Base Metals Weekly Round-Up: Cuts, Lifelines and Shiny Estimates

Base metals this week saw zinc front and center as a major player in the smelting business found itself with its back against the wall, while a large copper mine is soon to change hands.

In general news, nobody can quite agree on what went wrong or who’s to blame, but everyone can agree the Asia-Pacific Economic Cooperation summit in Port Moresby this past weekend did not go well when it comes to the ‘cooperation’ in the group’s name.

In the days since, a torrent of stories about discord has dominated the international news cycle. The picture painted appears to be yet another proxy platform for the US and China to snipe at each other.

Looking at commodities, which are hunkering down to be under sustained assault in the trade war, copper trended down slightly over the week after starting out at US$6,259 per tonne on Monday (November 19) and reaching US$6,245 on Thursday (November 22). Thursday’s price isn’t so bad considering the red metal was down at US$6,180.5 at recently as November 16.

Zinc, which had a similar jump in value between last Friday and the following Monday also trended down over the week, falling to US$2,656 per tonne by Thursday, or by a modest 1.26 percent. According to reports, smelter bottlenecks are propping up the metal’s value for the time being, though with higher production and the trade war in full swing, its value may fall.

Nickel on the other hand isn’t getting a boost from anywhere, not even EV hype — the touted battery metal has been slipping in value since mid-2018 and is showing no signs of a turnaround. On the LME it was trading at US$10,965 on Thursday, down 2 percent over the week.

Base metals top news stories

This week, beleaguered global zinc miner-processor Nyrstar (EBR:NYR) snagged itself funding to continue day-to-day operations, while Canadian Lundin (TSX:LUN) trimmed jobs at Candelaria and SolGold (TSX:SOLG,LSE:SOLG) released an updated mineral resource estimate for Alpala.

1. Zinc Producer Nyrstar Gets Funding Lifeline with Strings Attached

On Wednesday (November 21), Nyrstar announced Trafigura had extended it a US$650-million working capital facility to allow it to continue its day-to-day operations as a zinc smelter.

Nyrstar is cash-strapped and in debt, and according to Wednesday’s release, none of the US$650 million can be used to repay any debts as the company’s share price crashes.

The agreement with Trafigura, which is a 25 percent shareholder of the company, includes a US$220 million interim payment on November 21, which will be replaced and refinanced by the US$650 million facility “when it becomes effective on November 30.”

According to analysts, the need for an interim payment to cover 9 days of operations is a bad sign for liquidity at Nyrstar.

2. Lundin Mining Trims Candelaria Copper Jobs

Lundin Mining has confirmed it will be cutting jobs at its Candelaria mine in Chile, the Canadian company’s largest copper operation.

As reported by Reuters, Lundin will be cutting 106 positions at the mine in order to “improve competitiveness and productivity,” even after the company confidently revised its copper guidance upwards following its Q3 report.

There are currently almost 6,000 employees at the mine located in the Atacama region of northern Chile, and the company said that the cut jobs represented less than two percent of the total workforce.

3. SolGold Polishes Alpala Copper-Gold Project to a Shine

SolGold has released an attractive new mineral resource estimate for its Alpala copper-gold deposit in northern Ecuador, the main target of its Cascabel project.

In a Tuesday (November 20) release, the company boasted that its updated mineral resource estimate for the deposit was now double what it had been in December 2017, allowing it to more than qualify as a tier 1 copper and gold project.

Company CEO, Nick Mather, said that SolGold was pleased with the progress made with the new update — and clearly the markets are pleased too as the company had a 6.56 percent jump in value on the Toronto Stock Exchange.

In other base metals news

Canada’s Teck Resources (TSX:TECK.A,TSX:TECK.B,NYSE:TECK) announced this week that it would be announcing who won the contest to become its development partner at its Quebrada Blanca copper mine in northern Chile. Last week, Australia’s Rio Tinto (ASX:RIO,LSE:RIO,NYSE:RIO) entered the fray.

In Australia, BHP (ASX:BHP,NYSE:BHP,LSE:BLT) blamed brake failure as the event that led to the intentional derailment of a fully-loaded 268-wagon train in the Pilbara. While transport connections between the major miner’s iron ore assets in the interior and its port facilities were disrupted, the derailment is not projected to negatively impact its sales guidance for the year.

Top global copper producer Chile is projected to increase its copper output by 2 percent by the end of the year according to a report released this week, which noted that the great challenge to operators there is falling grades.

In Sydney (and now London), MOD Resources (ASX:MOD) announced it was now a dual trader with shares listed on the Australian Stock Exchange and the London Stock Exchange, with its London listing under ‘MOD’.

Canadian miner Nevsun Resources (TSX:NSU) was boasting this week that its suitor, Zijin Mining (HKEX:2899) has cleared all its regulatory hurdles on its way to acquiring the company.

Meanwhile, German chemicals company BASF (ETR:BAS) is reportedly working on a new recipe for EV batteries that would lower dependence on nickel and increase manganese content.

Finally, in the Democratic Republic of Congo copper output is reportedly up 8.7 percent, while cobalt production doubled.

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