Copper, tin, zinc boosted by outages and politics but gold gets another shot across the bows

Gold took another warning shot as interest rates edged higher, but iron ore staged a useful China-driven recovery while zinc, tin and copper benefited from outages and political interference.
25th November 2021
Tim Treadgold

New Zealand’s central bank punched well above its weight with a second 0.25 percentage point increase in its cash rate to 0.75%, effectively laying the foundation for other countries to follow, though Australia’s Reserve Bank says it will stay on the sidelines for at least another 12-months.

The NZ move was enough to rattle gold, which lost $US55 an ounce over the week to trade around $US1792, a fall which wiped 6% off the ASX gold index as sector leaders such as Newcrest slipped 46c lower to $24.15 while Evolution lost 23c to $4.09 and Northern Star fell by 55c to $9.79, though Shaw and Partners refreshed a buy tip and target share price of $12.

Macquarie Bank alarmed its clients with a mid-week report which suggested “tapering”, code for an end to government monetary stimulus “could come faster than expected”.

“Having climbed the stairs, gold has gone down the elevator even faster than we anticipated,” the bank said. “The immediate cause has been a sharp reversal in 10-year treasury interest protected securities (TIPS) in the U.S. with nominal yields pushed above 1.6%.”

It’s not all bad news for gold, with speculation in the market that Canada’s biggest miners are keen to buy more of the Australian industry with companies such as Calidus, Capricorn and Red 5 singled out as potential takeover targets.

Capricorn was the only member of that trio to get a share price boost, up 6c to $2.93 even as the broader gold market fell. Calidus slipped 2c lower to 62c and Red 5 was down 1c at 28c.

Exploration news produced a handful of winners, led by E2 Metals, which added 11c to 26c after reporting high grade gold and silver from the first hole drilled in its Andrea Sur project in Argentina, with assays up to 15 grams of gold per tonne over 16 metres from a depth of 31m with a 2m core in that intersection grading 108g/t.

Metal Hawk managed a 1c rise to 32c after reporting a 4m intersection at 17.8g/t from a depth of 75m at its Kanowna East prospect near Kalgoorlie in WA while Predictive Discovery failed to impress with its latest drill result from the Bankan project in Guinea, slipping 2c lower to 24c despite a thick intersection (52.8m) assaying 3.6g/t from 510m.

Two reports which could have long term implications for the investing climate were released during the week, the first from Australia’s Reserve Bank, which took the unusual step of warning about the potential “risk of a sharp correction down the road” with its senior staff closely monitoring asset prices to see that they remained “sensibly valued” during the current era of ultra-low interest rates.

The second report which could have a more immediate effect given events in a number of commodity markets was from the Canadian investment bank BMO, which picked up the significance of the La Nina weather pattern developing in the Pacific, an event known to produce extreme rain events and limit the production of some important commodities such as metallurgical coal in Queensland.

That La Nina warning was one of several potential shocks which could test the supply of critical metals which are already tight. Copper, perhaps the most important, has been pushed US22c higher to $US4.46 a pound thanks to a threat from the Peruvian government to shut two mines on environmental grounds and ongoing uncertainty in Chile over its future political direction.

Zinc’s price drivers, which lifted the metal by US7c to $US1.54/lb, were flooding in the Tara mine in Ireland and Glencore’s plan to close a project in Italy. Local stocks exposed to zinc, including Alta and Ironbark, barely moved

Tin was another metal driven higher by outside events, with the price hitting an all-time high of $US40,000 a tonne after the Indonesian Government threatened to stop the export of unprocessed material by 2024, much as it has done with nickel. Metals X, the most tin-exposed local miner, added 3.5 (9%) to 42c over the week.

Iron ore was the surprise of the week, reversing a month of decline to add $UD14 a tonne to trade at $US95/t, a rise which delivered strong share price gains such as $5.24 to Mineral Securities, which rose to $45.77, 54c to Champion Iron, which rose to $4.63, and $2.60 to Fortescue’s share price which rose to $17.96, making a mid-week sell tip and price target of $11 from Goldman Sachs looks significantly out of sync with the market.

Lithium stocks continued to gain ground, led by Pilbara Minerals, which hit an all-time high of $2.63, before easing to $2.62 for a 21c gain over the week. Orocobre put on 46c to $9.80 and Vulcan continued its recovery after a short-selling shock, adding 45c to 10.70, still well down on its all-time high of $16.65 reached in September.

Copper, as mentioned earlier, had a good week thanks to doubts about future South American supply, with local copper stocks moving higher, led by AIC Mines, which added 5c to 49c from fresh work at the old Eloise mine in Queensland with a best drill hit of 12.9m at 4.6% copper.

QMines, which rarely gets a mention, rose by 2c to 39c after reporting high grade copper, gold and zinc from drilling at its Mt Chalmers project. Shaw and Partners reckons the stock is heading to 72c, and Sandfire rose by 26c to $6.33 thanks to its Spanish acquisition, which has helped the stock rejoin the ASX top 200.

Overall, the ASX had a mixed week with the gold index down 6%, essentially in line with the price moves of the major producers. The broader metals index, which incorporates iron ore miners, was up 4.8% while the market as a whole was flat with a modest rise of 0.33%

Other news and market moves of interest this week included:

  • Strandline having its best week in six months with a rise of 5c to 25c after reporting that 65% of costs at its Coburn titanium minerals and zircon project were locked in at or below the project’s definitive feasibility study.
  • Stellar Resources getting a 0.2c boost to 2.6c after reporting encouraging silver and lead intersections from drilling at its Montana project near Zeehan in Tasmania with a best hit of 1.2m at 31.8oz of silver and 23.9g/t of lead plus useful grades of zinc and copper from a depth of 423m.
  • Talga reporting high grade graphite intersections from the first round of drilling in the current season from its Vittangi project in Sweden with a best hit of 50m at 29.2% total carbon in graphite form, but suffered a sell-off on the market, shedding 7c to $1.84 though it did drop as low at $1.69 early on Friday.
  • Fund raising was in full swing during the week, led by uranium hopefuls such as Elevate which pulled in $11.5 million for work on its Namibian and Australian assets. Valor, which raised $5.4 million for work on its Canadian uranium projects. Gold raising were led by Saturn which attracted $8 million for its Apollo Hill project near Leonora in WA, and Medallion Metals which raised $4.8 million for its Ravensthorpe project also in WA.
  • Australian Potash reported steady progress at its Lake Wells project, but failed to attract support as its price slipped 0.3c lower to 7.8c, close to a 12-month low and a country mile less than the 30c price target set by Euroz Hartleys, and
  • Deep Yellow and Vimy were both sold down as investors shied away from their tentative merger talks with Deep Yellow

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