News - Prospector's Diary

Shares down. Commodities up. At its simplest that’s what happened on markets this week as multiple conflicting signals, ranging from war in Ukraine to rising U.S. interest rates, sparked increased investor anxiety.

If pushed to pick a winner at a bleak time, it was that old faithful in a time of crisis, gold, which added $US45 an ounce to trade at $US1935/oz, a 2.5% increase which compensated for a 3.4% fall in the overall Australian market as measured by the all-ordinaries index. What happens next, the question troubling every investor, is a fearful unknown with Russia on the warpath in what looks increasingly like an attempt to rewrite history, pushing the border with Europe back to 1945, and perhaps beyond

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Ukraine is not the only “powder keg” at risk of exploding. The same is being said of two CLANC metals, nickel and aluminium, where prices are poised to blow-up.

The CLANC family, comprising copper, lithium, aluminium, nickel and cobalt, has been trading up to decade highs thanks to their new-found markets in energy transition, but the next move up could be spectacular as stockpiles disappear and buyers become desperate. Lithium, which is reported to be fetching up to $US50,000 a tonne in its carbonate form in China, is an example of what can happen when customers forget to place long-term orders and are forced into the spot market.

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If you have ever wondered what the early stages of a commodities boom looks like, consider three comments made this week... “We’re out of everything.” - Jeff Currie, head of commodities research at Goldman Sachs. “No stopping the commodities freight train.” - U.S. investment bank, Jefferies. “Supply chains strung like piano wire.” - Paul House, chief executive of mining technology provider, Imdex.

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Rare earths and other critical metals moved back into focus this week thanks to Australian Government project funding offers but it was gold which really caught the eye of investors as reports surfaced of a “whale” soaking up bullion every time the price slipped far below US$1800 an ounce. 

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Red ink ruled the stock market this week, as every investor knows, but there was a solitary flash of green which could be a pointer to what comes after the volatile shake-out underway across all financial sectors as central banks crank up interest rates.

Western Areas, a WA-focused nickel miner, added 11.5c to $3.55 thanks to the intervention of iron ore billionaire Andrew Forrest in what looked like a seamless and friendly merger with fellow nickel producer, IGO. Forrest, who is keen to rebuild his nickel credentials after the failure of Anaconda Nickel 20 years ago, demonstrated his willingness to pay a high price for nickel assets when late last year he outbid BHP in a battle for Canadian nickel hopeful Noront Resources.

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Records tumbled across the resources sector this week, but the most significant financial event occurred in Germany where the all-important 10-year government bond turned positive for the first time in almost three years.

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Lethargy ruled on the Australian stock market this week as investors started to pack up for the Christmas trading break, though not before placing fresh bets on a handful of battery metal stocks while casting a wary eye over gold miners as higher official

Lithium led the way in the battery sector, though this time with a relatively new player, Kalamazoo Resources, doing best with a rise of 3.5c to 38c after announcing an exploration deal with Chile’s lithium champion SQM over an exploration project in WA’s Pilbara region. Though only a grass roots undertaking, the Kalamazoo deal near the historic gold mining centre of Marble Bar is significant because of SQM’s reputation as a major producer of the metal and its 50% stake in the rapidly developing Covalent joint venture in the south of WA with Australian conglomerate, Wesfarmers.

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Iron ore staged a handy bounce above $US100 a tonne this week but most investor interest remained focussed on battery metals and the broader issue of energy transition, the two themes which will dominate markets in 2022.

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