Gold was a victim of rising rates, shedding US$40 an ounce to sell for as little as US$1832/oz, the lowest this year, down US$125/oz in two weeks – though there were signs of a recovery in late trading yesterday to around US$1842/oz.

What weighed most heavily on gold was the latest U.S. Government debt estimate, with the Congressional Budget Office saying that the country will need to borrow an additional US$19 trillion over the next 10 years, and the only way that can happen is with the enticement of high interest rates (and yes, that is trillion with a T and 12 zeros).

Australia is also looking down the barrel of higher rates, with National Australia Bank tipping a terminal rate of 4.1% in May, meaning there will need to be three more increases of 0.25%, making it a record 12-successive upward moves.

It was with this background that Wilsons, an investment bank, named its four resource stocks most likely to cop a takeover offer in the wake of the Newmont bid for Newcrest.

Northern Star, Lynas Rare Earths, Allkem and Mineral Resources are the stocks on top of the Wilsons’s merger and acquisition list because it can “see a robust year for resource stocks, which will include M&A activity as the sector undergoes growth and consolidation to take advantage of strong balance sheets after a bumper 2022”.

Newmont edged a bit closer to Newcrest when the target indicated a willingness to talk if the price was higher, a suggestion backed by a big dividend boost to US35c a share despite a slight fall in profit to US$293 million for the half year to December 31.

M&A activity in the gold sector saw another development during the week with Canada’s B2BGold offering to pay US$824 million in a share-swap offer for fellow Canadian miner, Sabina Gold & Silver, while locally Tulla Resources and Pantoro announced their merger.

UBS reckons there’s a lot more to come in gold M&A and while strategy and value might be driving the deals, “they all underline the sector’s requirement to replenish resource inventories of wasting assets and the lack of new discoveries globally”.

Reporting season hit full tilt this week with a flood of reports that included South32’s 44% fall in net profit to US$560 million for the December half year and iron ore specialist Fortescue Metals Group announcing a 15% decline in the half to US$2.37 billion.

Fortescue softened the effect of the lower profit by lifting its interim dividend to US75c a share, a reward which pleased mum and dad investors but failed to satisfy investment bank professionals.

Uncertainty over how to value Fortescue reached new heights this week, with the share price down fractionally to $22.19, but without a buy tip among the big investment banks which are uniformly saying sell because of the iron ore price outlook and doubts about the company’s renewable energy strategy.

A sample of bank comments about Fortescue and share price forecasts include:

  • Goldman Sachs: Sell, with a modest trimming of the stock’s forecast future price from $13.60 to $13.50, down 39% on last sales.
  • Citi: Sell, with a future price tip of $18, and a comment that the current “sweet spot” in iron ore prices “can’t last”.
  • Morgan Stanley: Underweight, with a future price forecast of $14.40.
  • Macquarie: Underperform, with a future price forecast of $17.50; and
  • Morgans: Reduce, with a future price forecast clipped from $16.50 to $16.10 and a comment that Fortescue was facing “a shrinking margin for error”.

As has been said here before, there is a whopping gap between what amateur investors are prepared to pay for exposure to Fortescue and what banks reckon the stock is worth, setting the scene for a fascinating battle of beliefs.

Battery metals had a mixed week, with recent lithium stars fading, a new star emerging and a remarkable share-price tip.

Patriot Battery Metals, the leading Australian lithium player active in Canada, ran out of puff after a strong start to the year, shedding 25c this week to $1.48, exactly double the 74c in early January.

Omnia, a new Aussie playing in the Canadian snow, had a terrific week after reporting a 2.3 kilometre pegmatite on its ground in Quebec, rising by 8.5c (44%) to 28c.

Vulcan, the Aussie lithium stock in Germany, fell by a hefty $1.12 to $6.18 after the release of what looked to be a promising definitive feasibility study into its Landau project which CG Capital Markets loved, awarding Vulcan a speculative buy tip and future price forecast of $19 – a potential rise of more than 200%.

Other lithium moves included: Pilbara, down 6.5c to $4.72; Liontown, down 9.5c to $1.37; Core, down 4.5c to $1; and Global, down 34c to $1.81.

Graphite, the sometimes overlooked but nevertheless important battery mineral, showed signs of waking after a fresh observation from Benchmark Mineral Intelligence at the Indaba mining conference in Cape Town earlier this month that it is poised to “do a lithium” thanks to rising demand and limited supply.

That was followed this week by a string of Australian graphite exploration reports which included:

  • Buxton Resources adding 1.5c to 18c after announcing the start of a drilling program at its Graphite Bull project in WA.
  • Lithium Energy slipping 1.5c lower to 90c despite announcing high grade intersections of up to 16 metres at 26.3% total graphitic carbon from drilling at its Burke project in Queensland; and
  • iTech losing 2c to 31c after announcing the start of drilling at its Eyre Peninsular project in South Australia.

Gold, as mentioned earlier, had a rough ride, as did most gold explorers and miners. Sector leaders were universally sold off, with Northern Star down 74c to $11.49 despite making Wilsons’ M&A list. Evolution lost 24c to $2.93 and Gold Road slipped 7.5c lower to $1.46.

Another theme of the week was a fresh burst of capital raising, which often follows the completion of full and half-year results.

Share issues this week included Pantoro, which is merging with Tulla and is raising $75 million, Ora Gold ($8.85 million), Kin Mining ($7.13 million), Tennant Minerals ($5 million) Nimy Resources ($3.2 million), Arrow Minerals ($2.7 million), Reward Minerals ($2.6 million), Cannindah Resources ($2.75 million) and Thomson Resources ($1.74 million).

Other news and market moves this week included:

  • Growing concern that rare earths leader Lynas might have ongoing problems with the government of Malaysia over the processing of radioactive ore mined in Australia. The stock slipped 71c lower this week to $8.26, but remains on the buy list of Barrenjoey, though the broker has lowered its price forecast from $12.50 to $12.
  • Lithium and iron ore miner Mineral Resources fell a hefty $3.48 to $87 and suffered an investment downgrade from Credit Suisse which shifted from buy to neutral and pruned its price target from $85 to $84.
  • Widgie Nickel turned lithium hopeful with a plan to direct ship ore from its Faraday lithium deposit in WA, adding 1c on the market to 34c.
  • Toro, once best known as a uranium hopeful, performed a similar trick with a promising 8.2m nickel intersection at its Dimma project in WA. Hand-held assays returned results of between 1.9% and 3.1% nickel.
  • Sierra Rutile rose by 5c to 25c as it slowly emerged from its Iluka Resources spin-off and plans to expand a rutile mine in the west African country of Sierra Leone; and
  • Sheffield Resources added 4c to 61c after announcing that work on its Thunderbird project in the far north of WA is more than 75% complete.