clearing a major hurdle to calling an early election. The resource rent tax will be at a rate of 30%, down from the previous "super profits" tax rate of 40% and it will only apply to coal and iron ore mining and exploration companies earning more than A$50 million in annual profit. Although miners will pay more tax, the total will be less than under the proposed "super profits" tax and the government still gets extra revenue to fulfil pre-election promises. Global miners BHP Billiton, Rio Tinto and Xstrata welcomed the new tax, but not all miners were happy, saying the deal still threatened Australia's resources sector and overseas investment. In fact, the watered down mine tax upset some smaller iron ore miners, the backbone of mineral exploration, who had wanted rebates on millions of dollars spent annually exploring.
    In the meantime, Chile's Congress rejected a government proposal to revamp mining royalties to help pay for reconstruction after a massive quake, in a major political blow for President Sebastian Pinera. The proposed change in mining royalties aimed to raise up to $1 billion out of a wider $8.4 billion package to fund rebuilding after the February 27 disaster which killed over 500 people and ravaged industries in south-central Chile.
    Paradoxically, China, which helped its heavy industry survive the financial crisis by lowering barriers to exports, is now hitting the same exports with a tax to discourage rampant production that uses too much energy. The government has repeatedly vowed to crack down on overcapacity, threatening to withdraw loans, outlawing expansion and advocating a wave of consolidation that will leave only a few big players in each industry. As a result China set a target of cutting the energy intensity of its economy by 20% in the current five-year plan, which ends this year, but that now looks a hard target to meet. After falling for four years, energy use shot up in the first half of this year because of expanded production in high-energy industries. The government said it would cut and scrap some rebates on exports of steel and most base metals and semi-finished products made from those metals from July 15. T his new export tax policy is part of efforts to limit capacity of high-energy and high-emission industries for which coal and coke are needed. China now aims at exporting high value-add finished products like automobiles and ships instead.
     China's PMI fell by 0.9 points to a 17-month low of 51.2 points in July, marking the third straight month of decrease. An official from China's Federation of Logistics & Purchasing attributed this to seasonal factors and macro-control measures like property sector tightening and export tax rebate.

      In London, the Lead cash settlement price rose by 20% to US$ 2,065 per ton while the Zinc cash settlement price increased by 15% to US$ 1,973.50 per ton on the   30^th of July 2010.
    Lower zinc prices have sparked a supply response, with smelters in China reducing production recently. These cuts should help to slow fast production growth and prevent a build in stocks over the summer. While spot buying in China is soft at the moment, the demand outlook received a boost from news that the government will increase infrastructure spending 45%.
    Same wise, supply-side dynamics are becoming increasingly supportive for lead. Chinese production is expected to fall in the coming months due to a concentrate shortage, and smelter closures. In addition, battery shipments as well as replacement shipments have picked up recently. This is a positive sign, as replacement demand accounts for the majority of battery demand.
    Doe Run Peru has failed to secure financing and resume operations at its La Oroya multi-metal smelting complex by the latest deadline of 27 July set by the Peruvian government. The next step will be for Indecopi, the government agency for corporate bankruptcies, to oversee the creation of a creditors board that will decide whether to liquidate or restructure the company’s assets. The second option leaves open the possibility of another company taking over the plant, as another option - the government taking over the plant - would be a less favoured one, given the $150M still needed to finish an environmental clean-up and the $110M owed to creditors. The Peruvian government is also reluctant to permanently close the complex, due to the political and social fallout from the loss of thousands of jobs, either directly or indirectly. In 2008, its last full year of operations, La Oroya produced 114,259 tons of refined lead and 43,440 tons of refined zinc. However, such closure is unlikely to affect balances in the lead or zinc markets, with ample capacity in China to treat the concentrates that might otherwise have been processed at La Oroya.
    Terramin Australia has made significant progress with the process of compiling a definitive feasibility study on the Tala Hamza zinc project in Algeria. All onsite activities for the study have been completed ahead of schedule, and design work on the surface facilities and road access is well advanced. Tala Hamza has the potential to have combined zinc/lead production of 250,000 - 400,000 tons per year.
    Kagara Zinc has reported positive results from a pre-feasibility study for its Admiral Bay mine project in Western Australia. The study envisages an initial 2.5 million tons per year operation with forecast revenues of A$ 4.964 billion over an initial 10.2 year mine life. The company expects to complete a bankable feasibility study within the next six months.
 Xstrata has begun construction of the Bracemac-McLeod mine in Quebec. The new mine will produce 80,000 tons per year of zinc at full production which is expected to be attained in Q1 2013.
    LME lead stocks started to slightly decrease to 183,825 tons while zinc stocks stand at 619,725 tons.   
 

