Base Metals Weekly Round-Up: Samarco Kicked Down the Road

- August 24th, 2018

In the base metals sector this week, Escondida is out of the news and copper’s still way down thanks to trade war tension between the US and China. Meanwhile, Samarco’s beyond the horizon, Belgrade has its bids for RTB Bor and Poseidon Nickel nixes a takeover.

News this week has been a little turbulent outside of base metals, although investors are no doubt used to this by now.

The US and China are still throwing around tariffs, with the Trump administration’s latest round kicking into effect on Thursday (August 23), angering Beijing.

In Australia, voters received reminders to change the batteries in their smoke alarms after politicians in Canberra switched out the prime minister (again), further cementing the view that one of the world’s most favored mining jurisdictions is in fact the land of the bloodless coup. The country has had six prime ministers in a little over 10 years, only two of which were removed by a general election.

Moving away from the madness of politics and egos, it’s been another rough week for copper, with its value failing to rebound from lows set last week despite a slight uptick over the course of the week.

On Thursday, copper was trading at US$5,910 a tonne, down from its Monday (August 20) starting point of US$5,962, and well down from its Tuesday (August 21) weekly high of US$6,025.

Zinc broke ranks with its base metal compatriot, trending upwards, although not by much, reaching US$2,440 per tonne by Thursday, up from US$2,381.50 on Monday — an increase of 2.45 percent.

Nickel followed copper, with its price chart for the week aping copper more closely — a Monday value of US$13,550 per tonne shadowed a Tuesday high of US$13,675 before everything went pear shaped.

Thursday ruined the party for everyone, with the battery metal reaching a weekly low of US$13,135 — a 3-percent drop. However, copper and nickel have so far avoided falling to last week’s lows. 

Base metals top news stories

Scroll down for the top base metals news stories this week.

1. Samarco Restart Not on the Horizon: BHP

In news that might come as a surprise to co-owner Vale (NYSE:VALE), BHP Billiton (ASX:BHP,LSE:BLT,NYSE:BHP) has kicked the can that is the long-awaited Samarco restart even further down the road.

The Australian miner let loose revelations that undefined negotiations over the construction and design of a tailings dam with Brazilian prosecutors are holding up progress.

The news, revealed by Reuters, comes despite the miner slowly accumulating the permits and licenses required to restart the mine.

In its financial report for 2018, BHP had said that the restart remains a focus, “but is subject to separate negotiations with relevant parties and will occur only if it is safe, economically viable and has the support of the community.”

A BHP exec guesstimated that the huge iron ore project will not restart operations until beyond 2019.

2. Hunt for RTB Bor Copper Partner Narrows to Three Bids

The Serbian government has revealed that it received only three qualifying bids from miners interested in taking on the debt-laden, neglected and unloved RTB Bor copper complex in Eastern Serbia.

Belgrade had attached plenty of riders to requirements for bids, including 10 years of continuous experience in copper operations, US$500 million in sales revenues in the past 12 months, US$350 million in the bank ready to be spent on RTB Bor, a commitment not to lay off any of the estimated 5,000 workers and plans to increase copper production “three or four times” over the coming years from a base of 15,000 tonnes in the first half of this year.

That’s a tall order.

The Serbian Ministry of Economy revealed that the three bids are from companies in China, Russia and Canada, and did not elaborate on anything else.

The partial or complete privatization of state-owned RTB Bor is a recommended action by the International Monetary Fund, which over the last few years has been assisting the Balkan country untangle and tidy up its finances.

3. Poseidon Nickel Could Squander Takeover Bid with Trading Halt

As fast as it was on the table, it was off it and walking out the door.

Texas-based Black Mountain Metals came after Australian Poseidon Nickel (ASX:POS) with a US$67-million cash offer, but backed away when it learned that the unsurprisingly nickel-focused company was pursuing capital-raising processes.

“As a result of this morning’s trading halt announcement by Poseidon, we intend to terminate our proposal regarding the acquisition of 100 percent of Poseidon shares at an attractive premium,” said Black Mountain CEO Rhett Bennett when he learned Poseidon had initiated a trading halt on the ASX.

Not all was lost though, because that advanced-staged process announced by the company turned out to be its major shareholder, Fortescue Metals (ASX:FMG) chairman Andrew Forrest, dumping a whole lot of money into Poseidon to help fund the restart of two of its nickel mines.

In other base metals news

There was a lot happening around the world in the base metals space this week.

On Monday, MMG (HKEX:1208) said that its profits were up and patted itself on the back for the successful ongoing ramp up of its Dugald River zinc-mining operation in Queensland.

Staying in Australia, Gina Rinehart’s Redstone extended its offer for the takeover of Atlas Iron (ASX:AGO) to August 31, drawing out the conclusion to what has been an epic battle of mining giants over ownership of the Western Australian company.

One of Atlas’ former suitors, Fortescue Metals, hasn’t been having a fantastic time this year so far, announcing a 58-percent drop in net profit, partially off the back of changing tastes in Chinese steel mills, which are beholden to stricter environmental regulations that require smelters to seek higher grades of iron ore — something Fortescue’s competitors are in a better position to offer for the time being.

Still in Australia (lots of news from down under), BHP is grappling with ongoing issues with its Olympic Dam copper smelter in South Australia. In its yearly report, the company says that mining operations are continuing, but the failure of several boiler tubes at the acid plant on site are holding up production, making Olympic Dam the sole underperformer in the BHP portfolio.

Speaking of copper, there isn’t much news out of Chile for the first time in a few weeks, with Escondida winding down as a source of angst for the copper market.

Straying away from majors in the southern hemisphere, China’s Sichuan Road and Bridge (SHA:600039) announced it will start producing copper, zinc, gold and silver at an Eritrean mine by early 2019.

Don’t forget to follow us @INN_Resource for real-time updates!

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

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