Further boosting the outbreak of optimism was the start of what could become a major phase of merger and acquisition (M&A) activity in the gold sector as Newmont starts to clean out its house after acquiring Newcrest last year, with the Telfer mine in WA first to go.
Newmont’s US$475 million sale of Telfer to London-listed (Andrew Forrest-back) Greatland Gold had been expected but the announcement of the deal has set the scene for widespread gold-sector consolidation such as that seen in a second deal this week, the US$2.5 billion takeover of Egypt focused Centamin by African specialist AngloGold Ashanti.
China’s reported lithium move, if confirmed, was echoed by at least two big banks, UBS and Citi, with the key said to be a decision to mothball the Jiangxi project of CATL, the country’s biggest lithium battery maker, accounting for 8% of Chinese lithium production.
Citi said it expects lithium to “bounce” over the next two-to-three months on supply curtailments. “We expect investors, both inside and outside China, to cover their short-sold positions over the coming weeks,” Citi said.
Short covering in Australia appears to have started two weeks ago with the short position in leading local lithium miner Pilbara Minerals falling from 22.5% of the company’s issued capital to 20.2%.
Citi said it was lifting its lithium price targets for the next three months to US$14,000 a tonne for lithium carbonate and US$14,200/t for lithium hydroxide. The bank’s previous target was US$10,000/t.
Morgan Stanley, another bank, said a conference call with Chile’s lithium leader SQM included management observations that lithium customer activity was picking up because of the long supply chain.
New supply, according to SQM, will need an incentive price in the high teens to US$20,000/t.
The effect on depressed lithium miners, which have been bashed by a 70% fall in the price of their metal over the last 12-months, was immediate with moves that included Pilbara Minerals, up 13.5% to $2.87, and Liontown, up 17% to 72c. IGO, which expects a volatile lithium market for the next 10 years, was up 14c at $5.41.
Mineral Resources, which has been hit by the fall in lithium and iron ore, was a big winner this week, rising by 18% to $38.29, perhaps on its way back to $70 which is the target price in a new Morgan Stanley research note based on a briefing with management.
“We remain overweight Mineral Resources,” Morgan Stanley said, “and do not see an equity raising being required. The stock looks cheap, offering significant upside for value investors with a long-term horizon.”
Uranium’s boost came a day after the lithium revival and followed reports of Russian President, Vladimir Putin, asking his government to consider limiting uranium exports in retaliation for western sanctions over the war in Ukraine.
International uranium stocks reacted quickly to that news with Canada’s Cameco up 6%, Laramide Resources up 17% and London-listed uranium fund Yellowcake up 4%.
Australia’s uranium stocks followed yesterday. Boss rose by 36c to $2.86. Paladin was up $1.11 at $9.76, and Deep Yellow, was up 19c at $1.17.
The M&A effect on gold stocks was muted by a blip in the gold price which initially tested its all-time high with a surge to US$2525 an ounce on Wednesday before easing back to US$2517/oz which limited most share price gains to a few cents.
While the lithium, uranium and gold factors were unfolding, a fourth ingredient in the recovery mix was emerging in the shape of life at the ultra-small end of the market where bottom fishers have become increasingly active in building positions in microcaps.
Trigg, which has been on the sidelines for the past three years, caught the eye of traders after news that it was joining the antimony hunt, a move which delivered a 40% share price rise to 2c, valuing the stock at a still lowly $8 million – but someone just made 40% on the stock.
Petratherm, once a geothermal energy explorer, is up 90% over the past month to 3.8c as it gets a few sniffs of copper in South Australia, and Locksley Resources, a $6 million minnow rose by 60% this week to 3.5c thanks to its antimony interests.
Always a high risk (possible high reward) strategy, what seems to be happening is that investors with spare cash are rummaging around in the bargain basement looking for oversold small stocks. They have plenty to choose from.
A quick look at the full ASX quotes list shows around 850 stocks with a market value of less than $20 million, around 36% of all listed securities, including some well-known names.
This week saw Stavely rise by 24% to 3.1c (for a market cap of $13.5 million) after reporting promising drilling results at its Junction copper project in Victoria.
Nimy Resources was up 7% this week and 55% over the last four weeks to 9.3c (market cap $16.5 million) thanks to encouraging drill results at its Masson copper/nickel project in WA.
Overall, the Australian market had a roller-coaster week, up and down on successive days in what looked like a tug-of-war between optimists and pessimists with the optimists on top late in the week to deliver a modest 0.7% rise in the all-ordinaries index, a 1.4% rise in the metals index and a 2% rise in the gold index.
Iron ore miners rallied modestly thanks to a US$2/t rise in the price of the material on the Singapore exchange, but at US$92.30 a tonne it is still down US$30/t on its price in May.
Fortescue clawed back 17c to $16.44 after touching a 12-month low of $15.88 on Tuesday. Champion Iron continued to fall, shedding another 9c to $5.50 while Mt Gibson Iron added 0.5c to 29c.
ING, a Dutch bank, sees continued weakness in iron ore as demand for steel in China remains subdued but Barclays, a British bank, sees the current low price as representing “compelling entry point” for big iron ore miners such as Rio Tinto which has a share price that appears to be based on an iron ore price of US$74/t.
News from the gold sector, as mentioned earlier, was dominated by the Newmont/Telfer deal and the Centamin takeover with most other stocks drifting with the up-and-down price.
Westgold claimed success in identifying sediment hosted gold on its WA tenements but fell 7c on the market to $2.81. De Grey added 3.3c to $1.12 as it waits for a bid from Gold Road or another suitor, while Gold Road itself lost 2.5c to $1.54.
At the top end of the gold sector, Evolution rose by 4.5c to $3.99 while Northern Star led the way up with a rise of 38c to $14.97. followed by a bullish note from Morgans which reckons the stock is heading up to $16.90.
Other news and markets moves of interest included:
- BCI Minerals rising by 2.5c to 27c after receiving final approval for its Mardie salt project on the WA coast.
- Sun Silver added 4c to 67c thanks to news that historic drill core at its Maverick Springs silver project in the U.S. had returned high antimony readings on hand-held (XRF) readers, plus another high-grade silver intercept from drilling at the project.
- Equinox Resources went the other way with a 1c fall to 25c after announcing the signing of an option to buy an antimony project in Canada.
- Peel Mining rose by 1c to 11c after reporting the highest grades yet at its Wagga Tank polymetallic project in NSW, including two metres at 6.45% copper and 3000 grams per tonne of silver from a depth of 112m, and
- Lynas led rare earth stocks higher with a rise of 13c to $6.92 while Viridis Mining was steady at 67c despite the initiation of coverage by Bell Potter which sees the Brazilian focused explorer rising to $1.70.
