Cameco has announced that it will not raise its CDN$4.50/share bid for Hathor and will allow its offer to lapse tomorrow. Rio topped Cameco’s offer last week, putting in a bid of CDN$4.70/share, valuing Hathor at CDN$654 million.

Today’s share price rise in the other junior miners is no doubt based on the belief that Cameco still wants to acquire additional uranium assets now that it has lost Hathor. Denison, for example, has a market cap of just over $500 million and may be a reasonable substitute if Cameco decides to continue shopping around.

The acquisition of Hathor comes at nearly the same time that Kazakhstan has taken over as the world’s leading uranium producer. The Central Asian country now produces about 33% of the world’s uranium, more than the second and third largest producers (Australia and Canada) combined. The country also plans to build new enrichment facilities in a partnership with France’s Areva SA (OTC: ARVCY) in an effort to move up the value chain.

Cameco is already producing uranium in a joint venture in Kazakhstan and is seeking a production increase of about 33%, which would raise its share of production from project to 2.9 million pounds of uranium. That might be enough to forestall future acquisition plans.

Today, though, Cameco shares are up 6%, at $17.66 and Rio shares are up nearly as much, at $49.10. Shares of Denison are up more than 6.5%, at $1.30, in a 52-week range of $0.81-$4.52. Shares of Uranerz are up 12.75%, at $1.73, in a 52-week range of $0.87-$5.93 and shares of Uranium Resources are up 6.3%, at $0.85, in a 52-week range of $0.52-$3.98.

Paul Ausick

As is typical in a bidding war, competitor companies are also garnering some interest from the back-and-forth between Rio and Cameco as investors figure that the value of all uranium miners might rise. Uranium miners Denison Mines Corp. (AMEX: DNN), Uranerz Energy Corp. (AMEX: URZ), and Uranium Resources Inc. (NASDAQ: URRE) have all gotten a boost from the bidding, but perhaps not as much as might be expected.

Cameco originally offered C$3.75/share in cash for Hathor only to see Rio come in a few weeks later with an all-cash offer of C$4.15/share. Cameco raised its offer to C$.4.50 earlier this week, and now Rio has come back with an offer of C$4.59.

Denison, Uranerz, and Uranium Resources all saw share prices fall from the time of Cameco’s original offer on September 1st, bottoming out in early October. The shares got a bit of a boost when Rio’s offer was announced in mid-October, but shares of all three are still trading down from their levels of September 1st.

Uranium prices hit a peak of more than $70/pound in February, and have since fallen to around $55/pound. The disaster at Japan’s Fukushima Daiichi nuclear plant following the earthquake and tsunami in March and the subsequent decision by Germany to retire all its nuclear power plants has weighed on both nuclear plant builders and uranium miners.

Cameco, the world’s largest uranium miner, has experienced a near -50% drop in its share price since early March, largely as fallout from the immediate closure of 14 nuclear generation plants in Japan and Germany. Mining costs are also rising, putting even more pressure on profits.

The outlook for uranium demand is not very strong either. While it’s true that there are many new plants under construction, delays due to more regulatory reviews are being anticipated, even in China and India where construction has been growing.

The other impact of the current low price for uranium is that it stalls new mining projects. If demand picks up over the next several years, supply is likely to be weak due to cancellation of new projects.

That’s largely the reason that Hathor is worth the fight. The company is sitting on reserves that are estimated to be able to produce up to 5 million pounds of uranium annually. And regardless of a possible slowdown in production, uranium miners expect China’s nuclear building program to proceed as planned. Chinese demand is expected to grow, as is India’s, and Hathor’s uranium is already being produced and there’s plenty more to dig out.

There’s no doubt that Rio has deeper pockets than Cameco, and Rio’s latest offer totals about C$654 million. But Cameco has about $1.2 billion in cash and short-term investments in its war chest, so the battle may not be over quite yet.

Paul Ausick

Iron ore purchases have seriously begun migrating to the spot market, which is particularly hard on small miners, though less of a problem for BHP, Rio Tinto and Vale. These giant miners can take a longer view of market conditions, and all are spending to expand production to meet growing demand. And demand remains strong to some extent because spot prices are, in many cases, lower than contract prices.

