Base Metals Weekly Round-Up: Sales, Goodies and Arguments

This week the commodity markets have been mostly dominated by noise coming from the US and anxiety over the state of the global economy, as markets around the world continue their volatile streak.

The calamity out of the US is mostly the government shutdown that is now stretching into its third week — with the cessation of government operations now straddling two congressional terms after the 116th congress was sworn in on Thursday (January 3). US President Donald Trump heralded the occasion by holding a press conference to go on about his border wall again.

Meanwhile in commodities, where almost everything is down — except gold, which as usual enjoys a boost every time the US dollar takes a dip, base metals have continued their downward trajectory besides nickel which so far is up this week.

The wannabe battery metal was trading at US$10,710 a tonne by Thursday (January 3), up 1.1 percent on the last day of 2018 when nickel was at US$10,590.

Copper kept on heading down after starting the week continuing last year’s decline. As of Thursday, copper was trading at US$5,810.5 — a decline of 2.57 percent this week.

The red metal is now trading below 2018’s low of US$5,822, which it hit in September.

Zinc was much the same, though falling by a much more modest 1.2 percent to US$2,479 a tonne.

Base metals top news stories

In top base metals news covered by INN this week, Zijin Mining (HKEX:2899) is smashing the piggy bank to pay for its new toy, Rio Tinto (ASX:RIO,LSE:RIO,NYSE:RIO) got itself a late Christmas present in Mongolia, and Zambia has given miners there a lashing over new taxes which kicked in this week.

1. Zijin To Sell Shares to Fund Nevsun Takeover

China’s Zijin Mining has revealed it’s mulling over selling 3.4-billion domestic shares to Chinese investors to fund its C$1.86-billion takeover of Canada’s Nevsun Resources (TSX:NSU).

In a Wednesday (January 2) release, the company said that it would be applying with the China Securities Regulatory Commision (CSRC) to raise 8 billion yuan (or around US$1.2 billion) by selling shares to investors in China.

Just last week, Zijin had announced that the friendly takeover bid of Nevsun Resources — which holds the Timok copper project in Serbia and the Bisha copper-zinc mine in Eritrea — had been successful with shares tendered amounting to 89 percent as of December 28, 2018.

2. Santa Comes Late for Rio: Energy Agreement for Oyu Tolgoi

Rio Tinto has received a late Christmas present, announcing on Monday (December 31) that it had signed a power-supply agreement with the government of Mongolia for the Oyu Tolgoi copper mine after months of delays.

The operator of the mine, Turquoise Hill Resources (TSX:TRQ), said in a release that it now had a framework agreement with Ulaanbaatar that “establishes the basis for a long-term domestic power solution for the mine.”

The agreement is a significant step forward for questions around the power supply for Oyu Tolgoi, which has been beset by delays and domestic wrangling over ownership and location.

3. Zambia: Miners Skipped Opportunity to Argue Against New Taxes

Zambia has accused miners crying foul about new mining laws of not providing a convincing argument that their operations are negatively affected.

Ministry of Mines permanent secretary Paul Chanda accused miners of not even bothering to explain to the government how the new laws would impact profitability, after being given the opportunity to do so.

“We wanted them to show how the new taxes will affect production and profitability but so far we haven’t received anything …two mining companies have written to us asking us to give them more time but we haven’t heard anything from the others,” said Chanda in an interview with Reuters.

In other base metals news

In other news, Chile reported that its copper output in November 2018 was the highest it had been in 13 years at 540,720 tonnes, 7 percent above the same time in 2017.

Excluding December’s production numbers, Chile’s 2018 production numbers now sit at 5.33 million tonnes — a 6 percent increase on the same 11-month period in 2017.

Staying in South America, Vale (NYSE:VALE) announced in the last week that it had approved another two-year term for its CEO Fabio Schvartsman, who will now head the iron ore giant until at least May 2021.

In Cuba, the national nickel miner Cubaniquel was quoted by local media last week saying that it was due to produce more than 50,000 tonnes of nickel in 2018  — seemingly hitting its yearly target of 50,000 tonnes which it announced back in April, though the government does not release official numbers.

Anglo American (LSE:AAL) announced on Thursday that it would be shaking up the leadership of its base metals unit, with current base metals executive and Group Director of Strategy and Business Development Duncan Wanblad to lose base metals to Ruben Fernandes — who is currently CEO of Anglo American in Brazil.

Of course, don’t forget elections in the Democratic Republic of Congo  — where President Joseph Kabila has stood aside for the first open election held in the African country and cobalt-copper powerhouse. Results are pending, but unrest is widespread.

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