The CLANC family, comprising copper, lithium, aluminium, nickel and cobalt, has been trading up to decade highs thanks to their new-found markets in energy transition, but the next move up could be spectacular as stockpiles disappear and buyers become desperate.
Lithium, which is reported to be fetching up to $US50,000 a tonne in its carbonate form in China, is an example of what can happen when customers forget to place long-term orders and are forced into the spot market.
Local lithium miners have benefited from the price surge but have also been frustrated by project construction delays and cost increases. Pilbara Minerals for example is up 37% on a six-month basis but down 20% over the last month, including a 38c fall this week to $2.94.
Liontown, on the other hand, was a winner this week, adding 6c to $1.58 after announcing a sales agreement with electric vehicle (EV) maker Tesla
Citi, an investment bank, reckons nickel could be about to replicate lithium’s wild ride with a price spike, possibly up another 39% to $US30,000 a tonne, while Morgan Stanley sees aluminium chiming in with its own price explosion, backed by a report from Trafigura, a big commodities trading house, which warned this week that the world’s aluminium stockpile has all but disappeared.
It’s been said many times before, but these really are interesting times because when supplies of important metals such as aluminium, nickel and lithium run out the price can head into the stratosphere.
CLANC metals, as they have been known for the past 12-months, were the star performers in a week of confusing and contradictory news flow that was dominated by Russia’s threatening behaviour towards Ukraine and fresh hints from the U.S. central bank that interest rate rises are on the way and are likely to ratchet higher until inflation is tamed.
Gold, as it is inclined to do, ignored the bankers and their interest rate threats, sailing up to $US1873 an ounce, back where it was in the middle of last year and appearing to illustrate a comment from Evolution Mining boss Jake Klein, that the U.S. is “slow walking” its inflation fight.
“People are talking about four-to-five interest rate hikes over the next 12-months, but that will never be enough to bring 7% inflation under control,” Klein said.
“My view is that the bank will err on being conservative and that will mean inflation will be higher which should bring people back to a store of value commodity such as gold.”
Evolution, despite a disappointing half year profit of $90.8 million, enjoyed a 43c share price lift to $4.07, a sign that investors agree with Klein’s view of better days ahead for gold.
Northern Star had a solid half-year with profit up 43% to $261 million, which underpinned a 77c share price increase to $9.25.
Australian corporate news this week was dominated by a flow of half and full-year profit reports, led by BHP which delivered a bumper result and generous dividend, but offset by a lower profit and reduced dividend from Fortescue Metals Group.
Earnings of both BHP and FMG are dominated by iron ore, a mineral which is starting to deliver mixed results as premium quality material weakens slightly to around $US136 a tonne while lower grades, of the sort mined by FMG, have fallen to below $US100/t, rubbing $1.99 off its share price, which closed the week at $20.65.
FMG’s declining earnings from iron ore, when combined with its heavy spending on renewable energy projects, continues to test the loyalty of investment banks with Morgans downgrading its share price forecast for the stock from $20.20 to $18.60 while retaining a hold tip.
“Declining iron ore prices, increasing low-grade discounts, and severe cost headwinds set up a difficult outlook for FMG compared with the last 12-months,” Morgans said.
Mineral Resources was also hit hard by grade discounting, which triggered an 88% profit decline to $156 million, causing a share price fall of $5.13 over the week to $48.76, though the stock earned a buy tip from Bell Potter which reckons its revised lithium strategy will drive Mineral Resources back to $61.35.
Copper, arguably as important as gold in the current bout of economic and political uncertainty, moved back up to trade at precisely $US10,00/t, powered by solid demand, weakening supply and fresh speculation of trouble in Chile, the world’s copper champion, where talk of higher taxes have surfaced again.
Sandfire was the local copper stock to attract most attention with Macquarie Bank describing it as a “new copper major” after its acquisition of the Matsa assets in Spain and construction of the Motheo mine in Botswana. On the market, Sandfire traded steady at $7.35 but with Macquarie tipping a target price of $9.12.
Develop Global caught the eye of investors with its latest deal, the acquisition of the mothballed Woodlawn copper and zinc project in NSW for up to $100 million in staggered payments. “We’ve done an absolutely cracking deal,” said Develop boss, Bill Beament, who also announced a fully underwritten $50 million equity raising.
Other copper moves included OZ Minerals, down 23c to $26.20 and New World Resources up 0.1c to 7.1c as interest grows in its Antler project in the U.S. and Shaw Stockbrokers initiated coverage with a buy tip a price target of 20c.
Nickel, as mentioned earlier, is being closely watched for a possible price break-out, though that failed to influence trading in local nickel miners.
Mincor and Panoramic proved yet again that it is better to travel than to arrive. Mincor slipped 3c lower to $1.77 despite reporting the delivery of first ore from its redeveloped Kambalda mines to BHP, while Panoramic was steady despite reporting a second shipment of nickel and copper concentrate to China.
Other news from the market and price moves of interest included:
- Bulletin Resources added 3.5c to 16c after reporting exceptional lithium assays from rock chip samples at its Big pegmatite near Ravensthorpe in WA with best reading of 8.21% lithium. Chip samples are a very early indication of what might lie beneath the surface.
- Metals X reported more promising tin assays from the latest drilling at its Renison mine in Tasmania with deep hit below current mining levels of an exceptional 9.56% tin over 6.1 metres. On the market, Metals X added 2.5c to 62c.
- Ragnar Metals rose by 1.1c (29%) to 4.9c after reporting 145m of extensive nickel and copper mineralisation from a depth of 393m at its Tullsta project in Sweden.
- Future Metals said the latest drilling had confirmed bulk tonnage potential at its Panton palladium and platinum project in the north of WA. Best assay was 18.27m at 1.95 grams a tonne of palladium equivalent. On the market, Future rose by 2c to 24c.
- AVZ Minerals slipped 3.5c lower to 81c after reporting that it had successfully raised $US240 million from China’s Suzhou CATH Energy Technologies to help fund its Manono lithium project in the Democratic Republic of Congo.
- Peak Rare Earths added 7c to 85c after announcing that the Chinese company, Shenghe Resources, would acquire a 19.9% stake in the stock, and
- Uranium stocks weakened as the price of fuel stagnated at $US44 a pound. Boss Energy dropped 19c to $2.02. Lotus lost 2c to 25c, and Aura Energy was 3.3c weaker at 29c despite reporting a vanadium resource in its Tiris uranium project in Mauritania.
