Base Metals Weekly Round-Up: Unfinished Trade Talks Sway Metals

As the discussion around a US-China trade deal continues to be a knockdown drag out, a contest of tariffs between the two nations has left investors uneasy about economic growth.

After US President Donald Trump put down US$200 billion worth of tariffs on Chinese imports last week, the Asian nation retaliated on Monday (May 13) with duties of its own, affecting US$60 billion worth of US imports. While Trump showed optimism towards a deal through tweets on Tuesday (May 14), Chinese state media indicated the nation was losing patience with the trade talks by Thursday (May 16).

With the back and forth between China and the US being anything but stable, some base metals found themselves experiencing a similar up-and-down treatment this week.

Nickel managed to trend continuously upward this week, starting Monday off at US$11,720 per tonne on the London Metal Exchange (LME); it grew to US$12,210 by Thursday. While zinc dipped to its lowest point on Tuesday at US$2,710 per tonne on the LME, it found growth by Thursday as it hit US$2,780.

Lead also hit its weekly low on Tuesday when it fell to US$1,766 per tonne on the LME, but it managed to rally and reach US$1,825.5 by Thursday. As for copper, the red metal saw its weekly low on Wednesday (May 15) when it dropped to US$6,001 per tonne. However, like its base metal comrades, it rose to US$6,088 by Thursday.

In iron ore, the commodity wavered between the US$93 to US$94 per tonne range through the week, only to later jump past the US$96 mark on Thursday. As of 3:54 a.m. EDT on Friday (May 17), the metal was down 1.41 percent to US$94.79.

Base metals top news stories

1. Ivanhoe Ready for Kakula, Kipushi with C$67 Million Boost

Through joint venture (JV) partner Zijin Mining Group (OTC Pink:ZIJMF,HKEX:2899), Ivanhoe Mines (TSX:IVN,OTCQX:IVPAF) has added an extra C$67 million to its checkbook, putting the company in a position to finance its Kakula and Kipushi mines.

Zijin, which is Ivanhoe’s JV partner at the Kamoa-Kakula copper project in the Democratic Republic of Congo, exercised its anti-dilution rights this week. In doing so at C$3.98 per share, Zijin raised C$67 million — or US$49 million — for Ivanhoe, and retained its 9.8 percent stake in the company.

The move comes less than a month after Ivanhoe received a C$612 million investment from CITIC Metal (OTC Pink:CTPCY,HKEX:0267) subsidiary CITIC Metal Africa Investments. The funding from CITIC also came through a payment of C$3.98 per share, which at the time represented a 29 percent premium.

2. Rio’s West Angelas Expansion Recommended for Environmental Approval

Western Australia’s Environmental Protection Authority has given its recommendation for the expansion of Rio Tinto’s (ASX:RIO,LSE:RIO,NYSE:RIO) West Angelas iron ore mine.

Rio announced last October that, along with JV partners Mitsui (OTC Pink:MITSY,TSE:8031) and Nippon Steel & Sumitomo Metal (OTC Pink:NPSCY,TSE:5401), it would be investing US$1.55 billion into two iron ore operations in the Pilbara region: West Angelas and Robe Valley.

The plan is for US$579 million of that amount to go toward the development of West Angelas’ C and D deposits. The move comes in an effort to sustain iron ore capacity there and at Robe Valley. Rio aims to continue producing its Pilbara Blend from West Angelas, and claims the brand is the “industry’s benchmark premium product.”

3. ICSG Raises 2019 Copper Deficit Prediction

According to the latest copper forecast from the International Copper Study Group (ICSG), China is set to remain the world’s top contributor to world refined production growth through the end of 2020.

In its copper forecast for 2019 and 2020, the ICSG says it expects world mine production to remain generally unchanged this year from 2018’s 2.5 percent increase; growth in 2020 is set for 1.9 percent.

This year’s forecast factors in additional output from the start up of First Quantum Minerals’ (TSX:FM,OTC Pink:FQVLF) Cobre Panama project, the expansion of Southern Copper’s (NYSE:SCCO) Toquepala mine and some small- to medium-sized mines going into commissioning.

Also in the news

Major miner Vale (NYSE:VALE) told state officials in Brazil’s Minas Gerais that another one of its dams is at risk of collapsing, with this one being at its Gongo Soco mine. The iron ore company warned that the dam, located in the city of Barao de Cocais, is at risk of rupturing as soon as next week should movement in the embankment of the mine pit near the dam continue at its current rate.

This week also saw African Battery Metals (LSE:ABM) complete field operations at its Kisinka copper-cobalt project in the Democratic Republic of Congo. The operations included the gathering of 663 termite mound samples, which were collected on a grid covering the company’s whole license area.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.