Unkindly dubbed “the poor man’s gold” silver has been playing second fiddle to its yellow cousin for the past 12-months but has recently been outperforming.
Since Christmas, silver has risen by 23% to US$28.20 an ounce. comfortably eclipsing gold’s rise of 14% to US$2367/oz.
Investment banks reckon silver can continue to outpace gold, firstly because it has been playing catch-up after years of underperformance, but also because industrial demand is accelerating thanks to silver’s use in electronics and solar power.
ANZ is tipping silver to reach US$31/oz by the end of the year, up another 9%, a price last seen 11 years ago, with a supply squeeze possibly pushing it higher because silver is largely produced as a by-product of zinc and lead mining where the incentives to invest are less than most commodities.
Silver-exposed stocks have enjoyed a modest bounce as the price of the metal has been rising. Silver Mines has added 3c (21%) to 18c over the past month and Adriatic Metals, which is producing silver alongside zinc and lead, is up 51c (14%) to $4.27.
The silver revival has also encouraged a new float in the form of Sun Silver which is seeking $13 million (at 20c a share) to fund work on its Maverick Springs silver/gold project in the U.S.
Gold, which flew high in the opening months of the year, is showing signs of fatigue after hitting an all-time high of US$2415/oz late last week.
Over the past few days, gold has pulled back to US$2367/oz, weighed down like most asset classes by the latest interest rate comments from Jay Powell, chairman of the U.S. central bank.
Powell warned that “it is likely to take longer than expected to achieve confidence” that inflation is falling to a manageable level.
That remark spooked markets because it came as the Iran/Israel conflict threatens to spiral out of control.
Good news, apart from the silver bounce, has been hard to find. The overall market, as measured by the all ordinaries index, lost 2% over the week, and at 7906 points is back to where it was a month ago and only a few points above the start of the year.
A rise in the iron ore price to US$114 a tonne on the Singapore futures market boosted the prices of Fortescue (up 12c yesterday to $25.15) and Champion Iron (up 19c to $6.78) but more importantly, the increase flowed into the accounts of Gina Rinehart, the very private iron ore billionaire, who is charging into critical metals.
Fully-loaded with lithium assets through Liontown and Azure, Rinehart has just revealed a substantial position in the biggest U.S. rare earth miner, MP Materials, and the biggest Australian miner of the metals, Lynas Rare Earths – while also retaining stakes in Brazilian Rare Earths and Arafura.
There could be more to come from Rinehart as she repositions her portfolio, catching what could be the last hurrah of iron ore before the long forecast peak in Chinese steel demand finally bites, as the Reserve Bank warned again yesterday.
But until China’s steel appetite fades, Morgan Stanley sees continued strength in iron ore, tipping a September quarter price of US$120/t, which will ensure that Rinehart has plenty of spare cash to keep buying critical metal assets and perhaps drive a restart of failed MP/Lynas merger talks.
Morgan Stanley is as bullish on rare earths as it is iron ore, citing a meeting with the commodities research specialists at Wood Macenzie where the key magnet rare earth elements (neodymium and praseodymium) were said to be “in tight supply” as energy transition increases.
Gold, as mentioned earlier, faded over the week but news from gold stocks dominated news flow as smaller companies rushed out exploration reports and producers started filing their March quarterlies.
Price tipping was also popular, led this week by Citi, which is sticking with its target price of US$3000 an ounce for gold over the next six-18 months.
“US$2000/oz is the new US$1000/oz,” Citi said, adding that “the financial gold price floor has plausibly shifted higher to between US$1850-and-US$2000/oz in the way post GFC gold trading established a new long-term support level of US$900-to-US$1000/oz.”
Gold news and market moves of interest this week included:
- Spartan Resources added 5c to 66c just before announcing an underwritten capital raising of $80 million to accelerate work at its Dalgaranga project in WA.
- Bellevue Gold slipped 10c lower to $1.94 despite reporting strong March quarter production of 37,338oz. RBC Capital Markets reckons Bellevue will rise to $2.10,
- Evolution crept up by 2c to $4.01 after reporting March quarter production of 185,000oz at an all-in sustaining cost of A$1464, enough for Goldman Sachs to stick with a buy tip and target price of $4.25.
- Strickland Metals slipped 1c lower to 13c after announcing the acquisition of the undeveloped Rognozna gold deposit in Serbia.
- Gold Road fell by 19c to $1.62 after confirming media reports that it was a potential bidder for Canada’s Greenstone Gold Mines, and
- West African Resources reported a rich assay of 55.8 grams of gold a tonne over a 24 metre intersection at its Sanbrado project in Burkina Faso, but lost 7c on the market to $1.34.
Government support for mining was stepped up this week, firstly through loan support for two critical metals projects followed by the intervention of the U.S. Ambassador to Australia, Caroline Kennedy, in the nickel crisis with a warning that Australian miners were under attack from China.
Winners from the latest round of government financial support are Renascor Resources which has been offered $185 million to help develop its Siviour graphite project in South Australia, and Alpha HPA which is in line for $400 million for its high purity alumina project in Queensland.
On the market, Renascor added 2c to 11c while Alpha rose by 5.5c to $1.10. Bell Potter upgraded its buy tip and price target for Alpha from $1.60 to $1.75.
Lithium stocks continued to drift even as signs of a price recovery for the battery metal strengthened.
Bell Potter told clients mid-week that lithium carbonate prices in China had risen by 4% to US$13,800 a tonne thanks to a processor revealing plans to lift lithium cathode production by 30% this month.
That news did little for local lithium stocks where the trend was down, led by Pilbara Minerals which slipped 17c lower to $3.88, Liontown which lost 16c to $1.16 and Vulcan which dropped 35c to $3.16, reversing much of its rise earlier in the month.
Other news and market moves in a downbeat week included:
- Bellavista rose by 5.5c to 18c thanks to increased investor interest in its uranium exploration projects. Most other uranium-exposed stocks lost group. Boss was 30c weaker at $4.66 and Bannerman fell by 48c to $3.50 even as Shaw and Partners tipped it to rise to $7.40.
- Nimy Resources jumped 3.4c (80%) higher to 7.7c after reporting encouraging electro-magnetic drilling targets at its Mons copper and silver project in WA,
- Westgold Resources add 16c to $2.27 as interest grows in its possible merger with Karora Resources.
- WIA Gold slipped 0.5c lower to 8.5c despite reporting an increase in the gold resource at its Kokoseb project in Namibia and the appointment of former Centamin Egypt chief executive Josef El-Raghy as its chairman.
- Low-key Hawsons Iron added 1c to 4.4 after releasing an update on its namesake magnetite iron ore project in South Australia, and
- Talga Group slipped 2.5c lower to 75c after completing project design for its Vittangi graphite project in Sweden.