If customer demand continues to be strong, and the iron ore miners are unable to negotiate advantageous quarterly contracts as spot prices decline, then expanded production hardly seems the answer. That is especially the case if production costs continue to rise.

The situation in copper production is similar. China, which is the world’s largest consumer of copper, has been slowing down its copper refining industry and pulling materials from inventory rather than buying more. At some point, the refiners will have to restock, but that day could be some time off. Volatile copper prices are, so far at least, keeping Chinese buyers from making large purchases.

Copper prices have risen from near $3 per pound at the beginning of the month to around $3.40 per pound today, though still well below late July prices of around $4.40 per pound. But unlike the case with iron ore, demand is not as strong and a strike at Freeport’s Peruvian and Indonesian mines is lowering production goals. BHP has delayed some deliveries originally scheduled for the second half of 2011 to next year as it recovers from strike at its Chilean copper mine.

BlackRock’s claim that the big miners are undervalued appears to have merit based on the current state of the market and on expected demand from China. The real question might be one of timing. Iron ore and copper prices are currently low and may still be searching for a bottom. When that bottom is reached is anybody’s guess, but there is little reason to believe that it will happen very soon.

Demand for iron ore and copper remains strong in India and Brazil, while demand from developed countries is steady at best. Without a demand spike from China, though, India and Brazil together will not push prices significantly higher. Increased production and lower customer acceptance of quarterly contract pricing could continue to weaken, if not erode, prices further.

All these mining company stocks posted a new 52-week low earlier this month, although all have begun to climb back. For the past 12 months, BHP is down the least, at 6.5% and Southern Copper is down the most, at 31%. And today, when the DJIA is down about 1.2%, all these miners, except Southern, are down nearly twice as much. BlackRock has not made many converts today.

Paul Ausick

Met coal currently commands a contract price of about $285/metric ton. The spot price for Australian met coal is around $250/metric ton, a -20% drop in just three months. That indicates that the contract price will fall as well, and probably below the spot price. Platt’s has quoted a broker who has projected prices of $235/metric ton in the first quarter of 2012, falling to $205/metric ton by the end of the year.

The lower pricing is the result of an anticipated slowdown in the global economy, particularly in China which has experienced a construction boom in the past few years. But tighter government restrictions on lending and an over-supply of vacant buildings have resulted in fewer construction projects.

Still, there remains speculation that other coal companies may be takeover targets. We noted a rumor in early September that British miner Anglo American PLC (OTC: AAUKY) may be preparing a bid for Walter Energy. Last week, BHP Billiton plc (NYSE: BHP) was said to be considering a $6 billion offer for Walter Energy, with Brazilian giant Vale SA (NYSE: VALE) also included in the mix.

Like many commodities stocks, Walter Energy’s share price plunge in early August, and posted a 52-week low of $57.62. Shares have recovered to over $75, but that’s still about 50% off the stock’s 52-week high. If a takeover offer is coming, now is probably a good time.

US miner Patriot Coal Corp. (NYSE: PCX) has been boosting its production of met coal, and the company has said it sees strong demand for the steel-making coal continuing from Brazil and India. Patriot’s share price is about 67% below its 52-week high, making it another possible takeover target now that it’s market cap has fallen below $1 billion.

Peabody’s shares were up more than 3% at this morning’s opening, at $39.39, in a 52-week range of $30.60-$73.95. ArcelorMittal’s shares were also up more than 3%, at $18.72, in a 52-week range of $14.77-$38.88. The Market Vectors Coal ETF (NYSE: KOL) is unchanged, at $35.14, in a 52-week range of $27.42-$51.87.

The elephant in the room that no one wants to acknowledge is that if the stronger coal players are using the recent weakness to acquire the weaker players, perhaps these companies are positioning themselves better for the next decade and beyond.  Coal demand is a often considered as a leading indicator because it is still used as a key measurement for power consumption and for building infrastructure equipment and structures.  As with many businesses in and around commodities, getting better scale and better geography can incrementally lower costs and that drives higher margins.   Coal players seem to be positioning themselves for far beyond the next few years.

