Boss Energy, which will soon start producing uranium at its Honeymoon project in South Australia, traded up to an all-time high of $4.90 on Tuesday before easing back to $4.66, a gain of 35c (6.8%) with more to come as exploration expands the project footprint.
Paladin Energy, which is scheduled to start production at its Langer Heinrich mine in Namibia early next year, did a little better, adding 10c (11%) to $1.06.
Bell Potter, a local stockbroking firm, said in a note to clients yesterday (Thursday) that Boss could rise to $5.53 and Paladin was heading up to $ 1.31 – but also said it had a neutral (hold) recommendation on both.
Other uranium-exposed explorers joined the rush, which is being powered by tight supply and demand fundamentals and fresh fund buying which this week saw London-listed Yellow Cake acquire an extra 1.5 million pounds of material from the government of Kazakhstan.
Deep Yellow, which is in the running as the next explorer to make the jump into production, added 22c (21%) to $1.27. Devex rose by 4c (12%) to 36c, and Haranga, which is exploring the promising Saraya project in Senegal, put on 3c (17%) to 20c.
Overall, the Australian market managed a modest rise this week despite investor concern about the pincer squeeze on profits from a rising oil price and the threat of interest rates staying high for longer than some investors might be expecting.
The all-ordinaries index added 0.6%. The mining index lost 3%, while the gold index led the way down with an 8% drop thanks to the gold price sinking through the US$1900 an ounce mark to US$1874/oz, its lowest level in six months.
Central banks are in a muddle over how to handle the rising oil price, which could be feeding inflation or suppressing economic demand – a significant unknown which means they might raise rates again to crush inflation but risk crushing the economy as well.
Citi, an investment bank, told clients this week that the Australian central bank is likely to resist the temptation of another increase when it meets in October – but could deliver an unwanted Christmas present with a rate increase in December.
The falling gold price is a direct result of this oil/rates Catch-22, which has led to a prediction that the future graph of interest rates will look less like the inverse V of the Matterhorn in Switzerland and more like Cape Town’s Table Mountain – a long period of flat but high rates.
Hints of tougher times ahead were seen during the week with the U.S. VIX (volatility index), also known as the fear index because it can be an early warning sign of a market correction, rising by 12% this week, taking the rise to 20% over the past four weeks – a move which has some older investors worrying about what’s happened in October’s past.
The Australian dollar continued its fall, touching a three-month low of US63.7 cents. It was US68c in mid-July.
Against this background of economic and financial uncertainty a series of deals caught the eye of watchful investors, including:
- Liontown slipping below Albemarle’s $3 a share takeover bid with some trades booked at $2.88, a level which sparked fresh buying by iron ore billionaire Gina Rinehart who is believed to now have a 13% stake in Liontown. The stock closed yesterday at $2.98.
- Mineral Resources scored a major win with approval to snap up the contested Bald Hill lithium project which had been trapped in a messy insolvency situation. The new asset boosts the lithium portfolio of MinRes, sparking a share price rise of $1.41 to $67.46.
- Chalice Mining was reported to have attracted the interest of two international mining majors in its Gonneville nickel and palladium project with Glencore and Anglo American said to be in the running as a project development partner. Chalice continued to weaken, down 31c to $2.19 even as a global squeeze on the future supply of platinum group metals (which include palladium) started to surface.
- De Grey slipped 9c lower to $1.12 after announcing a $300 million placement and despite releasing what it called “outstanding financial metrics in a high confidence” definitive feasibility study into its Hemi gold project in WA. The mine is expected to produce 530,000 ounces of gold a year for the first 10 years at a cost of A$1295 an ounce, less than half the latest A-dollar gold price of A$2950/oz.
- ABX group was a surprise winner in the rare earth sector with a 1c rise to 8.5c after reporting high grade assays up to 17,333 parts per million (1.7%) from drilling at its Tasmanian rare earth project, news which followed a report by the accounting firm BDO that the rare earth sector was ripe for takeover activity, and
- Sev.en, a Czech company, emerged with a 51% stake in coal miner Coronado Global which rose by 21c to $1.98, eclipsing a buy tip from UBS when the stock was at $1.84, said to be heading up to $1.90.
Lithium news was more than the Rinehart/Liontown situation with one of the leading local producers, Allkem, releasing a growth plan aimed at delivering 179,000 tonnes of lithium carbonate a year from 2028, a target which helped lift the stock by 46c to $11.62.
Patriot Battery Metals went the other way, down 3c to $1.23 despite announcing a strike extension to its flagship Corvette property in Canada. The project now stretches along 4.35 kilometres.
SQM, the big Chilean lithium producer, released a report which said the company was on track to sell 250,000t of lithium carbonate equivalent from 2025, by which time its half-share of the Covalent joint venture in Australia will be contributing. The stock fell by 6% on the New York Stock Exchange,
BDO’s rare earth report stirred interest in the sector for the bold prediction that a wave of corporate activity could be on the way because there is a “host of rare earth companies with suppressed market values”.
BDO global head of natural resources, Sherif Andrawes, said the rare earth industry was at a similar stage to lithium of 2018, sold down but primed for period of consolidation.
Gold, interestingly, behaved differently in some markets where currency values had a substantial effect. Just as the Australian gold price clung closely to the magic A$3000/oz mark, the Chinese gold price remained close to an all-time high of 13,785 yuan, as Chinese investors look for increasingly rare safe havens.
Lithium news was led towards the end of the week by a report of talks between Australia and Europe for closer ties in critical metals, which could provide a fresh tailwind for lithium and other metals.
Other news and market moves of interest this week included:
- Lithium Power International added 12c to 35c after confirming that it was in merger talks with Chile’s national copper company, Codelco, which is keen to get control of the company’s Maricunga project in Chile’s lithium “golden triangle.
- WA Resources gained another 7c to $5.17 after releasing fresh high-grade niobium assays from its Luni project in the West Arunta region of central Australia.
- Kingsland Minerals slipped 0.5c lower to 25c despite announcing encouraging gallium assays as a by-product at its Leliyn graphite project in the Northern Territory.
- Strandline announced a management shuffle as it moves into steady-state production at its Coburn mineral sands project in WA, shedding 1.5c to 11c just as Shaw and Partners refreshed its buy tip and target price of 57c, and
- Strike Energy started gas production at its part owned Walyering gas project in WA, adding 1c to its share price which closed the week at 41c but with Macquarie Bank sticking with a buy recommendation and price target of 59c.