The effect of stockpiling can already be seen in rare earths where the U.S. Government’s Project Vault has created a floor price which underwrites the production of almost everything the western world can produce to lessen the effects of Chinese export bans.
Copper too is starting to see the effect of stockpiling, with the price rising even as the global economy wobbles as oil rises back above US$100 a barrel.
This week’s US16 cent per pound rise in the copper price to US$6.13/lb (before a late fall to US$6.02/lb) took the most widely used base metal back to within sight of its all-time high of US$6.21/lb reached in late January.
Leading investment bank Morgan Stanley said that copper is benefitting from a tight supply/demand situation and “geopolitical risks driving strategic inventory builds”, a long way of saying governments are starting to stockpile copper.
The reaction of local copper stocks was mixed with Develop leading the way with a rise of 32c to $5.87 after declaring that it has reached the milestone of commercial production at its Woodlawn mine in NSW.
Sandfire went the other way, falling by 12c to $17.79 after the release of its March quarter report which revealed a 6% decline in group copper equivalent production.
Other copper moves included Capstone losing 64c to $12.34, Aeris falling by 1.3c to 37c, and QMines creeping up by 0.1c to 5.6c after announcing the completion of a feasibility study into its Mt Chalmers copper and gold project in Queensland.
The second green shoot which is starting to effect the market is the greenback, the U.S. dollar, which is under pressure from soaring U.S. Government debt which is reported to be close to a peacetime peak of US$40 trillion.
Westpac Bank told clients that “the U.S. dollar increasingly lacks support” with the DXY dollar-exchange index) tipped to fall from its current reading of 98.6 to 96.8 by the end of the year and then down to a three-year low of 94 by the end of next year.
Because most commodities are traded in U.S. dollars, the effect of a falling dollar means consumers can afford to buy more in their currency.
Gold struggled with the background noise of economic trouble, slipping US$60 an ounce lower during the week to US$4701/oz.
Vault Minerals was the pick of the local gold sector, rising by 39c to $4.98 thanks to the powerful cash flow coming from its WA operations which generated $229 million in free cash to lift the company’s cash position to $728 million – putting the company on track to join the $1 billion cash club later in the year.
Investment bank UBS stuck with a buy tip on Vault but trimmed its price target from $7.10 to $7.05, still handsomely higher than last sales at $4.98.
Other gold moves, up and down, included:
- Northern Star, down $1.26 to $22.64, continuing a disappointing period which reflects investor concern about operating problems at some of its mines. Jarden Group has a sell rating on the stock with a price target of $22.30, questioning whether value is emerging or whether the stock is “a value trap”.
- Evolution Mining also suffered a sell-off, losing 30c $13.06. Greatland, after a stellar run up, lost 16c to $14.20.
- Astral rose by 1c to 20c after reporting an increase to 2.07 million ounces in the resource base of its Mandilla project in WA.
- Carnavale Resources rose by 1c to 12c after reporting bonanza grade gold from assays at its Kookynie project in WA.
- Perseus added 5c to $5.57 after releasing a strong March quarter production report which included its application to joint the $1 billion cash club, lifting its holdings of cash and bullion to US$817 million, and
- West African Resources fell by 15c to $3.36 after reporting the latest African government raid on a foreign investor with the military government of Burkina Faso snatching an extra 25% stake in the company’s Kiaka mine. (AWA. Africa Wins Again).
Lithium stocks continued to benefit from the rising oil price and the certainty that sales of electric vehicles (EVs) will be a big beneficiary of higher petrol prices.
Star of the lithium pack this week was Solis Minerals which jumped 4.3c (97%) higher to 8.7c after announcing the acquisition of an advanced district scale lithium project from mining major Rio Tinto in Brazil.
Vulcan Energy continued its upward run with a rise over the week of 13c to $3.58 thanks to its announcement of a supply agreement with German industrial giant Siemens for the Lionheart lithium and geothermal energy project in Germany.
Other lithium moves, up and down, included Liontown, up 14c to $2.33. PLS down 11c to $5.88. Core, up1c to 36c, and IGO down 36c to $8.67.
Rare earth stocks were mixed with the biggest move being a fall of $2.25 by sector leader Lynas which dropped to $18.64, even as big name investment bank UBS stuck with a buy tip and price target of $23.65, down modestly from an earlier target of $23.90.
Other rare earth moves included Viridis, up 52c to $2.57. Brazilian Rare Earths, up 35c to $5. Lindian, up 3.5c at 96c. Hastings down 3c at 47c, and Narryer Metals up a sparkling 3c (91%) to 6.9c after announcing a $1 million placement with part of the new shares being allocated to WA rainmaker Tim Goyder.
Uranium stocks had a mixed week with Canadian focused NexGen leading the way up and Paladin Energy leading the way down.
NexGen added 31c to $18.11 after announcing an expanded exploration footprint at its Patterson Corridor East project in Saskatchewan.
Paladin fell by $1.67 to $13.10 after releasing a steady March quarter production report. Bell Potter reckons the stock will rise to $15.30.
Other uranium moves included: Bannerman, up 29c to $4.73. Boss, down 1c to $1.69 and Lotus, up 2c to $1.57.
Other moves and news in a week dominated by growing concerns about the double-sided blockade of the Persian Gulf oilfields included:
- BHP, up 60c to $56.15 after announcing resolution of a long running dispute over iron ore pricing with its biggest customer, China.
- Canadian Phosphate, up 3.5c to 11c thanks to speculative interest in its Wapiti phosphate project in British Columbia.
- Ecograf, up 2.5c to 41c after announcing a strategic partnership with Japan’s Mitsubishi Chemical Corporation for battery anode (graphite) material, and
- Caspin Resources, up 1c to 12c after announcing high grade tin assay from its Kelpie tin project at Bygoo in NSW.
