Base Metals Weekly Round-Up: Higher Prices and Hostile Takeovers

Base metals are looking up again this week as crude oil heads downwards, trade war talk won’t go away and all eyes become glued to Escondida in Chile.

Price wise, copper has spent all this week on the up, gaining 1.54 percent over the week to reach US$6,254 per tonne by Thursday (July 26) after starting the week at US$6,150. Still, Thursday’s value represents a 5.1 percent fall from its price at the start of the month.

Other base metals aren’t getting such a boost and instead look to be levelling out—zinc was flat over the week, starting Monday (July 23) at US$2,618 per tonne and sitting at US$2,625 by Thursday, though it did reach a high of US$2,653 in between.

Lead as well is even flatter, barely moving from US$2,139.5 per tonne to US$2,140 on Thursday.

Base metals top news stories

Eyes again are on Lundin (TSX:LUN) and Nevsun (TSX:NSU) this week, while BHP (ASX:BHP,NYSE:BBL,LSE:BLT) seems stuck in the spotlight and Vedanta’s (LSE:VED) copper smelter gets a few more nails in the coffin.

1. Deal or No Deal: BHP Makes Final Offer to Union at Escondida

The biggest news of the week is of course what’s happening with BHP and its ongoing negotiations with workers at Escondida in Chile.

This week, BHP laid what it called its final offer on the table for the unionized workforce, offering a bonus of US$27,000 per worker and a 1.5 percent pay rise—well below the demanded US$40,000 bonus and 5 percent pay rise sought by the union.

Eyes are on the miner and the mine to see what happens next.

Last year’s 44-day strike over wages slashed production at the mine by 63 percent in the first quarter of 2017, sending shockwaves through the copper market. Escondida is the largest copper mine in the world and can move the market single-handedly depending on productivity.

2. The Hunt is On: Lundin Launches Hostile Takeover Bid for Nevsun

Pleasantries are over: Lundin doesn’t want to be patient anymore and has launched a hostile takeover bid for fellow Canadian miner Nevsun Resources and its attractive Timok copper-gold project in Serbia.

Laying out the options to Nevsun shareholders in stark terms, Lundin has presented itself as the choice of stability when it comes to getting the most out of the Timok project with its projected ten-year mine life and 27 million tonnes of ore grading 3.3 percent copper.

It’s offered shareholders C$4.75 per share, pegging the companies value at C$1.4 billion—less than the first publicly disclosed offer but now without any hangers-on.

Nevsun has urged investors to hold steady while it decides on a course of action.

3. Environmental Study Looms Over Vedanta’s Copper Smelter

Vedanta chairman Anil Agarwal will not be happy as government departments hammer nails into the coffin of his company’s 400,000-tonne per year copper smelter in India.

The Indian government’s federal pollution regulator has now reported that groundwater testing around the industrial site has come back with most samples containing heavy metals beyond permissible levels, lending credence to community protests against the smelter in May that lead to the deaths of 13 protestors and the closure of the plant.

Vedanta’s subsidiary Sterlite Copper has long denied the allegations it is polluting the local environment, saying it complies with regulations and vowing to fight against the closure.

In other base metals news

In other base metals news, quarterly reports are coming out thick and fast, with Cleveland-Cliffs (NYSE:CLF), MMG (HKEX:1208), Antofagasta (LSE:ANTO), the besieged Nevsun and Fortescue Metals (ASX:FMG) releasing reports this week.

Freeport McMoRan (NYSE:FCX) is still having a spot of trouble with the Indonesian government, with the latest development being Jakarta has asked the American company to “recalculate” mine damage at the Grasberg mine on the island of New Guinea. This will no doubt slow negotiations on ownership and operations of the mine even further.

Vedanta’s in the news down here too, with work on its Konkola copper mine in Zambia suspended due to a worker death on Thursday.

Meanwhile, Agarwal was reported on Friday (July 27) morning as seeking to delist Vedanta from the London Stock Exchange in moves suspected to be associated with his intentions for Anglo American (LSE:AAL).

BHP is not having the best luck with its South American operations, with a class action now launched against the company by investors over its part in the Samarco disaster in Brazil. According to the company, leading the action in Australia, BHP engaged in deceptive practices.

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