Rare earths started the rush into once obscure metals which have been reclassified as critical for modern technologies and armaments.
New applications for antimony, once used mainly as a flame retardant (think aircraft seats and Formula One driver suits), have evolved such as in the glass on rooftop solar panels, but it’s also a growing market in explosives, which is behind the China export cutbacks.
Larvotto, which owns the Hillgrove gold and antimony project in NSW, is the biggest local winner so far in the race to find new sources of antimony, with a share price which has risen by 25c (205%) to 37c over the past two weeks.
Most companies exposed to antimony have also moved up strongly, including Lode Resources, which has risen by 28% to 12c after announcing the acquisition of the Magwood project in NSW, once a major source of the metal.
Felix Gold is up 66% at 8.3c after reporting the re-assay of old core at its Treasure Creek project in Alaska. Other companies with potential antimony exposure worth watching include Warriedar Resources, Iltani Resources, West Cobar Minerals, Black Cat and Techgen Metals.
Explorers and project developers are moving quickly to jump on the antimony express, which could have further to run given its use in the oldest human behaviour (war) and the newest technologies (solar panels).
But the key message for investors is in the way in which China has flipped from driving commodity markets with high import demand to a country driving markets by restricting exports.
Chinese controls on rare earth exports, and the equipment used to process rare earths, are the primary reason for the rise of Lynas Rare Earths from obscurity as a penny dreadful 10 years ago to the status of a top 100 stock with a market value of $6.5 billion.
Heavily sold-down over the past two years thanks to falling prices for its primary metals, neodymium and praseodymium (trading as NdPr), Lynas has started a revival which coincides with China’s antimony export threats, up 12% over the last month to $7.02 and potentially rising back to $8.30 as tipped this week by Bell Potter.
The problem with Bell Potter’s enthusiasm is that other brokers disagree, including Morgan Stanley, which sees Lynas resuming its downward spiral towards a price target of $4.75 — ouch!
Gallium, germanium, niobium, tin and cobalt are also on the 50-element list described loosely as “endangered metals” by the U.S. Government’s Geological Survey, a list too long to be of much use to investors – but it is a starting point for following a theme which will run for decades.
What makes rare and critical metals particularly interesting is that not only is demand being driven by new technologies (and supply limited by Chinese export controls) but exploration and project development is being limited by ever-tightening government regulations.
Investors in Australia’s oil and gas sector know all about excessive regulation and abuse of environmental rules by activists such as through the fraudulent claims made about the Barossa project of Santos, but that problem spread to mining last week.
Regis Resources had all the ducks lined up for its McPhillamys goldmine in NSW only to be stymied by the environment minister Tanya Plibersek who said she had listened to secret objections by Aboriginal women which convinced her to ban the building of a tailings dam critical to the project.
Secret women’s business is an entirely new hurdle for miners and while there’s way to fight it without risking all sorts of accusations, it could become a factor in further limiting supply of commodities.
The Regis crisis didn’t hold the company back as it rose by 10c over the week to trade at $1.83, to be one of the better performing gold stocks as the price of the metal was marooned at around US$2512 an ounce.
That flat gold price surprised some investors who had expected a strong rally after confirmation from the Jay Powell, chairman of the U.S. central bank, that an interest rate lowering cycle could start within days.
But some market observers see Powell’s promised cuts as a sign that gold will have to share the investment limelight with other metals as a widespread economic recovery takes hold next year with copper moving back to centrestage.
Overall, the market this week can best be described as flat with investors struggling to decode the signals from central banks, commodity markets, the politics of the U.S. election presidential campaign and early shots in Australia’s electoral cycle.
A promising start to the market on Monday and Tuesday faded later with the all ordinaries index up, just, with a rise of 0.3%. Mining stocks fared worse, down 1.3% and even gold stocks failed to fire despite the near record price, with the gold index falling by 1.5%.
Iron ore, a market darling for the past decade, continued to show signs of a fading boom though it did manage a rise of US$5 a tonne to US$98.80/t.
BHP, one of the biggest iron ore miners, started the week strongly with a rise to $41.79 before diving to $40.24 for a fall over the week of 40c. Rio Tinto performed the same trick, ending the week down 81c at $110.27.
Fortescue did better thanks to its generous dividend payout, adding 33c to $18.52, while Mineral Resources, which has lithium and iron ore problems, fell by $4.87 to $40.03, with the fall supercharged by a decision to drop the annual dividend.
Weakness in the lithium market continued to weigh on all stocks in the sector, including local leader Pilbara Minerals which slipped 2c lower to $2.93 and received fresh sell advice from UBS and Morgan Stanley. UBS sees the fall extending to $2.20, Morgan Stanley is slightly more optimistic with a price target of $2.70.
Delta Lithium was a rare example of a stock with lithium in its name rising, but the 1c gain to 22c was more to do with news that Delta is making progress with its Mt Ida gold project in WA.
Other gold stocks had a mixed week, as forecast on Monday by a seasoned columnist who said after Powell’s interest rate comments that it might be time for “last drinks at the gold bar” with the theory being that falling rates will boost the broader economy and lessen the appeal of safe haven assets such as gold.
A flood of profit results did little for gold stocks. West African reported a $92 million profit and suffered a 3c share price fall to $1.42. Genesis was 10c weaker at $2.08 after reporting a profit of $27.8 million, and Red5 was down 3c at 33c.
Gold Road reported a first half profit of $43.1 million only to see its shares fall by 17c to $1.65 even as Macquarie said they were heading up to $1.90, and Alkane generated pre-tax earnings of $59 million, before slipped 2c lower to 41c just as Bell Potter said buy because the stock would rise to $1.10.
Other news and market moves in a week packed with profit reports included:
- 29Metals leading a mixed copper sector with a rise of 3.5c to 36c despite reporting a loss for the year of $65 million. Citi reckons the stock will rise back to 45c.
- Sandfire lost 12c to $8.64 after reporting an underlying pre-tax profit of US$362 million.
- Sun Silver added 4c to 61c after reporting that it has the most silver in the ground of any ASX-listed company via the 423 million ounce Maverick Springs project in the U.S.
- Lucapa Diamond Co generated headlines two weeks ago after reporting the discovery of a 2492 carat gem at its Karowe mine in Botswana but the magic rubbed off this week with the stock falling by C15c to C42c on the Canadian market.
- Boss Energy led a retreat by uranium stocks with a fall of 11c to $2.79 after the uranium price fell back to US$78.25 a pound. Paladin was down 2c to $9.71, and
- Nickel Mines rose by 1c to 83c as it continued to expand its Indonesian nickel operations. UBS sees the stock returning to $1.05.