But behind that sobering reminder from the grey gnomes at the Federal Reserve was the optimism evident in the early upward moves which point to an eventual break-out from the one-up, one-down, pattern since the start of the year.
The net result of this week’s events was that markets returned to where they had started after the U.S. stock market hit a record high, followed by record prices for copper and gold.
Locally, Australia’s Reserve Bank followed the U.S. lead with the minutes of the latest board meeting containing a warning that “the risks around inflation have risen somewhat”, almost certainly a reference to a big spending pre-election Australian Government budget.
The big corporate news this week was a continuation of BHP’s attempt to convince Anglo American that a merger made sense if it would first offload the baggage of its South African iron ore and platinum assets, a request which has ignited strong political opposition in Johannesburg.
Australian investors are also concerned that BHP might be paying too much in its rush to become the world’s biggest copper producer, a view reinforced by a sudden 7% drop in the copper price which fell from a peak on Monday of US$5.18 a pound to US$4.78/lb.
BHP paid a high price from the combination of the lower copper price and increased offer for Anglo American, first falling 4% in London trade and then by 3% in Australia.
Gold, another investor favorite, was hit by the latest interest rate threat of “higher for longer”, falling by 2.8% from an all-time high of US$2450 an ounce on Monday to around US$2368/oz.
The difference between the start of the week and the mood towards the close could not have been greater.
On Monday there were reports of “panicked traders” rushing to jump aboard the copper express as it left the station only to find that by Wednesday they were sitting on the tracks.
Despite this week’s interest-rate driven setback copper is still seen as a commodity most likely to outperform over the next 12-months, and beyond.
Jeff Currie, a former Goldman Sachs commodity strategist, described copper during the week as “the highest conviction trade I’ve ever seen” with the price tipped to reached US$6.80/lb thanks to the demands of energy transition, artificial intelligence data centres and military consumption.
“You can’t come up with a better story,” Currie told the Bloomberg news service. “I’m confident that this time we have liftoff.”
Copper stocks blossomed early but faded fast with Sandfire a prime example, initially rushing up to an all-time high of $10.16 before sliding back to $9.21 for a 33c fall over the week.
Most other copper stocks had a similar experience, up strongly then down with Coda one of the few to retain some of its rise. The stock initially rocketed up from 12c to 22c, at which point it copped an ASX speeding ticket, and then slid back down to 17c, still up 5c on the week.
Cyprium was another copper winner, just. It added 0.5c to 4c after reporting a positive scoping story for the development of a big open cut development at its troublesome Nifty mine in the north of WA.
Other copper moves included 29Metals, down 9c to 50c. Caravel, down 4c to 22c. Anax, down 0.6c to 4.3c. Aeris, down 1c to 30c, and Kingsrose, up 1c to 5.2c after announcing an exploration alliance with BHP covering copper and nickel prospective tenements in Norway and Finland.
Gold stocks were mixed with explorers outperforming established producers. Toubani was the pick of the week, up 1.5c to 15c after reporting a thick (57 metres) intersection grading 2.48 grams of gold a tonne from a depth of 85m at its Kobada project in Mali.
Ausgold benefited from a major management overhaul, adding 1c to 3.8c as it moves towards production at its Katanning project in the south of WA, while Sunstone edged up by 0.1c to 1.2c after reporting visible gold in trenches at its Limon in Ecuador.
Bellevue was the best of the producers, adding 3.7c to $1.90 with Gold Road also in the black thanks to a 1c rise to $1.62.
Major gold producers to lose ground included Northern Star, down 98c to $14.11 and Evolution, down 28c to $3.82.
Iron ore stocks delivered an upside surprise thanks to the price of the material creeping up by another US$1 a tonne to US$117/t and an optimistic report from Morgan Stanley which went against the gloomy view of its banking rivals to predict that the next move in iron ore is more likely to be up than down.
Morgan Stanley said China’s fading appetite for steel was being matched, and might eventually be overtaken by other markets, especially the Middle East and the rest of Asia.
Fortescue, which also reported progress with a hydrogen powered haul truck, added 23c this week to $27.04. Champion Iron was up 24c to $7.56 and Equatorial Resources, which is exploring the Nimba project in Guinea, added 1c to 16c.
Mineral Resources was sold down after reporting first ore on a ship at its Onslow project in WA, shedding $1.61 to $76.86, though the fall might have had more to do with the company’s lithium interests remaining under price pressure.
Lithium stocks weakened under the pressure of a negative Citi assessment of the metal and a wildcard report from the Reuters news service that Saudi Arabia’s mining company, Maaden, had successfully extracted lithium from sea water.
The Saudi success, which does not appear to be on a commercial scale, is a warning for what might be achieved in the future. The Citi review was about what’s happening now with the global lithium market in oversupply and sales of electric vehicles growing at a slower pace than expected.
Citi reckons the lithium carbonate price could slide from its current U$14,500 a tonne to US$12,000/t by the end of the year, before recovering to US$20,000/t by the end of next year.
Adding to the uncertainty about lithium, and other critical metals, is Australia’s problem of trying to please its ally in the U.S, which is closing its borders to Chinese metals, and the high level of Chinese investment in Australian mining which might lead to Australian metals being rejected by U.S. authorities.
Price moves among lithium stocks includes Pilbara, down 3c to $4.03. Liontown, down 2c to $1.41, and Wildcat, down 1c to 49c. Charger swam against the tide with a 3c rise to 11c after reporting lithium and niobium anomalies at its Mt Gordon project in WA.
Rare earths became a hot potato at a resources investment conference during the week with Lynas, an existing producer and Iluka, a potential producer, swapping barbs about the alleged market manipulation of China. Iluka’s view is that China is flooding the market to suppress prices. Lynas disagrees.
On the market, both companies lost. Lynas was down 17c at $6.91. Iluka fell by 23c to $7.65.
Other news and market moves of interest this week included:
- Gibb River Diamonds adding 2c (84%) to 4.6c after announcing the grant of mining leases covering the historic Ellendale diamond mine in WA.
- RareX rose by 0.6c to 2c after reporting the acquisition of a district scale niobium project in the East Yilgarn region of WA.
- Alpha HPA slipped 5c lower to 92c after successfully raising $175 million as it prepares to make a final investment decision on its high purity alumina project in Queensland, and
- Rincon Resources edged 0.5c higher to 12c after raising $5.6 million to expand its niobium and rare earth search in WA’s remote West Arunta region.