Base Metals Weekly Round-Up: Zijin Steals the Show

Base Metals Investing

In base metals news this week, China’s Zijin Mining is splashing the cash in Canada while CITIC takes a huge chunk of Ivanhoe Mines and New Century Resources speeds up development at its Queensland zinc mine.

In the news this week, Canadian job numbers aren’t looking so flash while Prime Minister Justin Trudeau mulls his next move over the Trans Mountain pipeline.

On the global front, US President Donald Trump is disappearing into a mess of his own making while the White House tries to figure out who authored “that” op-ed published by the New York Times this week that seems to imply some of Trump’s economic ideas are never making it past thought-bubble stage.

Thermometer of the global economy, copper looked like it was done bottoming out last week, and then it hit another year-plus low on the London Metal Exchange.

It dipped to US$5,822 per tonne on Tuesday (September 4) before heading back up towards its Monday (September 3) starting point of US$5,950 but not quite making it by Thursday (September 6).

The red metal sat at US$5,939 a tonne by Thursday.

Zinc appears to be a little more bouyant —on Thursday it was almost back where it started on Monday at US$2,469.5 per tonne, still lower over the course of the week but well up on its mid-August low of US$2,324 per tonne.

Nickel was down over the week as well, following a trend set last week. It started out the week at US$12,665 on Monday and was down to US$12,485 by Thursday with a mid-week low of US$12,410 on Wednesday (September 5).

Base metals top news stories

1. Zijin Sweeps Nevsun Off its Feet with C$1.86-billion Offer

The top story of this week was marked by a thud. Whether that was Lundin Mining (TSX:LUN) thumping its desk or a suitcase of money landing on Nevsun’s (TSX:NSU), we’ll never know.

The short of it is that Nevsun has found a suitor in China’s Zijin Mining (HKEX:2899), which has offered C$1.86-billion to graciously take the Canadian miners Serbian and Eritrean assets off its hands.

The offer appears to be exactly what Nevsun was searching for as it scorned fellow Canadian Lundin for its pedestrian C$1.4-billion hostile takeover bid.

Zijin has left little room for challengers, as according to analysts, other bidders would have trouble making any offer that still allows for an economic return on investment.

Nevsun’s board has unanimously recommended that shareholders accept the offer, while its advice to ignore Lundin’s offer remains the same. Lundin announced on Friday (September 7) that it has no plans to amend its offer.

2. Good to Go: Ivanhoe’s CITIC Deal Nears Closing

Another Canadian miner soon to be swimming in Chinese money, Ivanhoe Mines (TSX:IVN), announced this week that it’s soon-to-be largest shareholder, CITIC (HKEX:0267), has crossed all its t’s and dotted all its i’s with the powers that be in Beijing, clearing the way for the C$723-million deal to close later this month on September 19.

On closing, CITIC will become Ivanhoe Mines’ largest shareholder, taking control of 196,602,037 common shares, or 19.5 percent of the company, for C$3.68 per share.

Zijin Mining makes a second appearance in big news this week —as partner of Ivanhoe at the Kamoa-Kakula copper project, it elected to use its anti-dilution rights to retain its share of ownership, meaning Ivanhoe gets another C$78-million pile of money.

3. New Century Inks AU$40-million Deal for Mine Expansion

Getting away from Canadians and the Chinese, in Australia, New Century Resources (ASX:NCZ) received a AU$40-million endorsement from the big end of town in the land down under.

The company signed the deal with National Australia Bank (ASX:NAB), saying it was possibly “the first project debt financing package provided for a mine rehabilitation and tailings reprocessing operation by a ‘Big 4’ Australian bank.”

New Century said it was aiming to use the funds to “expedite plans for expansion to full production rate,” as with the AU$40 million it would not have to wait for sufficient cash flow from current operations to proceed with further works.

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In other base metals news

BHP (ASX:BHP,LSE:BLT,NYSE:BHP) has entered into an agreement with Guyana Goldfields (TSX:GUY) to acquire its 6.1-percent interest in SolGold (TSX:SOLG), the majority owner and operator of the Cascabel porphyry copper-gold project in Ecuador.

In China, Western Mining (SHA:601168) is getting stuck into its Tibetan operations, and will start commercial production at its 100,000 tonne per year copper smelter in Qinghai in October, and spend US$1.17-billion on expanding its Yulong copper mine in Tibet.

Meanwhile, miners in Zambia had better duck for cover, as Bloomberg reported the Zambian government is looking to reign in its budget gap with higher taxes on mining.

In Russia, the Baikal Mining company has decided it’s time to go ahead with its massive Udokan copper project in eastern Siberia. There’s basically all of the work ahead of them though, as this week’s announcement was about the dedication of a memorial stone commemorating the decision.

Chilean state-owned miner Codelco suspended operations at three of its four furnaces at its Ventanas copper foundry in central Chile due to high levels of gas emissions on Monday, which the company said could have a ‘minor’ effect on production. Codelco was also reported this week as having a 2 percent increase in copper production in the first half of this year, up to 875,000 tonnes.

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

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