Base Metals Round-Up: Nickel Jumps on Supply Fears

Base metals had a positive week, with nickel, copper and zinc prices edging up and on track for a weekly gain. 

Worries of a supply shortage pushed nickel prices higher this week, with the base metal starting the week at US$13,985 per tonne on the London Metal Exchange and ending at US$16,340 — an almost 17 percent increase.

Copper also saw some gains this week despite global economic uncertainties. The red metal was trading at US$5,661 per tonne on Monday (August 26) and climbed to US$5,721 by Thursday (August 29).

Zinc also inched up, starting the week at US$2,269 per tonne and hitting US$2,284 by Thursday. Despite the positive move, the metal is still on track for a fifth consecutive monthly decline.

Meanwhile, iron ore prices retreated this week as the market awaits confirmation of production restrictions in China. The metal was trading at US$91.16 per tonne on Friday (August 30).

Top news stories

1. Fortescue Profits Jump on Boosted Iron Ore Prices

Fortescue Metals Group (ASX:FMG,OTCQX:FSUGY) reaped the benefits of iron ore’s recent price spike with a record after-tax net profit of US$3.2 billion for its 2019 fiscal year (FY19). That’s a 195 percent boost from the previous year (FY18).

The company shipped 167.7 million tonnes of ore in its FY19, marking a 1 percent drop from its FY18. However, average revenue came to US$65 per dry metric ton, which is a 48 percent increase from FY18, pushing total revenue to US$10 billion, a 45 percent boost from FY18.

Fortescue has attributed the revenue spike to several causes, including continued strength in Chinese stainless steel production and an increased volume of higher-value products shipped.

2. Sandfire Profits Fall, Metals Production Hits Records

While profits were lower than in its 2018 fiscal year (FY18), Sandfire Resources (ASX:SFR,OTCQB:SRAFF) is showing off record copper and gold output from its DeGrussa asset.

In its annual financial results report, Sandfire lays out a group net profit after tax of AU$104 million, down from FY18’s AU$120.8 million. The company noted the fall of copper prices during its 2019 fiscal year (FY19), which impacted profits. However, between DeGrussa’s record production, record low C1 costs and a lower Australian dollar, the blow from copper’s weakened state was offset.

FY19 saw the production of 69,394 tonnes of contained copper and 44,455 ounces of contained gold out of DeGrussa. At a C1 cost of US$0.83 per pound, this was Sandfire’s highest operational performance in terms of volume and cost.

3. Superior Lake Resources Releases Zinc Project BFS

Superior Lake Resources (ASX:SUP) has released a bankable feasibility study (BFS) for its Superior Lake zinc project, which is set to have a nine year mine life.

Located in Ontario, Canada, the project is expected to have a post-tax net present value of US$115 million and a post-tax internal rate of return of 27 percent. Earnings before interest, tax, depreciation and amortization are docketed at US$59 million per year at full production; initial capital expenditure is set at US$86 million.

On the production side, the asset is set to produce 38,000 tonnes of contained zinc per year and 1,400 tonnes of copper annually. The plant’s throughput is set at 325,000 tonnes per year, with an average grade of 13.7 percent zinc.

Also in the news

Australia-listed Heron Resources (ASX:HRR) said an independent review has confirmed the company’s Woodlawn’s technical and operational basis. However, due to a seven month delay in project construction, Heron is now looking for more capital to move forward with the project.

Woodland is expected to produce 70,000 tonnes per year of zinc concentrates, 30,000 tonnes per year of copper concentrates and 25,000 tonnes per year of lead concentrates.

Looking over to South America, nickel-focused Horizonte (TSX:HZM,LSE:HZE) has signed a royalty agreement with Orion Mine Finance that will provide the company with an upfront cash payment of US$25 million for the development of the Araguaia project in Brazil.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.