From ashes to ashes, dust to dust, potash stocks make a comeback, just as they were about to rust

16th November 2018
Tim Treadgold

Discovery, corporate action and the return of an almost-forgotten commodity, potash, were the highlights of the Australian resource sector in what was downbeat week on almost every market in world.

Fear of a significant economic downturn caused by the trade war between China and the U.S., when combined with the cost of rising interest rates, is starting to weigh heavily on investors, especially those exposed to technology stocks.

Oil and copper – two of the must-have commodities of every modern economy – have also been sinking, joined this week by nickel, which is being buffeted by a collapse in demand for another key material, stainless steel.

For investors at the top end of the resources world, it was a rugged week. BHP shed $1.23 to $31.95 thanks to its exposure to oil and copper. Rio Tinto lost $3.24 to $77.80 – with neither company benefiting from big share buy-backs designed to boost their share prices.

Away from the big end of town the picture was somewhat brighter, though the overall trend was down as talk of a recession clouded outbreaks of optimism.

The best performer by a country mile was the stock which made the best discovery of the week, if not one of the best of the year, Peel Mining, which added 9c (27%) to 42c after reporting what it called a “stunning” drill hit from resource drilling at its Wagga Tank polymetallic prospect near Cobar in western NSW.

An 18.2 metre zone assayed 40.2% zinc, plus 15.7% lead, plus useful grades of copper (0.97%), gold (2.77 grams a tonne), and silver (356g/t). Peel’s managing director didn’t hold back when he described the assay as “ultra-high-grade”, and “awe-inspiring.”

The trick now is to keep drilling to work out how much of the super-rich material is in the discovery area, which starts at a depth of 182m.

Corporate activity was kicked off by Northern Star making a clean-up bid for the 49% of the East Kundana gold joint venture it doesn’t already own by offering $150 million in cash for the stake held by closely-related Tribune Resources and Rand Exploration.

A messy ownership situation involving Tribune and Rand has created an opportunity for Northern Star to make its move, although the market has not been kind to anyone involved thanks to the gold price dipping below the $US1200 an ounce mark before a recovery later to around $US1209/oz.

Tribune fell 15c over the week to $4.90. Rand was down 24c to $2.15 and Northern Star eased back by 19c to $8.25.

Silver Lake and Doray joined the corporate action club a day later with a mutually agreed merger which has the simple aim of creating a bigger gold mining company – not that investors smiled on the deal, with both Silver Lake losing 3c to 49c and Doray down 6c to 30c. In theory, the merged entity should have a stock-market value of around $400 million.

Potash, the commodity at the top of the fertiliser sector’s pecking order, made an overdue return amid reports of rising prices in India, which has a huge appetite for food, and strong profits by one of the major producers, Israel Chemicals, which produces potash from the Dead Sea.

Interestingly, the Israeli company earned more from reduced revenue – a perfect pointer to expanding profit margins.

On the Australian market potash-exposed stocks have performed well in a generally down week. Danakali added 5c to 80c. Kore Potash also rose by 3c to 14c. Highfield put on 9c to 69c, and Davenport Resources gained 2c to 10c. Kalium Lakes went to other way, shedding 1c to 38c.

Lithium stocks had a mixed week with better to come. Pilbara Minerals eased 4c to 81c despite announcing its keenly-awaited stage two expansion on Monday, to be followed today (Friday) by the official opening of stage one.

Other news-making and price-moving events, both up and down, included:

  • Encounter Resources added 1.5c to 5.6c after announcing an exploration deal with Independence Group in the red-hot Paterson Range of WA, where Rio Tinto is reported to have made a major copper discovery. Independence did less well, falling by 45c to $3.99 thanks to its exposure to the weakening gold and nickel markets.
  • Antipa Minerals, another of the Paterson Range explorers, added 0.2c to 2.2c after reporting encouraging gold assays from its Chicken Ranch and Minyari Dome prospects in the Paterson Range. The best drill hit was 3m at 4.05g/t from 63m.
  • Accelerate Resources added 2c to 12c after reporting visible copper in drill core from its Thomas Creek prospect in the Mt Read volcanics of Tasmania.
  • Cassini Resources reported its best-ever nickel assay from drilling at the Nebo prospect in WA’s West Musgraves region with readings as high as 2.91% nickel over a 23m intersection, with useful copper, cobalt and platinum assays. On the market, Cassini added 1c to 9.
  • Adriatic Metals reported fresh assays from its Rupice project in Bosnia, including 18m grading 17.6% zinc and 9.4% lead. On the market, the shares slipped 4c lower to 64c.
  • MACA, a mining services provider, suffered a 32c (26.6%) share-price fall after issuing a profit warning linked to rising labour costs.
  • SolGold reported visible gold from the latest drilling at its Cascabel project in Ecuador but its London-listed shares barely moved to be steady at 37 pence.
  • Alderan Resources reversed some of its recent losses by adding 4c to 22c after reporting high-grade copper assays from drilling at its Accrington project in the U.S. with a best assay of 14m at 3.4% copper, 1.15% zinc, plus some gold and silver.
  • Kingwest Resources added 2c to 20c after reporting encouraging drill results from its King of the West gold project in WA with a best hit of 7m at 13.04g/t, and
  • Mount Gibson Mining hit a 12-month of 64c on Monday as interest builds in the re-start of mining at its Koolan Island project, but then fell back to 56c for a 4c loss over the week after the company said it was looking for other projects, perhaps outside iron ore.

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