Fresh trade war worries fail to dampen appetite for big raisings to fund miners’ expansion plans

If not for a series of significant fund raisings to back expansion moves by gold, nickel and lithium-exposed companies, the past five trading days were largely negative for investors.
22nd November 2019
Tim Treadgold

If not for a series of significant fund raisings to back expansion moves by gold, nickel and lithium-exposed companies, the past five trading days were largely negative for investors.

Saracen Mineral Holdings was the big one this week, attracting $796 million to help pay for a company-changing half-share in the Kalgoorlie Superpit gold mine.

Mincor’s $35 million to accelerate nickel developments and ioneers’s $40 million to expand work on its Rhyolite Ridge lithium and boron project in the US. were two other well-supported deals.

Saracen’s share price held up well despite the expanded capital base with the stock slipping 33c to $2.98. Mincor also shrugged off the effect of the new capital to shed just 6c to 60c while ioneer held its ground at 22c.

Elsewhere, sentiment was weighed down by a fresh wave of doubt about the chances of a quick end to the China v US trade war and concern about the negative effects of the attempt to impeach US President Donald Trump.

As if that wasn’t enough to ensure a bad week at the office, Australian investors were rocked by a fresh banking scandal over questionable overseas money transfers which could unseat the chief executive and chairman of Westpac in a re-run of the crisis which hurt National Australia Bank.

If there was a safe place in the market this week it was old faithful: gold.

Down earlier this month because of concern about demand for gold at a time when the world seemed to be moving back into a conventional growth cycle, the return of uncertainty saw the price stabilise and then pick up a modest $US5 an ounce to $US1472/oz while the Australian gold price rose by $A8/oz to $A2166/oz.

Most other metal prices fell over the course of the week, except copper which crept up by US2c a pound to $US2.65/lb, a move which adds to the argument that copper is the metal most likely to succeed if/when the trade war abates.

Finding winners on the Australian market this week was not easy, but there was a stand-out performer, Adriatic Minerals, which released the result of a positive scoping study into its Vares silver-lead-zinc project in Bosnia.

For an estimated capital outlay of $180 million, Adriatic will get a robust development expected to achieve a rapid capital payback of just eight months after production starts.

On the market, investors ran the stock up to $1.44 for a gain over the week of 35c, though the stock did touch a 12-month high of $1.50 early on Thursday.

SolGold was another rare winner for the week, though its listing in London meant that most Australian investors were unaware of the bonanza gold grades encountered by the Brisbane-based company during drilling at its Cascabel project in Ecuador.

Best hit reported by SolGold was a narrow (0.4 metre) vein assaying 617 grams a tonne in what is largely seen as a copper exploration project. On the London market, the stock added 1 penny to 19.78p.

Oklo Resources was another gold explorer to get a boost after reporting a drill hit of 10.97g/t over 47m from a depth of just 48m at its Seko project in Mali, a result good enough to lift the stock by 2c to 14c.

Better-known gold stocks were generally flat. Evolution slipped 8c lower to $3.90 but was down to $3.80 at once stage. Bellevue was steady at 46c. Gold Road lost 7c to $1.08, while Northern Star bucked the trend, just, with a rise to 5c to $9.31.

The only area of the market to enjoy across-the-board buying support was the services sector where companies selling drilling, assaying and mining equipment performed well, moving up when almost everything else was falling.

Seven Group, a major Caterpillar equipment provider, added 24c to $19.30. Emeco, another equipment dealer, rose by 2c to $2.14. ALS, which has an assay division among its assets, rose by 55c to $8.91, and Perenti, the drilling company rocked by the murder of workers in Burkina Faso earlier this month, added 2c to $1.98 – which is still well short of the $2.33 just before busses carrying drill rig crews were ambushed.

Other news events and price moves, mainly small up or down, included:

  • Mineral Resources suffered a sharp sell-off after its chief executive, Chris Ellison, told shareholders at the company’s annual meeting that part-owned Wodgina lithium project in WA was unlikely to re-start production this financial year. An 85c share-price fall to $13.94 came despite a second announcement about plans to increase iron ore production.

 

  • Salt Lake Potash added 7c to 81c after announcing that it had signed three binding sales agreements for product from its Lake Way potash project in WA. Other fertiliser stocks were mixed. Kalium Lakes lost 1c to 47c while Highfield added 3c to 75c when trading resumed after few days of suspension.

 

  • Neometals reported further progress on the titanium circuit of its Barrambie vanadium project in WA but the shares remained at 20c.

 

  • Kingsrose added 0.1c to 3.4c after reporting encouraging assays from deep drilling at its Talong Santo gold project in Indonesia with a best intersection of 19.89g/t over 4.2m from a depth of 263.4m.

 

  • Whitehaven Coal dropped to a 12-month low of $2.98 before clawing back 7c to $3.06 in a fresh sign of the pressure in the coal sector. At the start of the year, Whitehaven commanded a price of $4.99.

 

  • Metals X, which has been struggling with its Nifty copper mine in WA, also fell to a 12-month low when its shares touched 12c before a modest rebound to 12.5c. The stock traded as high as 45c in January.

 

  • Strike Resources added 0.2c to 4.2c after announcing that it proposed to export iron ore from its Paulsens East mine in WA’s Pilbara region from the Beadon Creek facility at Onslow.

 

  • Rox Resources gained 0.1c to 2.2c after reporting high-grade drilling results from its Youanmi near-mine exploration program, including 5m at 125.68g/t, and

 

  • Tungsten Mining added 1c to 19c after reporting the potential for bulk tonnage mining at its Mulgine Trench project in WA with assays up to 0.13% wolfram (an ore of tungsten) over 192m from surface.

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