    In London, the Copper settlement price rose by 11% to US$ 7,195.0 a ton with a contango of US$ 22.5 on the 30^th of July 2010. 
    China imported 328,231 tons of copper and copper semi-finished products in June 2010, down by 17% from May and also down by 31% from June 2009. This is the third consecutive monthly decline by world’s largest metals consumer, signalling that demand growth may be weakening.
Yunnan Copper, China’s fourth-biggest copper smelter, will shut down a 200,000 tons per year plant in Kunming province until April next year for maintenance. The shutdown underlined concerns about demand and oversupply in China’s copper sector, although the company said the stoppage was planned and would not affect its target of 320,000 tons per year.
However, the Chinese government is planning to establish a new style rural power grid construction in three years, which will use an estimated 1.75 million tons of copper. Investment is expected to reach 200 billion yuan (US$29 billion).
    In Peru, Xstrata announced the approval of US$1.47 billion investment to develop the Antapaccay project. The project is an expansion of their Tintaya mine, which will reach the end of its life in 2012. The development of Antapaccay will increase Tintaya’s concentrate production by 60% to an average of 160,000 tons per year for the first six years of the at least 20-years life of mine that is expected for Antapaccay. In 2010, Tintaya is expected to produce 70,000 tons of copper-in-concentrate. Meanwhile in Australia, Xstrata reinstated about AUD600mn ($508mn) copper mining and exploration projects after the government restructured its proposed mining tax. Work would now start to extend the company’s Ernest Henry mine in Queensland by at least 12 years to 2024.
    Vale announced it had reached a tentative contract agreement with workers at its Sudbury, Ontario nickel and copper mining operation, signalling the end of a bitter, year-long strike. About 3,000 workers went on strike in Sudbury last July in a dispute regarding pensions, bonus output is expected to ramp up to full capacity by Q4 10.
    The Mine Workers Union of Zambia (MUZ) announced on 28^th July plans to block the development of Vale ’s US$400 million Konkola North project in the country. Vale had earlier this month announced its intention to move forward with the Konkola North project, which it expects to commission in 2013 at an initial production rate of 50,000 tons per year, rising to 100,000 tons per year in Phase 2.
    OZ Minerals has approved Prominent Hill underground mine and development has already started. The underground mine is expected to add 25,000 tons per year of copper-in-concentrate and 12,000 ounces per year of gold to existing open pit production.
    LME copper stocks slightly decreased to 411,525 tons at the end of the month.

    In London, the tin settlement price rose by 10% to US$ 19,550 per ton with a contango of US$ 125 on the 30^th of July 2010.
    Tin continues to provide the most robust picture across the base metals complex. Falling supplies and rising demand from manufacturers in Europe and Asia are pushing tin prices to their highest levels in two years and analysts believe it will soon rise above a key $20,000 a ton barrier.
    The World Bureau of Metal Statistics estimates that total tin demand jumped 20% in the first quarter of the year compared with the same period of 2009. Japan’s refined tin imports are up 80% in January-April, compared with the 2009 period.
     Similarly, Itri, the tin industry-backed body, said this year that global solder shipments in the first quarter of 2010, which account for over half of the metal’s consumption, were 50% higher than the very depressed first quarter of 2009, due to stronger output from the electronics industry in Japan, South Korea and Europe. As a result of the market tightness, buyers are paying bigger premiums to secure cargoes than at any time over the past two years.
    The main culprit is a drop in supplies from Indonesia. Its exports of refined tin, which account for a third of the market, dropped 14.5% to 43,263 tons in Q1 2010 compared with the same period of 2009. The drop comes on the back of a crackdown on illegal mining in Bangka-Belitug, off Sumatra island, and the depletion of the easily mined reserves. The latest closure was the PT Donna Kembara Jaya smelter, which shut last month, removing about 5% of Indonesia’s output from the market. Indonesia's refined tin exports were estimated at 8,029.92 tons in June, a 7.3% fall from 8,661.2 tons in the same month a year ago.
    Production has also fallen in Peru, the third-largest exporter, and Bolivia, the seventh largest, as the financial crisis cuts credit to the regions’ miners.
    However, in Bolivia, t he government has approved US$10.2 million to finance infrastructure works and equipment for the construction of state-owned tin producer Vinto's Ausmelt furnace.
    LME tin stocks are now down 46% this year to 15,050 tons, the lowest level since June 2009 and equal to about 16 days of global consumption.

