Rising nickel and gold prices highlight brighter outlook for metals

22nd March 2019
Tim Treadgold

Nickel regained its share of the investment spotlight this week with the price moving back to within touching distance of $US6 a pound and local nickel favourite, Mincor, taking a big step towards a production re-start at its mothballed Kambalda mines in WA.

International developments further boosted interest in the metal with Vale, the troubled Brazilian iron-ore miner, dusting off plans to invest $US500 million in its New Caledonian nickel business.

Driving the nickel revival is demand for the metal in batteries. Ore from Mincor's Kambalda mines is particularly well suited for conversion to battery-grade chemicals. 

Vale’s chief executive, Fabio Schvartsman, told the Reuters news agency that the fresh investment in New Caledonia was being made “amid expectations that nickel prices will recover as demand for the metal increases to build batteries for electric vehicles”.

Mincor’s move to resume operations at Kambalda started with the signing of an offtake term sheet with BHP which will ensure that Mincor has a market for its ore – news that saw the stock add 7c to 42c.

Other nickel stocks were largely unmoved, even as the nickel price reached $US5.99/lb, up 25% on the price late last year during the height of the uncertainty caused by the China v US trade war.

Other metals are also benefiting from indications of an improvement in the trade stand-off, with Macquarie Bank telling clients after a five-day tour of the country that confidence was rising in China as credit restrictions are eased, the property market recovers and infrastructure spending accelerates.

Australian iron ore producers have been the biggest beneficiaries of the improving Chinese economy and the slowdown in iron ore exports from Brazil.

Just how much of a boost the Brazilian problems mean for Australian iron ore miners could be seen in a 4% increase in Australian iron ore exports during February, with Fortescue Metals (shipments up 16%) and Roy Hill (up 19%) the biggest winners, according to the investment bank, UBS.

On the stock market, the biggest winner over the past month from the strong iron ore market is Mt Gibson Iron, which is trading at a five-year high of 94c, up 11c for the week and 22c for the month.

Gold, as expected, reacted vigorously to news that official US interest rates are likely to be on hold for the rest of the year.

The rates decision from the US central bank saw gold enjoy an immediate rise of $US18 an ounce, taking the price back to $US1318/oz while the Australian gold price rose by a more modest $A8/oz to $A1845/oz thanks to strengthening of the A-dollar.

The performance of local gold stocks was mixed. Leading producers such as Northern Star, Evolution and Newcrest firmed moderately while smaller and emerging producers did better.

Gold Road added 8c to a fresh 12-month high of 98c. Doray also reached a 12-month high of 52c, before easing to 50c for a 1c rise over the past week.

Another emerging mineral-price trend is the continued firming of conditions in the titanium minerals market, which Morgan Stanley, an investment bank, expects to continue thanks to strong demand in China for paint pigment (the major use of titanium dioxide).

Helping exporters of titanium minerals to China are strict environmental regulations which are limiting domestic production. This is good news for existing producers such as Base Resources, which rose by 2c to 31c this week, using the improved market to unveil plans for its Toliara mine in Madagascar.

But it wasn’t all good news on the market this week, with one-time graphite darling, Syrah Resources, continuing its fall from grace with its share price touching a six-year low of 98c.

Metals X was another one-time high-flyer to touch a multi-year low of 20c, before recovering slightly to 21c, after reports of problems at its Nifty copper mine. In January last year, Metals X was trading at $1.21.

Other market movements and newsworthy events of the past week included:

  • Aeris Resources enjoying a 2c rise to 18c after announcing plans to buy the historic CSA base metals mine from Glencore for a company-stretching $US575 million, roughly seven times the current stock-market value of Aeris. As the size of the proposed deal was absorbed by investors, the stock slipped back to 17c for a 1c rise.
  • Spectrum Metals more than doubled from 1c to 2.5c after reporting encouraging assays from drilling at its Penny North gold prospect in WA. Best assays were 24.2 grams of gold a tonne over eight metres from a depth of 149m, and 35.2g/t over 4m from 135m.
  • European Lithium added 2.1c to 11c after announcing that it would participate in a German Government plan to develop a battery-making program for electric cars.
  • Kalium Lakes said it had arranged the debt component of its Beyondie potash project with the German bank, KfW IPEX. The company has already secured the financial support of an Australian Government regional investment agency. On the market, Kalium Lakes rose by 1c to 49c.
  • Tietto Minerals rose by 3c to 16c after reporting attractive and shallow assays from drilling at its AG project in the African country of Ivory Coast. Best hits were 18m at 11.72g/t from a depth of 39m, and 14m at 5.57g/t from 91m.
  • Talga Resources added 2c to 60c after reporting positive test results from its battery anode product, Talnode, in cold-weather tests.
  • Clean TeQ Holdings slipped 1c to 31c after reports from a mining conference that its is seeking an equity partner for its big Sunrise nickel-cobalt project in NSW.
  • Bardoc Gold moved up a modest 0.1c to 4.4c after reporting encouraging drill results from its Mulwarrie gold project in WA with a best hit of 12.27g/t over 2.6m from a depth of 73.4m.
  • Blackham Resources eased 0.2c to 1.8c after announcing a $26 million capital raising to boost production at its Matilda/Wiluna mine in WA to 100,000oz a year, and
  • Kingsgate Consolidated lost 1c to 24c despite announcing an $82 million settlement with its political risk insurers over the forced closure of its one-time gold flagship the Chatree mine in Thailand.

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