Base Metals Weekly Round-Up: Copper Hits New Lows

- August 17th, 2018

This week in base metals, miners are putting out half-year reports at a time when there’s a lot of noise in the markets, with the US punishing Turkey and China seeking alternatives to a trade war.

This week, Turkey stayed on as the US’ favored whipping boy, drawing the ire of US President Donald Trump for the detention of an American pastor. The Turkish lira has suffered through the weekwith more sanctions being threatened.

Meanwhile, China’s making an effort to try to avert a disastrous trade war by sending a delegation to Washington ahead of the threatened US$200 billion worth of tariffs.

All the drama’s having an interesting effect on base metals prices.

Copper sunk ever lower, reaching prices not seen since July 2017. The red metal hit US$5,842.50 per tonne on Wednesday (August 15) after starting the week at US$6,080 on Monday (August 13). By Thursday (August 16) it was back up slightly to US$5,859, but was still down 3.63 percent over the week.

The story was the same for zinc, which hit US$2,324 per tonne on Wednesday with a slight recovery the next day after starting at US$2,491 on Monday. Lead was down to US$2,000 per tonne by Thursday.

Nickel was down 4.13 percent to US$13,110 per tonne by Thursday, and shared a low point with its base metals compatriots on Wednesday, when it hit US$12,980.

Base metals top news stories

1. Low Grades Undermine Antofagasta’s Copper Output

Chilean copper miner Antofagasta’s (LSE:ANTO) half-year report revealed a drop in earnings, with the company laying the blame on a fall in grades.

Antofagasta’s four mines produced 317,000 tonnes of copper in H1, down 8.5 percent year-on-year due to lower grades at Centinela and a pipeline blockage at Los Pelambres.

Even so, output guidance remains unchanged, with the company expecting production to be up in H2, “mainly due to higher grades at Centinela, higher throughput and grades at Los Pelambres, and the 9,200 tonnes of copper in concentrates stockpiled at the Los Pelambres plant on account of the pipeline blockage in April, that will moved to the port.”

CEO Iván Arriagada struck an optimistic tone, saying that the second half of the year will be better despite short term “external factors” muddying the waters of commodities prices.

“So far no significant impact has been seen on copper demand that can be attributed to this uncertainty, although some positional financial trading is apparent. In the meantime, the strength of the US dollar appears to be impacting copper prices, although the corresponding impact on the company’s local costs partially offsets this,” he added.

2. The Year So Far: Ivanhoe Looks Busy

In its half-year report, Canada’s Ivanhoe Mines (TSX:IVN) revealed its numbers and detailed everything it has been up to in 2018 — and it’s been a busy bee.

Looking at the numbers, the company had a total comprehensive loss of US$38 million for Q2 compared to a loss of US$11.4 million for the same quarter of 2017. Ivanhoe explains that this was primarily due to a 16-percent weakening of the South African rand between the two periods.

A loss on paper says little, however, as over the quarter an arrangement with CITIC (HKEX:0267) has led to over US$800 million in investments in Ivanhoe’s three African projects — the Kipushi zinc-copper project and the Kamoa-Kakula copper project in the Democratic Republic of Congo (DRC), and the Platreef platinum-group metals project in South Africa.

Besides the three major projects moving forward, Ivanhoe also revealed it is spending money on exploration at its Western Foreland licences in the DRC. It’s spending US$2.8 million to learn about the area, which is to the west of the Kamoa-Kakula project.

3. Canadian Red Tape Slowing Exploration: Fraser Institute

In a report released last month, the Vancouver-headquartered Fraser Institute mused on the results of a survey given to miners around the world, with the responses showing that operators in Canada feel hard done by when it comes to exploration permits.

In a time of decreasing grades in the base metals space and a dearth of new projects coming online, bureaucratic roadblocks are less than welcome.

“The permitting process for mining exploration is one area that is often overlooked in broader policy debates on mining,” states the study.

“Yet, uncompetitive policies in this area can increase the time, costs, and risks associated with exploration, potentially leading to reduced investment and decreasing the chances that a viable deposit will be found and eventually developed into a mine,” it continues.

The report found that Canadians are waiting longer than ever when it comes to getting the go ahead to explore for new resources, weighing on the attractiveness of Canada as a mining jurisdiction.

Scroll down for more base metals news around the world.

In other base metals news

In big news for all miners in the Democratic Republic of Congo, Bloomberg has reported that the London Metal Exchange (LME) will be reviewing its requirements to ensure that all metal that passes through the exchange is free of child labor, conflict and corruption.

While the details aren’t yet public, sources have said copper producers could be categorized as “higher-risk” suppliers and removed from the LME’s list of deliverable brands unless a third-party auditor signs off on their sourcing standards.

The world’s second-largest iron ore producer, Rio Tinto (ASX:RIO,LSE:RIO,NYSE:RIO), could soon be offloading its 58.7-percent stake in Iron Ore Company of Canada, with Sky News reporting that the company is approaching bidders for the $6-billion stake.

In Chile, the Escondida saga continues, with the latest being that the strike is off — at least according to union officials, who also said they will put a new offer from BHP Billiton (ASX:BHP,NYSE:BBL,LSE:BLT) to a vote. Watch this space because we might go around the racetrack again.

Staying in Chile, state-owned miner Codelco announced it will be going ahead with a scaled-back plan for the Chuquicamata mine, which involves turning the 330,000-tonne-per-year open-pit operation into an underground mine.

Over in Brazil, Anglo American (LSE:AAL) told Reuters that it expects to obtain permits for its Minas-Rio iron mine by June next year, which would clear the path for the 26.5-million-tonne-per-year project.

Australian nickel miner Poseidon Nickel (ASX:POS) announced on Friday (August 17) that it has received a proposal from Black Mountain Metals, which has a focus on “seeking to acquire nickel sulfide assets” —which Poseidon Nickel has. No formal offer has yet been made, so the target company has yet to issue any recommendations. That said, a 43.59-percent spike in its share price on Friday might be an indicator on how the stock market feels. The proposal as it stands is for AU$0.06 for all of Poseidon’s shares.

Sticking with nickel, despite all the noise around Russia, Nornickel posted impressive returns for H1, with core earnings up 77 percent to US$3.1 billion. The company credited the electric vehicle boom for a spike in demand for the metal, as inventories in London and Shanghai fell over the year.

Meanwhile, Nevsun Resources’ (TSX:NSU) leadership is doubling down on its recommendation to shareholders not to tender their shares in the face of a hostile takeover bid from fellow Canadian miner Lundin Mining (TSX:LUN). The company released a video of CEO Peter Kukielski repeating the same dot points the company has been saying for the last few weeks.

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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