Grand Glasgow promises see battery metals investors stuff a wee more profit in their sporrans

4th November 2021
Tim Treadgold

Energy, as expected, was the big news on financial markets this week as the Glasgow climate change conference dragged on, but there was another event which kept investors on their toes - a fresh indication that official U.S. interest rates will be heading higher next year.

A $US20 an ounce fall in the gold price on Wednesday was the most obvious reaction to the unveiling of a plan by the U.S. central bank to phasing down its bond buying, which has been pumping cash into the economy.

The gold-price fall, which was later reduced to $US10/oz as the price crept back to around $US1775/oz, was enough to rub an outsized 3.7% off the ASX gold index as leaders such as Newcrest, Evolution and Northern Star all slipped by around 3%.

Gold was not alone among the major commodities to be sold down. Iron ore dropped below $US100 a tonne (for a while) and oil lost $US3 a barrel, ending a month-long winning streak.

The oil price slide was largely the result of a build-up in U.S. inventories, but it also played into the overall energy theme being driven by climate change concerns which are attracting promises of major capital injections.

The sheer weight of money earmarked for spending on climate change initiatives means it will be the defining event on financial markets for at least the next 20 years, though there are doubts about a lot of the promises being made.

The biggest of all pledges, the $US130 trillion Mark Carney says is being marshalled by banks, fund managers and insurers, is far too large to be credible which means the former governor of the Bank of England might have damaged the cause of climate change.

Other big-name climate crusaders, including Australia’s own Andrew Forrest, have also been super-charging their campaigns with hugely ambitious claims while lashing out at anyone not singing from the climate change hymn sheet.

The proof what’s been achieved at Glasgow will be in the delivery of undertakings and without China and Russia as signatories to whatever is agreed, the change process could be a lot longer than delegates would like.

For Australian investors, the easiest entry point into the climate change thematic continues to be lithium and the other battery metal stocks, where prices are edging up, in line with surging sales of electric vehicles.

Lithium winners this week included the usual suspects; Pilbara Minerals, up 16c to $2.35, Orocobre, up 91c to $9.71, and Liontown, up 6.5c to $1.93.

But the positive lithium trend extended well down into the emerging crop of explorers and early-stage developers with a number of new names popping up, including: Arizona Lithium, up 4.5c (55%) to 13c. Arcadia Minerals, up 6.5c (33%) to 26c. Tempest Minerals, up 0.5c (22%) to 2.7c, and Global Lithium, up 12c (22%) to 67c after announcing that China’s biggest battery maker, CATL, might be buying a stake in the stock.

Vulcan Energy, which is planning to extract lithium from deeply-buried brine in Germany, staged a recovery after being buffeted by a controversial short-sellers research note which questioned the company’s business case.

Looked at over the week, Vulcan was down 48c to $12.64, but that price was $1.80 above the $10.84 low point reached on Tuesday. Canaccord Genuity staunchly defended Vulcan with its own research note on Wednesday, saying the stock is heading to $21.

Uranium continues to benefit from stockpiling by investment funds, with Canada’s Sprott Group reported to have socked away another 700,000 pounds of the fuel, a move with helped Deep Yellow add 7.5c to $1.08, Paladin put on 7c to 95c and Boss rise by 1.7c to 30c.

Nickel, which is increasingly being treated as a battery metal, staged a later recovery to $US8.92 a pound but it wasn’t enough to save falls across the board, including: Western Areas, down 30c to $2.91. IGO, down 59c to $9.12. Mincor, down 0.5c to $1.32, and newly listed Widgie Nickel, down 1c to 22c, but with a buy tip from Euroz Hartleys which sees the stock rising to 36c.

The other big nickel event being played out on financial markets is the tussle between BHP and Andrew Forrest for the Canadian explorer, Noront Resources. The latest twist in a complex tale is speculation that the two bidders might joint forces, an event which seems unlikely given past bad blood, but it was enough to rub C6 cents off Noront’s share price which retreated to C79c, having touched C87c last week.

Iron ore, as mentioned, continued its predictable slide down towards a forecast long-term price of $US75/t, though it’s not all one-way traffic. After an early dive this week to $US92.18/t on the Dalian market in China, high-grade ore managed to claw its way back to $US100.10/t.

The late recovery helped local pure-play leader Fortescue Metals scrape together a 21c rise to $14.23, well ahead of the mid-week low of $13.96 on Tuesday when most investors were watching the Melbourne Cup.

Credit Suisse reckons Fortescue will slide back to $13.50 but also sees as a useful yield play, trading on a potential dividend yield of 12.8% in the current financial year and 10.2% next year – certainly better than bank interest at 0.1%.

Copper, another metal playing a role in energy transition, clung to a price of $US4.50/lb, down on the $US4.80/lb of last month and a factor in local leaders such as OZ Minerals and Sandfire continuing to weaken, OZ by $1.51 to $24.10 and Sandfire by 31c to $5.52.

Cyprium Metals, which is making progress with its ambitious plans for the troublesome Nifty copper mine in WA slipped 1c to 19c while Peel also fell 1c to 23c despite an optimistic note from Canaccord on the expected release of a maiden resource for the Wirlong project in NSW, which the broker reckons will lift Peel to 60c.

Most gold stocks were flat over the week with little in the way of exploration news to generate interest. Challenger Exploration reported encouraging assays from drilling at its Hualilan project in Argentina, including 63.3 metres at 8.5 grams of gold a tonne from a depth of 108m, but could add just 0.5c to 29c.

Apollo Consolidated rose by 6.5c to 66c after Ramelius raised its cash and share takeover offer to 62c, while Westgold and Gascoyne both slipped 1c lto $1.92 and 35c respectively after a proposed merger was abandoned.

The best move on a drilling result came from Predictive Discovery, up 3c to 22c after reporting high grade extensions to its Bankan project in Guinea with a top result of 24m at 8.8g/t from 463m.

Other news events and market moves included:

  • Australian Strategic Materials had nothing new to say this week but built on its reputation as an emerging star of the rare earths and strategic materials industry with another upward surge in its share price to $12.11, a rise of $1.59, taking the increase since being spun off by Alkane Resources in the middle of last year to $11.36, or 894%.
  • Develop Global, the new mine services company head by Bill Beament, continued its rise with a 2c gain to 64c.
  • Celamin, the Robin Widdup-led phosphate development company with its foot on a project in Tunisia, was steady at 8c despite reporting exceptionally rich assays from the latest drilling, including 37.6m at 21.9% phosphate.
  • Whitehaven Coal lost 18c to $2.51 after a sharp fall in thermal coal prices caused by Chinese Government market intervention in the coal market, a key factor in soaring electricity prices, and
  • Australian Potash slipped 0.3c lower to 9.3c after announcing a $12 million capital raising to continue developing the Lake Wells project in WA.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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