Paul Ausick

Which U.S. industries and companies stand to get hit the hardest in the event a trade war gets started? The U.S. Census Bureau provides data on the dollar amounts of U.S. imports from and exports to China that we have looked at to see where the impacts could be the largest.

According the Census Bureau data, in 2010 the U.S. imported goods from China worth about $365 billion, while exporting goods worth about $92 billion. If the U.S. were to implement tariffs on imports, the likeliest targets would be the goods with the largest dollar value. These imports include computer, semiconductors and telecom gear worth about $88 billion in 2010, clothing and other household goods worth an aggregate of about $71 billion, toys and similar items worth about $27 billion, televisions and other video equipment worth about $15 billion.

If all that sounds like the stuff you can buy at Wal-Mart Stores (NYSE: WMT) or Target (NYSE: TGT) or any number of other U.S. department stores, then be prepared to pay more for these items. Because comparatively little clothing or TVs or toys are manufactured in the U.S. any longer, an import duty on these items would hurt U.S. consumers without providing a lot of help to U.S. manufacturers. Hopes that a new manufacturing segment might spring up are not likely to be realized among large companies but smaller manufacturers could gain some benefit.

However, if China responds with import tariffs of its own, several major U.S. industries could get seriously hurt. Raw materials exports such as coal, copper, iron ore, lumber, and other metals are particularly vulnerable. So are agricultural products like soybeans, cotton, and corn. Industrial and agricultural machinery exports could also face penalties. Another substantial U.S. export is automobiles.

Coal miners like Peabody Energy (NYSE: BTU) and Arch Coal (NYSE: ACI) could get hit, as could copper miners Freeport-McMoran Copper & Gold (NYSE: FCX) and Rio Tinto (NYSE: RIO). Lumber companies Weyerhaeuser (NYSE: WY) and Plum Creek Timber (NYSE: PCL) could face higher duties on log exports.

Agricultural products companies such as Archer Daniels Midland (NYSE: ADM) and Bunge (NYSE: BG) could be in China’s sights if duties are applied to food exports. Caterpillar (NYSE: CAT) and Deere & Co. (NYSE: DE) are likely to see prices for their equipment rise with a concomitant loss of sales to competitors from Japan and Korea.

General Motors (NYSE: GM) and Ford Motor (NYSE: F) both look to China as a growth opportunity. In 2010 U.S. car sales in China totaled more than $3 billion. Slapping a tariff on U.S. cars could really chill the hopes of the U.S. automakers. General Electric (NYSE: GE) could also face tariffs on industrial engines and parts, as well as aircraft parts and other equipment.

China has been fighting inflation for most of this year by restricting bank lending and raising interest rates. Absent a significant currency adjustment, this does little good for the global economy and not much long-term good for China’s domestic economy. If the yuan were allowed to float freely, it could appreciate by as much as 30%. That would quickly eliminate the inflation threat in China, bringing the cost of the country’s goods more into line with foreign costs, slowing the country’s exports, and giving other economies a chance to fill the gap and begin growing again.

But that outcome does not appear likely. Instead, China appears willing to fight the Senate legislation with a trade war. The war of words is likely to last well into next year, but the first real shot is already being primed.

Paul Ausick

Northern Dynasty was named in April as a top undiscovered pick by Midas Fund manager Tom Winmill, provided an investor can wait until 2016 for the investment to pay off.  That’s no less true today, even if the price has come down significantly.

The company fully expects further legal and legislative challenges, including a ballot measure in the local taxing jurisdiction that would prohibit all large-scale development and is specifically aimed at Pebble.

A pre-feasibility study for the project is expected next year, but the current estimate for the size of the resource is 350,000 tons of copper, 12,000 tons of molybdenum, and 600,000 ounces of gold. Anglo American has committed $1.5 billion to the initial stages of the project, of which about $350 million  has been spent so far.

