Commodities Watch: Barrick Outbids Chinese Miner; China Raises Quotas on Some Metals; USDA Releases Food Price Forecast (ABX, EQXMF, LUNMF)

Today’s news includes a higher bid for a Canadian copper and gold miner, some higher quotas on Chinese metal exports, and the latest forecast on food prices for 2011 from the US Department of Agriculture.

Barrick Gold Corp. (NYSE: ABX) has offered $7.8 billion in cash to acquired Canadian miner Equinox Minerals Ltd. (OTC: EQXMF). The offer represents a 30% premium to the price of Equinox on February 25th, the day before Equinox made an unsolicited offer to buy Lundin Mining Corp. (OTC: LUNMF) for $4.3 billion. The Barrick offer has been accepted by Equinox, which will drop its hostile bid for Lundin as part of the deal.

Chinese mining firm Minmetals Resources Ltd. said it would make a $6.5 billion bid for Equinox earlier this month, but the Equinox board declared that to be a lowball bid and dismissed it. The Barrick bid is about 16% higher than the Minmetals bid.

A tender offer starts tomorrow and is set to run for at least 35 days. Barrick needs to accumulate two-thirds of the outstanding stock of Equinox, which is one of the top 20 copper miners in the world with major properties in Chile and Zambia.

The current boom in commodities — with copper one of the biggest boomers — is throwing off mountains of cash for big mining companies like Barrick and they are taking advantage of the boom by using their new wealth to combine. So far this year there have been mergers and acquisitions valued at $133 billion in the materials sector, more than double the amount for the same period a year ago.

The government of China has raised 2011 mandatory quotas on some minor metals. The quotas cap production of tungsten at 87,000 metric tons, up 8.75% from 2010; tin at 73,000 metric tons, up 12.3%; antimony at 105,000 metric tons, up 5%; molybdenum at 200,000 metric tons, up 17.6%; and rare earth metals, up 5.16% on oxides and flat on refined output.

The US Geological Survey estimated 2010 global production of antimony at 135,000 metric tons, with China producing about 89%. Global consumption of tin in 2010 is estimated at 360,000 metric tons, of which China consumes about 21%. China also produces more than a third of the world’s supply of molybdenum, a component of stainless steel.

But everyone’s eyes are on the rare earth figures, which are slightly higher than original estimates. China does not intend to issue new mining permits for tungsten, antimony, or rare earths any earlier than June 30, 2012. Prepare for ever-rising prices — again.

The US Department of Agriculture is forecasting that the Consumer Price Index for all food will rise 3%-4% in 2011, compared with just an 0.8% rise in 2010 and a 1.8% rise in 2009. Food price inflation hit 5.5% in 2008. Among the leaders are beef, up 12.2% since March 2010 and pork, up 11.2% in the same period. Coffee prices are up 9.4% since March 2010. Butter prices are 31.9% higher than March 2010. Bakery/cereal prices and retail dairy prices are expected to rise 3.5%-4.5% in 2011.

Paul Ausick