Shortages, outages, and stockpiling are three factors driving commodity prices higher, along with manufacturing demand, as countries learn to live with elevated oil prices caused by the Persian Gulf stalemate, which is starting to look a lot like the deadlock in Ukraine.

High oil prices and the inflation they have unleashed is a factor in the broader commodity uplift which saw copper rise this week by 7.2% to an all-time high of US$6.67 a pound before easing to US$6.52/lb.

Silver did even better, rising by 13% to US$87.88/oz, potentially heading back to its all-time high of US$121/oz reached in late January, around the same time gold hit its all-time high of US$5589/oz.

Gold, however, sat on the sidelines this week with a lowly rise of 0.2% to US$4682/oz, weighed down by Indian investors selling after the intervention of Prime Minister Narendra Modi who asked people to stop buying gold as the country battles the oil crisis, backing up his demand with a 6% increase in gold import duty and a 15% increase in the silver import duty.

The local big boys of mining, BHP and Rio Tinto, did best as the copper price reached for the stars with this week’s rise taking copper’s 12-month increase to 43%, slightly below gold’s 47% but a country mile behind silver’s 172% rise.

BHP added $4.68 (8%) this week to an all-time high of $62.12. Rio Tinto rose by $12.92 (7%) to $191.42 thanks to the copper boom and strong profits from their iron ore operations which are benefiting from a higher than expected price of US$111 a tonne.

It’s likely that some of the investors scrambling for a piece of BHP or Rio Tinto might otherwise have bought an investment property, an asset class made less attractive by this week’s tax changes which have increased the appeal of listed equities, especially resources.

Smaller copper stocks rode the price higher. Sandfire added $2.37 (13.55%) to $19.88, Capstone rose by $2.15 (18%) to $14.25, 29Metals, was up 7c (27%) to 32c, and Aeris added 9c (24%) to 47c. 

Powering copper is a perfect storm of tailwinds that include the extended outage of the giant Grasberg mine in Indonesia, a Gulf war-caused shortage of sulphuric acid after China banned exports of the essential copper processing material, and stronger than expected demand for copper in China as it expands its electricity grid.

Silver’s rise was part a catch-up with gold and part a delayed reaction to a Silver Institute report which forecast a deficit this year of 187 million ounces caused by strong demand from photovoltaic (solar panel) manufacturers and other renewable energy technologies.

Local silver exposed stocks performed strongly, led by Andean Silver which rose by 50c (25%) to $2.49 with that rise aided by a report of bonanza grades in the latest exploration at the company’s Cerro Bayo project in Chile where chip samples measuring up to 5643 grams a tonne of silver equivalent (silver and gold) have been recovered.

Other silver moves included: Sun Silver, up 26c (20%) to $1.58. Silver Mines, up 2.2c (13%) to 19c, and Investigator Silver, up 1c (16%) to 7.2c.

The effect of the copper rush (and the budget-caused property shake-out) can be measured in the performance of the major ASX indices where the metals and mining (XMM) index rose by 8.4% as the all-ordinaries slipped 2% lower and the banking index fell by 10% because of bank exposure to residential property lending which has been rocked by budget tax changes.

Commonwealth Bank was the primary victim of the tax changes, plunging by $22.48 (12%) to $154.31, only to be hounded by investment banks which see even tougher times ahead. Jarden is the chief gloom merchant tipping a future price for Australia’s biggest bank of just $90. Ouch!

Gold, as mentioned earlier was stuck at around US$4689/oz as Indian buyers withdrew from the market though seasoned London gold watcher Ross Norman reckons government intervention in the gold market will reinforce the case for investing in gold and silver.

The flat gold price did not deter investors from loading up with gold miners, perhaps because of recognition that they remain enormously profitable, as seen in the 7% rise in the ASX gold index as sector leaders outperformed the price of their underlying metal.

Evolution was the best of the big gold stocks, adding 50c to $13.37, followed by Genesis, up 49c to $6.57 and Northern Star, up 10c to $21.38.

Other gold news and share price moves included:

  • Minerals 260, up 3.5c to 88c after reporting the acquisition of tenements adjoining its Bullabulling project in WA and because of growing interest in the stock after the awarding of early stage development contracts. Morgans has a price target on MI6 of $1.40.
  • Dateline, down 4c to 20c after receiving a poor response to its bankable feasibility study into the Colosseum project in California.
  • Gorilla Gold, up 2c to 43c after announcing a fourth discovery at its Comet Vale project in WA.
  • Pantoro, down 12c to $3.26 despite unveiling plans to “materially” expand production at its Norseman project in the south of WA, and
  • Another big gold merger was North American-focused Equinox Gold and Orla Mining announced a share swap deal which will create a business valued at US$18.5 billion.

Some of the best moves in a week of lingering uncertainty about oil prices and tax policy came from special situations such as Larvotto’s 35c (27%) rise to $1.64 after it announced the hauling of first ore from its Metz underground antimony/gold mine in NSW. The stock traded up to an all-time high of $1.67 early on Thursday.

Other stand-out movers included:

  • Stelar Metals, up 6.5c (87%) to 14c after reporting the acquisition of the historic Hill of Leaders tungsten project in the Northern Territory. 
  • Almonty, a Canadian-based tungsten specialist with an ASX listing and a big mine in South Korea, up $1.31 to $26.47 after reporting a 221% increase in revenue in the March quarter, and 
  • IGO, up 52c to $8.76 thanks to growing interest in lithium and speculation that it might be of takeover interest to Rio Tinto as it grows a lithium division.

Other lithium stocks were mixed despite growing optimism in demand for the metal from makers of battery energy storage systems (BESS).

Lithium prices have been rising strongly in China and this week added 7%, taking the metal’s increase this year to 70% and the rise over the past 12-months to 205%.

Local leader PLS started the week strongly with a 29c rise to an all-time high of $6.59 before being whacked by sellers who took the stock back to where it started at $6.30.

Liontown suffered a similar fate with a run up to a high for the year at $2.64 being fading to $2.44, down 3c on opening trades this week.

Elevra was the biggest lithium loser with a fall of $1.44 (10.5%) to $11.92 after announcing that it had secured a $440 million funding package for its Moblan project in Quebec.

Other news and price moves this week included:

  • Iron Bear, a Canadian focused iron ore developer which generated a lot of headlines for its namesake project in Newfoundland but failed to make a lasting mark on the stock market, rising to 6.2c before fading back to 5.6c, where it started the week. With a magnetite orebody grading just 29.5% iron the company faces a heavy lift.
  • Fortescue told a different story thanks to continued strong demand for its dig and deliver hematite ore, rising by $1.89 to $22.93, even after negative publicity over a legal loss.
  • Ardea Resources was the pick of a recovering nickel sector with a 1c rise to 72c, taking its increase over the last two weeks to 9c.
  • Sky Metals continued to attracted support for its Tallebung tin project in NSW, adding 3c this week to 22c. Morgans has a price target on the stock of 35c.
  • Lotus led a weaker uranium sector with a fall of 11c (13%) to 71c after announcing a delay at its Kayelekera project in Malawi, and
  • Aldoro caught the eye of some investors with its claim to have the world’s biggest resource of strontium, a high-value but thinly traded metal. After a burst of publicity because of strontium’s novelty affect, Aldoro shares lost 6c to close yesterday at 41c.