Another winning week for re-charged battery stocks

13th October 2017
Tim Treadgold

It was a tale of two markets in the resources sector of the Australian stock exchange this week with the top end sagging and the bottom end on fire, especially battery metals, where cobalt burned brightest.

Big boys, including BHP, Rio Tinto and Fortescue Metals, were dragged lower by their exposure to iron ore, which started its annual price slump as Chinese steel mills cut production under government orders to limit pollution during the northern winter.

The net result, for someone simply looking at the market through index values, was an impression that nothing happened, with the metals and mining index opening the week and closing yesterday at virtually the same level.

That placid view masked a fiercely active market below the top 300 stocks, which is often where the best profits (and fun) can be had because while the major miners went nowhere, there was a near record number of smaller miners hitting fresh 12-month share price highs.

Stocks to reach new peaks, and this is not a complete list, included: Anglo Australian Resources, Arafura, Clean TeQ, DeGrey, Castle Minerals, Draig, European Cobalt, Hastings, Kidman, Lynas, Mineral Resources, Alderan, Mustang, Pilbara Minerals, Kogi Iron, Sheffield, Tawana and Whitehaven Coal.

Issues drawing investors into the market, apart from the family of battery metals, included ongoing interest in the Pilbara nugget gold story, copper exploration success, and a range of exotics led by Mustang and its rapidly-growing stockpile of rubies.

Overlooked for much of the past year, Mustang surged to high of 15c early yesterday, up 5c (50%) on its price at this time last week, and 300% higher than the price as recently as May.

It wasn’t one-way traffic among the smaller mining stocks. Argosy Minerals was sold down sharply after revealing a dispute with a potential Chinese investor in its Rincon lithium project in Argentina, a development which rubbed 6c (20%) off its share price which dropped to 25.5c.

Argosy, however, was a rare example of a battery metal stock going backward. The rest of the sector was heavily influenced by a fresh report from Macquarie Bank which upgraded price forecasts for cobalt, nickel and lithium.

Of those metals, cobalt was Macquarie’s favourite (this week) thanks to a study which pointed to a significant shortfall in production and the twin problems of 50% of the world’s cobalt coming from one high-risk country (the Democratic Republic of Congo, or DRC), with 70% of global supply from just 10 miners.

With demand expected to be comfortably outstripping supply by 2022 as the battery storage business booms, Macquarie reckons the lithium price will rise from around its current price of $US27 a pound to $US41/lb.

Shortly after that report circulated, cobalt-exposed stocks shot even higher, including:

  • Clean TeQ, up 11c to $1.26, with Macquarie forecasting a 12-month target price of $2.10.
  • Blackstone Minerals rising by 10c to 40c thanks to the acquisition of a cobalt, copper and gold project in Canada.
  • Longford Resources adding 3.3c to 12c after reporting a deal to lease the high-grade Columbia copper and cobalt mine in the US State of Nevada.
  • Northern Cobalt gaining 2c to 23c after reporting a start on drilling the Stanton cobalt prospect in the Northern Territory, and
  • Nzuri Copper remaining at its suspension level of 15c ahead of what is expected to be a significant report on its Kalongwe project in the DRC, which is rich in copper and cobalt.

Zinc-exposed stocks also had a solid week, led by New Century which attracted investment support from the US resource-fund manager, Sprott, which provided a $US45 million debt facility to re-start work on the tailings of the Century mine in Queensland, a development which lifted the stock by another 6c to $1.48.

Other market moving developments included:

  • Alderan Resources said it had started a 10,000 metre diamond drilling program at its highly-rated Frisco copper/gold project in the US State of Utah, an announcement which lifted the stock by 40c to $2.13. At one stage on Wednesday Alderan hit an all-time high of $2.23.
  • Castle Minerals bursting into the headlines after years in the shadows thanks to a deal covering prospective Pilbara nugget-gold conglomerate. On the market, Castle added 2.1c (190%) to 3.2c.
  • Dacian Gold reported first ore extracted from its Beresford underground mine at its Mt Morgans project, boosting the stock by 10c over the past five trading days to $2.11,
  • Millennium Minerals hit more high-grade gold while drilling at its Nullagine project, lifting its share price by 2.5c to 17c. Best assays included 11 metres at 11.69 grams a tonne from a depth of 43m with a 6m core in that intersection at 19.62g/t.
  • Riversgold, the comeback vehicle for former Doray Minerals boss, Alan Kelly, had a strong start on Tuesday with its 20c shares peaking at 24c, before slipping back to close at its prospectus price of 20c.
  • Anglo Australian Resources continued to move up this week, adding 1c to 7.5c as exploration steps up at its Think Big gold located just 20km south of the Kalgoorlie Superpit, a location familiar to the company’s chairman, John Jones.
  • Silver City Minerals said it had started exploration on a 6km strike extension of the Copper Blow project near Broken Hill in NSW, news which moved the stock up by 1.3c to 5.3c.
  • Venturex added another 0.2c to 1.7c after reporting high-grade copper intersections in the first diamond drill hole at its Sulphur Springs project south of Port Hedland in WA, with a best assay of 5.98% copper over 14m.
  • Staveley Minerals attracted the eye of analysts at the stockbroking firm Morgans as its makes progress at its Thursday Gossan project in Victoria. The stock only added half-a-cent this week to 14c but Morgans has it down as a potential 28c stock, and
  • Montezuma Mining upgraded the resource estimate for its Butcherbird manganese project near Newman in WA’s Pilbara region, news which lifted the stock by 1.5c to 19.5c.

 

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