The high-priced takeover bid for Azure Minerals by Chile’s SQM boosted the lithium sector, which had been sold down after Albemarle’s failed bid for Liontown and a weaker lithium price.

At $3.53, SQM’s offer for Azure is 44% up on pre-bid trading, but more interestingly it’s 1257% higher than Azure’s share price of 12-months ago, when it was trading at 26c.

That whopping increase over the past year reflects both the value of a high-grade mineral discovery and strong demand for lithium despite a 50% fall in the price of the metal over the past six months (and a 70% fall over the last 12-months).

China, as ever, was the key to this week’s events, firstly by unveiling a fresh round of economic stimulus, and then threatening a ban on graphite exports.

For local investors, those latest moves by China not only underlined its importance to the Australian economy but also provided a long-term guide to where there’s money to be made over the next few years – and it’s same places as the last few – critical metals and the ultimate sleeper which should wake next year, gold, when rates roll over and start falling.

Continued strong demand for Australian resources will underpin the mining sector with the flat spot of the past few months almost certain to be a short-term correction, not something worse, unless the Middle East descends into a regional conflict involving the U.S. and Iran.

Interest rates, the primary cause of investor angst this week, trended higher as government debt continued to rise led by heavy State borrowing to make up for revenue shortfalls, a recipe for a future crisis for the most heavily indebted States, especially Victoria.

On the bond market, the Australian 10-year note reached a 12-year high of 4.85% while in the U.S. the 10-year note moved over 5% on Monday before easing midweek and then charging back up to 4.97%.

A return of 5% on government paper makes other forms of investing less appealing, which is why U.S. stocks, other than a handful of high-flyers such as Microsoft and Meta, have been trending down since the middle of the year.

Locally, the next test of the overall market, which fell by 1.4% this week, will be November 7 when the Reserve Bank could announce a rise of 0.25% in official rates just before the running of the Melbourne Cup.

Graphite, which has been playing second fiddle to lithium despite its essential role as the anode in batteries, had an overdue week in the sun, perhaps starting what was predicted 12-months ago by Benchmark Mineral Intelligence when it said that graphite was “poised to do a lithium”.

China’s threat to limit graphite exports was dressed up as a change of policy to protect local supplies for the battery industry, a re-run of threats to restrict exports of rare earths, a sector which also had a solid week as the China embargo theme returned as an investment driver.

Local brokers and investment banks pounced on the graphite revival, rushing out buy tips for the sector. Macquarie said a Chinese ban could “disrupt the graphite supply chain”, especially to Korea, while Shaw said the export limits would be “very positive for near-term graphite prices”.

Syrah led the way among graphite stocks with a rise of 23c (52%) to 66c, but was trading as high as 93c on Tuesday, close to Macquarie’s 12-month price target of $1.

Talga followed with a rise of 16c to $1.13 but did get to a mid-week peak of $1.20, perhaps on track to reach Macquarie’s target of $2.

Other graphite news and share price moves included:

  • Evolution Energy Minerals up 3.5c to 18c as interest grows in its Chilalo project in Tanzania with Shaw tipping a future price of 72c. Black Rock Mining, which also has a project in Tanzania (Mathenge) added 2c to 11, perhaps heading for Shaw’s target price of 46c.
  • Buxton Resources, up 2c to 21c after reporting encouraging exploration news at its Graphite Bull project in WA.
  • Lincoln Minerals added 0.1c to 0.9c and used the graphite revival to raise $1.7 million for work on its Kookaburra Gully project in South Australia, and
  • Ecograf put of 4c to 16c as interest returns in its integrated graphite supply chain project.

Lithium action was dominated by SQM’s friendly, but high-priced proposal to merge with Azure, a deal which helped Pilbara Minerals reclaim recently lost ground with a rise over the week of 5.5c to $3.83 even as Pilbara management talked down takeover interest.

Mineral Resources was the heaviest loser in the lithium sector with a fall of 57c to $59.11, though RBC Capital Markets stuck with a buy tip and price target of $82.

Other lithium news and market moves included:

  • Calidus, up 2c to 16c after reporting SQM’s acquisition of a 40% stake in Pirra Lithium which is a partner in the Tabba Tabba project in WA. CG Capital Markets was “run over” by the deal with a research note tipping a future Calidus share price of 15c.
  • Sabre Resources played the nearology card with a report on its Pilbara lithium project close to Azure’s Andover discovery, an announcement which helped the stock add 1.5c to 4.8c.
  • Allkem, one of the local lithium leaders, was missing in action this week, slipping 41c lower to $10.11, and
  • Global Lithium got a lukewarm response to the latest drilling ay its Manna project, losing 5c to $1.22 despite a best assay of 16m at 1.57% lithium from a depth of 176m.

Gold stocks largely ignored the steady rise in the price of the underlying metal which edged back towards US$2000 an ounce with goldminers potentially held back by competition from rising bond rates.

The gold price reached US$1985/oz on Thursday before easing slightly after seeming to be on track to reach the Morgan Stanley target of US$2050.

Local leaders Northern Star and Evolution lost 18c and 7c respectively to $11.95 and $3.55, and Bellevue Gold slipped 7c to $1.41 despite reporting the pouring of its first gold bar at its namesake project in WA.

Black Cat Syndicate was a rare gold winner, adding 2c to 21c after reporting high grade assays from the latest drilling at its Paulsens project with a best hit of 5.1m assaying 95.9 grams a tonne, with a 0.27m core at a bonanza grade of 1370g/t, or 44 ounces to the tonne.

Capricorn Metals reported strong September quarter production but lost 20c to $4.62 even though Bell Potter said it was heading up to $5.50.

Other news and market moves this week included:

  • WA1 Resources added $1.86 to $6.65 after reporting a high-grade extension to its promising Luni niobium discovery in central Australia with a best drill hit of 31m at 4.6%. It was trading at $1.44 at the start of the year.
  • Nimy Resources rose by 5.5c to 23c following the report of a 54m intersection of nickel and copper sulphides from a depth of 118m at its Mons project in WA.
  • Sheffield Resources announced first ore production at its Thunderbird mineral sands project in WA. On the marker the stock added 4c to 51c.
  • Sandfire Resources reported increased copper production in the September quarter, offsetting a fall in the copper price to its lowest since late last year. The stock added 4c to $5.92.
  • Fortescue Metals Group added 52c to $22.08 after reporting slid September quarter iron ore production and a modest increase in cash costs, and
  • Lynas gained 73c to $7.03 after being awarded an extension to its operating licence by the Malaysian Government, a rise which boosted the overall rare earth sector.