The total development cost could go much higher though. A joint venture between Barrick Gold Corp. (NYSE: ABX) and Novagold Resources Inc. (AMEX: NG) has raised the development cost estimate for its Donlin Creek project in Alaska from $4.5 billion to $7 billion. A total of 38 million ounces of gold has already been identified at the Donlin Creek project, but that didn’t keep investor George Soros from dumping all his shares earlier this year.

Junior miners like Northern Dynasty and Novagold have no choice but to form partnerships with the big miners on projects like Donlin Creek or Pebble because they simply can’t raise enough capital on their own. Yet a gold mine like Donlin Creek could be worth the billions it will cost, and a project like Pebble, which is primarily copper, is far more subject to commodity price swings and thus more sensitive to cost increases.

Northern Dynasty shares closed last night at $6.84, up about 6% on the day, in a 52-week range of $4.87-$21.76. Novagold closed at $7.02, up about 2.6% on the day, in a 52-week range of $5.93-$16.90. Shares in both are down about -21% over the past 12 months. The Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) closed at $29.54 yesterday, in a 52-week range of $25.22-$44.86. The Market Vectors Gold Miners ETF (NYSE: GDX) closed at $56.27, in a 52-week range of $50.42-$66.98. Neither Northern Dynasty nor Novagold is included in either fund.

The SPDR Gold Trust (NYSE: GLD) closed at $160.49 last night, up about 0.65% on the day, in a 52-week range of $127.80-$185.85. Shares are trading up another 0.85% in the pre-market this morning.

Paul Ausick

Copper prices peaked in February, about a month behind copper miners Freeport-McMoran Copper & Gold Co. (NYSE: FCX), Southern Copper Corp. (NYSE: SCCO) and a little earlier than BHP Billiton plc (NYSE: BHP) and Rio Tinto plc (NYSE: RIO). The decline in share prices was gradual from about April through July, but beginning in August shares turned more sharply down, as did the price of copper itself.

Corn prices hit a peak in June, and are still about 20% higher than they were in October 2010. None of the big ag stocks are near that high except fertilizer maker Monsanto Co. (NYSE: MON), up 31% in the past 12 months. Archer Daniels Midland Co. (NYSE: ADM) shares are off -23% in the past year, Bunge Ltd. shares are off about -3%, Potash Corp. of Saskatchewan shares are down about -11%, and Mosaic Co. is off nearly -18%. Ethanol producers Valero Energy Corp. (NYSE: VLO) is up about 2%, while Pacific Ethanol Inc. (NASDAQ: PEIX) is barely breathing, off -96%.

The decline in the copper price began when orders from China began to cool off as a result of the country’s efforts to slow down its GDP growth. By some reports the country has an over-supply of housing that tops 65 million units. If the number is even half that, demand for copper in China could fall dramatically. And it’s possible to argue that a housing glut in China drove the copper price to new heights because construction in the US and other developed countries has stalled.

But the current global economic malaise is not entirely attributable to China. Eurozone sovereign debt and questions about the zone’s banks have pushed markets down hard and could be just as responsible for the falling price of copper as softer demand from China. In other words, copper could be following, not leading, a macroeconomic decline.

The falling price of corn can be attributed to better crop forecasts and the recent ‘discovery’ of more than 200 million bushels in US stocks has put even more pressure on corn prices. Unlike copper, though, corn prices get some demand help from a large alternative market. If corn is a leading indicator, then the effect of ethanol production, which consumes about 40% of the US corn crop, distorts its influence.

Ethanol production is highly profitable at the current price of around $6/bushel. Corn prices would have to rise to unprecedented heights over $9.50/bushel before demand from ethanol makers would start to decline. Even without the $0.45/gallon federal subsidy, corn prices would need to top $8/bushel before they would pinch the ethanol makers.

Something similar to the ethanol prop to corn prices doesn’t exist for copper. Some 70% of copper demand comes from construction and electrical/electronic industries. Of the remaining 30%, about 12% comes from the transportation industry and 9% comes from makers of industrial machinery. None of those sectors is large enough to prop up copper prices as ethanol props up corn prices.

