Editorial: Arab revolts roil commodities markets

Large anti-government protests and street battles in the Arab world continued to dominate headlines around the world in mid-February.

• Mass protests by Tunisians in December and January resulted in the ejection of president Zine el-Abidine Ben Ali, who had ruled the country for 23 years, and just 18 days of street protests in Cairo wound up ousting Egyptian president Hosni Mubarak in early February after three decades in power.

At presstime, the Libyan government looks to be the next regime to fall, with 41-year “Leader and Guide of the Revolution” Moammar Gadhafi and his family losing control of Benghazi, Sirte, Tobruk and parts of Tripoli. The regime has been ruthless in its crackdown on dissenters, with some 1,000 dead already. Gadhafi has threatened to kill many more to retain his rule, speaking approvingly of the Chinese government’s mass murder of pro-democracy students in Tiananmen Square in 1989.

Similar anti-government street protests have been taking place in Algeria, Yemen, Jordan and Bahrain. Iran has seen limited anti-government uprisings again, too.

The broad trend appears to be an historic “Autumn of the Patriarch” story, with the 1970s pan-Arab, secular, militaristic dictatorships giving way to more Islamic governments that more accurately reflect the population at large, similar to what has happened in Turkey.

This has all played havoc with the commodities markets. 

The cotton trade – already tight owing to bad weather in Bangladesh, Pakistan and Australia, and export restrictions in India – is getting even tighter with supply disruptions in Egypt, the world’s 15th largest cotton exporter. Cotton prices are already up 171% year-over-year, breaking through the US$2-per-lb. level for the first time ever on Feb. 17, and eclipsing the US$1.89 level seen during the U.S. Civil War (not adjusted for inflation). Major clothing retailers, whose shares declined on the Egyptian unrest, are already announcing 10% price hikes in response.

Oil prices have similarly spiked on the Libyan uprising, with oil prices now trading in the US$99-per-barrel range – a two-year high – after surging 9% in a day on news of production shutdowns, especially in the east of the country, which is the epicentre of the current revolt. With commercial flights cancelled, governments from around the world are evacuating tens of thousands of foreign nationals from Libya by boat and plane in the biggest cross-border evacuations seen in the past decade.

Libya produces about 1.6 million barrels a day of light, sweet crude (nearly 2% of global supply, or more than half of Canada’s output), and ranks as the world’s 11th or 12th largest oil exporter.

There’s no shortage of Western oil companies who have collaborated with the Libyan regime in recent years, and today’s affected companies include Calgary-based Suncor Energy, Italy’s ENI, Royal Dutch Shell, France’s Total, and Spain’s Repsol. There’s also talk Gadhafi has ordered the sabotage of oil facilities.

The countries to be hardest hit by any disruption in Libyan oil supplies are Italy, Germany, China, France, Spain, Britain, Austria, Ireland, Greece, Switzerland and Portugal.

Gold prices followed oil’s lead, surging above US$1,400 per oz. and reversing the New Year’s slump that bottomed at US$1,314.90 per oz. in late January.

• With gold prices buoyant, it’s been a great time for juniors to come out of nowhere to announce initial million-plus-ounce gold resource estimates.

At Richmont Mines’ Wasamac property in Quebec, the company has tallied 1.4 million contained oz. gold in measured and indicated resources of 5.1 million tonnes grading 2.51 grams gold per tonne and an inferred 11.5 million tonnes at 2.72 grams gold. Richmont says it “has the potential to play a pivotal role in our plan to transform Richmont into a 200,000-plus-ounce gold producer.”

EurOmax Resources announced a 2.1-million initial resource at its Logo gold prospect, part of its Trun project in Bulgaria. The resource is an inferred 91.2 million tonnes at 0.70 gram gold.

And at the Amisk project in Saskatchewan’s Flin Flon greenstone belt, Claude Resources and St. Eugene Mining have an initial resource of 30.1 million indicated tonnes at 0.85 gram gold and 6.17 grams silver, plus 28.7 million inferred tonnes at 0.64 gram gold and 4.01 grams silver. That translates into a contained 1.4 million oz. gold and 9.7 million oz. silver.