    In London, the Gold P.M fixing closed the month to a 12-week low at US$ 1,169.00 per ounce on July 30^th, 2010 (MTD: -6.03%, YTD: +7.49%), while Silver slipped in line with gold, ending the month at US$ 17.66 per ounce (MTD: -5.76%, YTD: +3.94%).
    Gold and silver prices have been on a downward spiral after three months of gains. Gold prices slid more than $75 and dropped below the key technical support of $1,200 an ounce as the broader sell-off in financial markets sparked a bout of profit-taking. Silver also fell sharply on demand worries amid signs of slowing economic recovery and lackluster U.S. auto sales.
    At the beginning of the month, gold dropped after China said bullion would not become a major investment home for its foreign exchange reserves. Gold prices extended losses after a rebound in equity markets as sharper appetite for assets seen as higher risk removed safe-haven support and after data showed that U.S. consumer prices fell for a third straight month in June, decreasing the metal's appeal as a hedge against inflation.
    Overall, demand for physical gold investment products including ETFs, coins and bars has softened as concerns over financial market stability have receded. However, according to the World Gold Council, investors bought 273.8 net tons of gold via exchange traded funds in the April-June period, the second-largest quarterly inflow on record. The total amount of gold held in the ETFs monitored by the WGC to over 2,000 tons, or worth $81.6 billion.
    At the end of the month, increased physical demand from Asia helped gold stage a mild rebound and particularly in India ahead of festivals that begin next month. Gold's correction has stimulated buying from India and physical consumers of the metal more generally. India may import 500-550 tons of gold in 2010, up from 480-490 tons from a year earlier.
    On the silver supply side, Fresnillo, announced record production of 19.1 million ounces in H1 and expects to produce about 38 million ounces of silver (equivalent to 5% of last year's world production) and
340,000 ounces of gold this year.
    On the gold mining side, Barrick Gold, announced its Q2 gold production rose 4.2% to 1.9 million ounces and remains on track to meet its full-year production forecast of 7.6 million to 8 million ounces. In Indonesia, Miner Freeport McMoRan has lowered its gold sales estimate by more than 20% for next year because of "geotechnical" issues at its vast Grasberg mine. As a result, the company now expects 2011 gold sales volumes to be about 1.5 million ounces, down from its earlier estimate of 1.9 million ounces.

    In London, Nickel rose by 3% to US$ 20,560 per ton, with a contango of US$ 80, on the 30^th of July 2010, while cobalt min. 99.3% traded at US$ 17.525 per pound.
    Vale eventually ratified the new five year collective agreement with the United Steelworkers (USW) which represents the production and maintenance employees in the company’s Ontario operations. The agreement ends the year long strike at the operation and could pave the way for the negociations at the company’s other Canadian operations experiencing the similar strikes. For the year, production out of the company’s Canadian operations is expected to be 65,900 tons.
    In Finland, Talvivaara has indicated that its production ramp-up at its bio-heap leach operation is on track. The company is maintaining its production target for this year to be 15,000 - 20,000 tons of nickel. 
    In Kosovo, Cunico Resources is expecting to increase its ferronickel production next year by restarting its second production line at the ferronikeli plant in October. It has only been operating a 14,000 tpy single line since the end of 2008 when the second line was idled on the back of weak market fundamentals. The company expects to produce 24,000 tons this year and 33,000 tons in 2011.
    In Western Australia, First Quantum has started a major recruitment campaign for its Ravensthorpe project. Five months after the company bought the project from BHP Billiton for US$350 million; it is planning to increase its workforce from the current 40 employees to 600 employees. The company is currently building two crushing plants which are expected to be more suitable to Ravensthorpe’s ore body. The plant is expected to come online at the end of Q1 next year, followed by a nine month ramp up to 39,000 tons per year of nickel.
    Meanwhile, Metals X has signed a mining agreement with indigenous landowners after 5-years of negotiation allowing for the Wingellina nickel-cobalt project in Western Australia to advance to the next stage. The bankable feasibility study will not start until a funding plan has been determined, which is possible by year-end. The Wingellina nickel laterite project possesses huge reserves containing as much as 1.8 million tons of nickel and 139,000 tons of cobalt. Work completed on the project so far suggests that nickel output of 40,000 tons per year and cobalt output of 3,000 tons per year over a mine life of 39 years are achievable. 
    LME nickel stocks have now fallen by around 30% YTD and 7,5% MoM to 116,778 tons.