Base Metals Weekly Round-Up: Hudbay Execs Look Down the Barrel

This week in global news, the US and UK have lurched along with their respective dramas, while China and Canada have continued their war of words — now with what looks like retaliatory jailings and threats of repercussions over the role of Huawei in Canada.

In the US, the shutdown continues to suck up most of the oxygen in politics, while another big story is on how US President Donald Trump’s former attorney Michael Cohen appears to be about to sing, if he isn’t already.

Not forgetting our British friends, Prime Minister Theresa May survived a vote of no confidence in the House of Commons after her Brexit bill was voted down in a historic landslide, making European markets close higher.

Outside of that maelstrom, for commodities the week was a mix of rising fortunes and stagnant ones.

For copper, the story was a positive one, with the red metal increasing in value through the week to Thursday, when it reached US$5,932 a tonne — up from US$5,860 a tonne on Monday.

Nickel didn’t go too far, starting at US$11,415 – jumping to US$11,575 in the middle of the week – and reaching US$11,445 by Thursday.

Zinc didn’t go too far either, but aped copper by increasing in value through the week to US$2,501.5 a tonne.

Base metals top news stories

In top stories this week: Hudbay Minerals ( TSX:HBM) has a fight on its hands after major shareholder Waterton nominated an alternative board and CEO, while for Turquoise HIll Resources (TSX:TRQ) and Atalaya Mining (TSX:AYM,LSE:ATYM) 2018 closed with happy numbers.

1. Major Hudbay Shareholder in Bid to Fell Company Leadership

A major shareholder of copper-focused Hudbay Minerals has announced eight dissident board nominees and an alternative CEO in a bid to replace much of the Canadian company’s leadership team.

In a letter to shareholders, Waterton Global Resource Management, an 11.9-percent shareholder of Hudbay, nominated the eight directors and “transformational” CEO Peter Kukielski (formerly of Nevsun Resources (TSX:NSU)) for election at the upcoming Hudbay annual meeting which is yet to be scheduled.

Waterson said that it is “not typically an activist as it has never run a proxy fight, but as significant shareholders the firm believes change at the board and management level is necessary to maximize shareholder value.”

2. Oyu Tolgoi Delivers the Goods: Exceeds Copper Guidance for 2018

The closely-watched Oyu Tolgoi copper mine in Mongolia has surpassed its copper and gold guidance for the last quarter of 2018 according to its owner-operator, Turquoise Hill Resources.

In a Thursday release (January 17), the company reported that its Mongolian operation has exceeded its copper guidance for 2018 by 2.6 percent at 159,100 tonnes, and its gold guidance by 1.8 percent at 285,000 ounces.

Turquoise Hill also reported it was working on a study to establish costs associated with the signing of an agreement with the Mongolian Government last month.

3. Atalaya Bests Increased Copper Guidance for 2018

European copper miner Atalaya Mining has revealed it’s managed to overshoot its copper production expectations in 2018, with its project in Andalucia bearing fruit for the company, which has subsequently posted an increased guidance for the coming year.

In its fourth quarter update and 2019 guidance report released on Tuesday (January 15), Atalaya said that copper production in Q4 2018 from its Proyecto Riotinto operation in Spain “once again represents a new quarterly record.”

The numbers for Q4 clock in at 11,172 tonnes (up 29 percent on Q4 in 2017) and for the whole of 2018, Proyecto Riotinto yielded 42,114 tonnes of the red metal, overshooting the company’s increased guidance by 1,114 tonnes.

In other base metals news

Last week in the Democratic Republic of Congo, Felix Tshisekedi was announced as the winner of the recent presidential election to decide who would replace long-time leader Joseph Kabila. The results were yet to be confirmed as of Friday, but there are calls by the African Union for the DRC to delay the result pending further investigation of the legitimacy of the vote.

Runner-up, Martin Fayulu has challenged the result, calling for a recount.

Over in Australia, Rio Tinto (ASX:RIO,LSE:RIO,NYSE:RIO) delayed iron ore deliveries from its Cape Lambert export facility after a fire there caused damaged last week.

There was plenty of calamity in the land down under, with a report released this week revealing a sinkhole swallowed two vehicles on a mining site last October, triggering a report by the Department of Mines, Industry Regulation and Safety into the incident. Nobody was injured.

In South America, a Fitch Solutions report noted that the risk of an El Nino developing in the eastern pacific could threaten mining operations there — with copper behemoths Chile and Ecuador in the firing line.

Last week, Chilean state copper agency Cochilco said that it expects its copper industry to triple its use of sea water in mining amid growing water shortages in the arid mining regions of the country.

CEO of Polish copper producer KGHM revealed his copper price estimates for the coming year, predicting the red metal would average between US$6,100 and US$6,300 a tonne — not far from the current value near US$5,900.

Meanwhile, over in the UK, India’s Vedanta (NSE:VEDL) told the supreme court that it believed a pollution case involving Zambian villagers should be heard in the African nation, and not 8,000km away in Europe.

While Vedanta de-listed from the London Stock Exchange last year, the Indian company retains a legal base in the UK.

In the US, a story from early in the trade war saga appears to be coming to an end, with Washington set to remove sanctions against Russian companies after a bid by Democratic lawmakers and dissident GOP Senators to retain them failed.

Speaking of the trade war, a survey of mining execs released this week revealed what everyone was thinking in regards to the current global climate: a potential Chinese slowdown is keeping many awake at night.

A plurality of respondents — 31.4 percent — said in a White and Case survey that the state of China’s economy is the largest risk to mining and metals in 2019.

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