While the smart guys at Goldman Sachs made waves a few weeks ago saying that European demand for copper was tapering off, they now seem to be reversing course by pointing to a serious lack of supply.
China is not the problem with the commodity markets, as far as Goldman Sachs is concerned. Instead, their analysts see the prospect of a “mild” recession in Europe knocking copper prices downward.
Shares of Ivanhoe Mines are down 14% during the last week amid bickering with the Mongolian government and its own controlling stakeholder, Rio Tinto.
News that gigantic gold miner Barrick wants to buy junior copper miner Equinox keeps reverberating through the commodity markets.
This is the nightmare scenario that scares a lot of traders out of the frontier markets: The Democratic Republic of Congo is liquidating FQ’s copper project.
Although First Quantum (FQVLF, quote) says it will fight the local court’s decision to shut down its $750 million project, it is unclear just where the Canadian company can go for help.
The DRC claims that FQVLF failed to live up to its contractual obligations. The parties are already disputing the case before the International Chamber of Commerce.
Another company, Highland Properties of the Virgin Islands, has reportedly already signed up to replace FQVLF on the project.
This is a textbook example of why frontier markets like the DRC (or Mongolia or Venezuela or Bolivia or, until recently, Russia itself) are so risky. The government holds all the cards and foreign corporations are really just hostage to its good behavior.
Sometimes that relationship works out really well. Other times — as FQVLF and its shareholders are discovering — it does not.