Investors hunt for nickel as US Fed ponders making more dimes
Battery metals, led this week by nickel, continued to outperform the rest of the resources sector while gold took a peek above $US1800 an ounce but faded as U.S. investors turned their focus on interest rate settings ahead of a key central bank meeting
26th August 2021
Battery metals, led this week by nickel, have continued to outperform the rest of the resources sector while gold took a peek above $US1800 an ounce but faded as U.S. investors turned their focus on interest rate settings ahead of a key central bank meeting.
The gathering of bankers in the Wyoming ski resort of Jackson Hole could be the setting for the Federal Reserve chairman, Jerome Powell, to reveal his plans for winding back monetary support for the U.S. economy.
In what some observers believe is the most important event since the outbreak of Covid-19 early last year, what Powell says will reverberate through every market with gold the canary in the financial cage.
An end to stimulus spending is inevitable, with timing the first of two unknown factors. The pace of winding back artificial government support is the other unknown, with that combination adding to the jittery mood of investors, which is why gold remains a safe place for the risk averse.
But guessing which way gold (and interest rates) might move is a high stakes game with the metal effectively opening and closing at the same price this week, around $US1798 an ounce with a high on Wednesday of $US1808/oz.
Local gold stocks largely rode out the uncertainty. Northern Star slipped 9c lower to $9.51, but earned a fresh buy tip from Macquarie Bank which reckons it will climb back to $13. Evolution was 9c weaker at $3.93, while Bellevue was among the best with a rise of 8c to 97c.
While gold waits for a lead from Jackson Hole, the path ahead for battery metals is much clearer, which explains the recent flurry of corporate activity – with a lot more to come as one of the key players from the last Australian nickel boom returns to the scene.
Andrew Forrest, best known as the multi-billionaire founder of iron ore miner Fortescue Metals, is back playing nickel games in Australia and Canada because he can see a shortage developing of high-grade (low polluting) nickel and because it’s chance to score a few points off one of his iron ore adversaries, BHP.
Western Areas is the company where Forrest could emerge as a nickel king maker with the stock already in play courtesy of an invitation to deal from fellow WA nickel miner, IGO, which is keen to build a bigger nickel business to match its newly acquired lithium interests.
Both IGO and Western Areas are suppliers of sulphur-rich nickel to BHP’s Kalgoorlie smelter, which needs outside material to balance the chemistry of what it mines at Mt Keith and Honeymoon Well.
Forrest, who made his name in nickel through the troubled Murrin Murrin project, has taken positions in most of Australia’s small nickel stocks, including Poseidon and Mincor, edging closer to a potential move to stitch up the sector using his iron ore firepower.
Corporate activity in the nickel sector added to the appeal of the metal, which has moved back above $US19,000 a tonne after a fall earlier in the year to less than $US16,000/t.
Banks, however, are mixed in their views even though Western Areas rose by 23c this week to $3.09, perhaps on its way to the $3.25 tipped by Credit Suisse but equally likely to drop back to the $2.31 seen by Bell Potter, which has cut its advice from hold to sell.
Other nickel news in a big week for the metal included:
- Azure Minerals jumping 12c to 33c after reporting highly encouraging drill results from its Andover project near Karratha on WA’s north-west coast. At one stage, Andover was trading at 40c thanks to thick (46.2 metre) intersections of material rich in nickel and copper, but with assays at least eight weeks away because of clogged assay laboratories.
- Mincor said it had encountered high quality nickel intersections from drilling near the historic Wannaway mine south of Kambalda with a best hit of 0.8m at 5.4% nickel and a hot spot of 0.1m at 17.9% nickel. On the market, Mincor traded up to a 10-year high of $1.40 before easing back to $1.39 for an 13c gain over the week.
- Duketon Mining rose by 1.5c to 37c after reporting a 22m intersection of sulphide mineralisation below its Rosie East nickel project near Laverton in central WA.
- Blackstone added 9c to 59c after reporting a 375m intersection of low-grade nickel sulphide at its Ban Phuc project in Vietnam. The disseminated material assayed 0.3% nickel but could have bulk mining potential, and
- Centaurus reported success from step-out drilling at its Jaguar project in Brazil with best assays of 16m at 1.32% nickel from 363.4m, and 5m at 2.56% nickel from 26.5c. On the market, Centaurus added 4c to 97c.
Lithium stocks followed nickel higher with the big news this week being first production of lithium hydroxide at the Kwinana processing plant of China’s Tianqi and its Australian partner, IGO which rose by 54c to $9.33, aided by its planned nickel deal with Western Areas.
Other lithium moves included Orocobre slipped 19c lower to $8.74 following its merger with Galaxy Resources. Pilbara Minerals rise by 13c to $2.23, and Liontown slipped 2c lower to 89c.
Rare earth stocks were also newsmakers this week as pressure grows to develop sources of supply outside China. Events and market moved included:
- Hastings Technology Metals said site works had started at its Yangibana project in WA, helping the stock rise by 1c to 22c.
- Australian Rare Earths reported consistently high-grade 3assays from its Koppamurra project in South Australia, adding 14c on the market to $1.17.
- PVW Resources reported encouraging assays from its Tanami project in WA (near the Northern Territory border) including 5m at 3630 parts per million (0.36%). On the market, the stock added 1.5c to 18c, and
- Peak Resources said it had started a bankable feasibility study into its Ngualla rare earth project in Tanzania but traded unchanged at 8.6c.
Iron ore staged a modest recovery with a $US7/t rise to $148/t which helped Fenix added 2.5c to 30c and Champion Iron rise by 22c to $5.82. BHP also recovered a little lost ground with a gain to 62c to $45.24 but remains under pressure following a credit downgrade warning from S&P Global.
Other news events and market moves of interest included:
- Okapi Resources rose by 6.5c to 44c after announcing the acquisition of a portfolio of uranium projects in the U.S.
- Iluka confirmed the brightening outlook for mineral sands producers with a 37% profit increase in the six months to June and management comment that all mines were back to full production. The stock added 50c to $9.43.
- Aurelia reported a solid profit for the June 30 year of $57.4 million, good enough to lift the stock by 1.3c to 35c but well short of the 60c price target set by Euroz Hartleys or the 50c by Macquarie.
- New Hope shrugged off a warning from the U.S. that funds would soon start short-selling coal miners with a 6c share price rise to $2.04, followed by a buy tip from Credit Suisse which sees the stock heading for $2.40.
- Citi, a leading U.S. investment bank, reckons the metals used in making cars, such as copper, aluminium, palladium and platinum could get a boost next year and in 2023 as manufacturers play catch up after a big fall in production this year caused by Covid and a shortage of computer chips.
- Coda Minerals fell 14c to $1.10 after releasing its latest drill results from the Emmie Bluff copper discovery in South Australia.
- Boab Metals added 1.5c to 40c after releasing a fresh set of assays from drilling at its Sorby Hills project in WA, and
- Stavely Minerals is expected to publish a maiden resource early next year for the Cayley Lode at its Victorian copper and gold project earning a buy tip from Euroz which set a price target of $1.10, more than double last sales at 41c.
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