The iPath Dow Jones-UBS Copper Subindex Total Return ETF (NYSE: JJC) is down more than -1.5% in the first half hour of trading this morning at $39.46, barely above its 52-week low of $39.08. The 52-week high is $61.69. The First Trust ISE Global Copper Index Fund (NASDAQ: CU) is up about 2.25%, at $26.37, in a 52-week range of $23.60-$46.85.

Agricultural ETFs are up slightly this morning. The Teucrium Corn Fund (NYSE: CORN) is up about 0.5%, at $40.09, in a 52-week range of $31.37-$50.69. The PowerShares DB Agriculture Fund (NYSE: DBA) is up about 0.6%, at $29.90, in a 52-week range of $26.60-$35.58. The Market Vectors Agribusiness ETF (NYSE: MOO) is up about 0.9%, at $42.30, in a 52-week range of $39.86-$57.93.

Paul Ausick

Analysts at Goldman Sachs are predicting a 40% chance that the world’s developed markets will into economic stagnation.  A survey by Bloomberg showed that global investors expect the debt crisis in Europe to lead to a second recession.  The primary cause for either is laid at the feet of the European sovereign debt crisis, and the side effects of a Greek default or a break-up of the European Monetary Union with at least one current euro-based country pulling out.

The impact has been felt most directly in the commodities markets, where economic conditions generate quicker reactions. Iron ore producers Rio Tinto plc (NYSE: RIO) and Vale SA (NYSE: VALE) have said that their order books remain full and that they have not received any order cancellations or requests for delayed shipments. Copper miner Southern Copper Corp. (NYSE: SCCO) has indicated the same thing. Freeport-McMoran Copper & Gold Inc. (NYSE: FCX) is dealing with a strike at its Peruvian and Indonesian mines, which may force the company to declare force majeure if the strikes are not settled soon. BHP Billiton plc (NYSE: BHP) maintains that Chinese demand is solid for iron ore, coking coal, copper, and other metals.

ArcelorMittal (NYSE: MT) is reported to be talking to its Spanish unions about a temporary shutdown of one of its plants in Spain during the last two months of this year. The company has already shutdown two European blast furnaces and other operations due to lack of demand for steel in Europe.

The main prop to iron ore and copper deliveries has been Chinese demand, but China’s iron ore inventories are already high and that if steel prices don’t improve, iron ore imports could be delayed. Prices for China’s steel continue to fall, down -0.3% yesterday compared with the day before. It won’t take long at that rate for orders to be cancelled or slowed down.

Uncertainty over how successful the latest European plan will be in restoring confidence in both the continent’s banks and its major currency is weighing down commodities prices. But the real slide won’t begin until China cuts its orders, and unless the world’s developed economies can get back on a growth track, those cuts could be just around the corner.

Goldman’s prediction of stagnation is already true, so the bank didn’t go out on a limb. Bloomberg’s survey indicated that 75% of the respondents believe that the eurozone will fall into recession within 12 months. The European banking sector and its piles of sovereign bonds will lead the global economy downward according to a third of respondents.

Europe may well lead the downturn, but the world’s emerging economies can make it immeasurably worse.

Paul Ausick

The other side of the mining coin is a bit more positive though. Gold miners Newmont Mining Corp. (NYSE: NEM), Barrick Gold Corp. (NYSE: ABX), and Yamana Gold Inc. (NYSE: AUY) have seen their share price rises outstrip bullion price rises for the first time in at least a year. The SPDR Gold Trust (NYSE: GLD) has lost about -5% of its value in the last month, while the gold miners are all up more than 1% and Newmont is up nearly 8%. The Market Vectors Gold Miners ETF (NYSE: GDX) is up about 1% in the past month, but the Market Vectors Junior Gold Miners ETF is down close to -5%.

In silver, the story more closely follows the copper downturn. Silver Wheaton Corp. (NYSE: SLW) is up about 1% in the last month, while the iShares Silver Trust (NYSE: SLV) is down about -9% and the Global X Silver Miners ETF (NYSE: SIL) is off nearly -5%.

