US markets relatively stable, Dec. 12-16

The U.S. Federal Reserve’s decision to raise its key interest rate 25 basis points to a range of 0.5% to 0.75% — its first rate hike since December 2015 — lifted the U.S. dollar but punished gold, with the price of the precious metal falling US$25 per oz., or 2.2%, to US$1,134.60 per ounce. The Fed said signs of a growing economy and expectations of higher inflation influenced the decision, and signalled that there would be more rate increases during 2017. The Dow Jones Industrial Average rose 0.4% to 19,843.41, while the S&P 500 Index dropped 0.1% to 2,258.07. The Philadelphia Gold & Silver Index lost 8.3% to finish at 73.41.

Freeport-McMoRan was the most traded stock and fell US$1.92 to US$13.83 per share. The company sold its Deepwater Gulf of Mexico properties to Anadarko Petroleum for US$2 billion in cash. Under the agreement, FCX has the right to receive more proceeds of up to US$150 million, to be paid as Anadarko realizes cash flows in connection with a third-party production handling agreement for the Marlin platform. Freeport expects to complete the previously announced sale of its onshore California oil and gas properties before the end of 2016.

Vale dropped US61¢ to US$8.17 per share despite news that it had received an operating licence for its S11D project in Brazil, the largest iron ore project in the company’s history. The S11D mine and plant are in Canaa dos Carajas, in southeast Para state, and the licence is valid for 10 years. The project will start commercial operation in January 2017. Of the total US$14.3-billion investment, US$6.4 billion was spent on the mine and US$7.9 billion on building a 101 km railway branch line, double-tracking the Carajas Railway and expanding the Ponta da Madeira maritime terminal in Sao Luis. Each of the plant’s three production lines can process 30 million tonnes per year. Ore from the open pit will be moved to the plant by a long distance conveyor belt. The project is named after its location: block D of orebody S11, which lies in the Southern Hills of Carajas. S11D is just one block of an orebody that has been divided into four parts: A, B, C and D. Vale says the S11 orebody could hold 10 billion tonnes of iron ore. Block D alone contains reserves of 4.2 billion tonnes.