HONG KONG: Zijin Mining Group Co, the country's largest gold producer, reporting on copper, gold and zinc prices, said a recovering world economy and loosening bank credit will bolster copper prices in the second half of the year.

Prices will rise because positive factors will outweigh negative ones, such as an oversupply of copper, the Fujian province-based company said yesterday in its earnings statement.

Copper prices have doubled this year as the mainland, the biggest user, imported record amounts for stockpiling and as the government pushed a 4 trillion yuan ($585 billion) stimulus. Zijin's call differed from that of Bank of America Merrill Lynch, which last week said copper prices are poised to fall.

"Though there is an oversupply of copper, as the signs for a recovering world economy become clearer and with an appropriately loosening credit control and liquidity, copper has rebounded strongly," Zijin, which gets 14 percent of its earnings from copper, said. "We expect positive factors to outweigh negative ones in the second half."

London exchange-monitored stockpiles of copper expanded by 7,750 tons to 292,125 tons on August 7, the highest level since June. Inventories in Shanghai climbed 24 percent last week.In trading, Zijin fell 0.3 percent to close at 10.40 yuan in Shanghai trading, matching the 0.3 percent decline on the benchmark Shanghai Composite Index. In Hong Kong, shares fell 0.7 percent to HK$7.24.

Meanwhile, in Shanghai, copper climbed for the first time in three days amid optimism the global recession may be easing. Futures in London jumped 7.5 percent last week as US employers eliminated fewer jobs last month than economists forecast.

Copper for November delivery in Shanghai rose as much as 4.6 percent to 48,740 yuan a ton before closing at 48,690 yuan. Economists believe China will maintain its macroeconomic policy stance aimed at bolstering domestic spending as the nation continues to suffer from the recession.

As for gold, Zijin yesterday said first-half profit rose 11 percent on higher gold prices and production. Gold, which has risen by 8.2 percent in price this year, accounts for 83 percent of earnings, it said.

"There will be positive changes in world economic growth in the second half," Zijin said. "Gold prices will remain at a high level."

Demand for zinc, used in automobiles and construction, as an element in the production of galvanized steel, will rise strongly on the mainland in the second half, Zijin said. That will support prices though there is a "big" oversupply, it said.

The company, which has been looking at gold and base metals acquisitions on the mainland, hasn't bought assets because of high gold prices and a "rapid" recovery in base metal prices, Zijin said. It will continue to seek acquisitions on the mainland and overseas in the second half, the company reiterated.

China Daily - Agencies

(HK Edition 08/11/2009 page4)