Copper prices have been trending downward more strongly for about the past six weeks. Since posting a high above $4.60/pound in February, copper now fetches about $3.55/pound. Weaker economic forecasts for the developed countries have caused some of the decline, but that has been more gradual. The 600-pound gorilla is China, where Rio’s CEO said that there is evidence that the country is de-stocking as the Chinese government tightens lending in an effort to cool inflation. The side-effect of that tightening is that growth is also slowed, reducing demand for copper and iron ore.

China’s de-stocking has been developing gradually over the past several months, but Albanese’s admission is the first statement from a major player in the mining sector that the sharp upturn in commodity prices has now turned south. The question, of course, is when it will turn back north again.

Commodity prices on everything from food to oil have been falling as demand expectations are adjusted to account for nearly universal slow growth. The key for copper and iron ore producers is China. Rio’s CEO made a special note of saying that the company’s largest Chinese customers “are not showing any sign of slowdown.” But, remember, he also said that there is evidence of de-stocking. Which is it?

The signals all point to a Chinese slowdown in both manufacturing and construction. But the copper and iron ore miners are hopeful that the low price for copper will spur a new round of buying. This could be a case of finding what you’re looking for in the tea leaves.

Copper is trading down almost -6% today, and gold is off more than -2%, at around $1,765 about an hour and a half before markets open this morning. Rio’s pre-market price is now $47.96, about -6.5% lower than the new 52-week low the stock posted yesterday. BHP is also below its 52-week low, at $68.56 in the pre-market, down about -4.75% from yesterday’s close. Vale is down about -3.5%, at $24.41, just pennies above its 52-week low of $24.08. And Freeport-McMoran is down more than -4% from yesterday’s close, at $34.10, well below the new 52-week low of $35.56 that the stock posted yesterday. Southern Copper is down about -1.5% in the pre-market, at $27.50, just pennies above its new 52-week low set yesterday.

Gold miners are moving down this morning’s pre-market as well, probably following the downward move in gold. Newmont is off about -2.5%, at $66.00, in a 52-week range of $50.05-$71.25. Barrick is off nearly -3%, at $51.75, in a 52-week range of $42.50-$55.95. Yamana is off nearly -3.75%, at $15.79, in a 52-week range of $10.41-$17.47. And it’s interesting that these gold miners’ shares traded quite near 52-week highs yesterday.

Paul Ausick

The Boeing (NYSE: BA) 787 Dreamliner officially launches. (Reuters)

The CEO of AIG (NYSE: AIG) talks with senior management at several Wall St. houses about negative research reports on his company by their analysts. (WSJ)

ABN Amro to cut 2,350 jobs. (Reuters)

Warren Buffett invests $5 billion in Bank of America (NYSE: BAC). (WSJ)

Demands by Finland could undermine eurozone plans to bailout Greece. (WSJ)

An attempt by Toys “R” Us to go public delayed until next year. (WSJ)

Mike Ullmann III to get $30.7 million when he retires from JCPenney (NYSE: JCP). (WSJ)

Rio Tinto (NYSE: RIO) and Mitsubishi raise the value of their offer for Coal & Allied Industries. (WSJ)

The liquidity of Greek’s banks worsens. (WSJ)

AMD (NYSE: AMD) adds a new CEO. (WSJ)

Delta (NYSE: DAL) says it will order a hundred 737-900 planes. (WSJ)

Samsung’s new Galaxy S II smartphone will not be sold by Verizon Wireless (NYSE: VZ). (WSJ)

Low interest rates helped company profits but not overall economic growth. (WSJ)

Some Chinese banks have difficulties as they increase money for capital requirements. (WSJ)

Investors still doubt the viability of some European banks. (NYT)

Pandora’s (NYSE: P) revenue and number of subscribers rise sharply. (NYT)

A ban on short selling in much of Europe is extended. (FT)

A shortage of engineers threatens U.S. car makers. (Bloomberg)

Douglas A. McIntyre