Base Metals Weekly Round-Up: Zinc Climbs on Supply Worries

Underdog base metal zinc found itself growing in leaps and bounds this week, hitting an 8-month high on Wednesday (March 13) as supply concerns on the London Metal Exchange (LME) ran rampant.

According to Reuters, warehouse zinc inventories certified by the LME reached their lowest point since October 2007 at 58,950 tonnes. The base metal’s price tag checked in at US$2,877 per tonne on the LME on Wednesday.

“Tightness on the LME seems to be playing into higher prices, even though there is a reasonable amount of stock in China which suggests that the global market is not as tight as the LME is,” Capital Economics analyst Ross Strachan told Reuters.

Meanwhile, copper prices — which also strengthened through the week — took a nasty plunge on Thursday (March 14), dropping almost 1.84 percent from Wednesday’s US$6,527 per tonne to US$6,408. According to Reuters, LME’s copper inventories were to blame as they grew 67 percent over the last two days.

Nickel also found itself falling flat this week after having peaked on Tuesday (March 12) at US$13,130 per tonne, but later collapsing to US$12,920 by Thursday. Lead prices were on the rise however, having grown 1.48 percent from Monday’s (March 11) US$2,079 per tonne price point to Thursday’s US$2,110 mark.

As for iron ore, prices ebbed and flowed through the week, keeping itself situated generally near the US$85-per-tonne mark; the commodity closed at US$85.09 per tonne on Thursday.

Top News Stories

1. Newcrest, Imperial Enter Joint Venture for Red Chris Copper-Gold Mine

Imperial Metals (TSX:III,OTC Pink:IPMLF) has entered a joint-venture agreement with Newcrest Mining (ASX:NCM,OTC Pink:NCMGF) by selling a 70-percent stake in its Red Chris copper-gold asset to the major miner.

While Imperial retained a 30-percent stake in Red Chris, it sold majority ownership to Newcrest for US$806.5 million in cash. Going forward, the two companies will form a JV for Red Chris’ operation, while Newcrest will act as the operator.

“This transaction presents a compelling opportunity for all stakeholders as it allows Imperial to significantly strengthen its balance sheet while forging a strategic partnership with a leading global mining company,” Imperial President Brian Kynoch said in a statement.

2. Vedanta’s Namibian Zinc Refinery on 5-week Time Out

Vedanta Zinc International is facing a five-week shutdown at its zinc refinery in Namibia following a strike by its mining contractor, which depleted stocks at the refinery.

According to Reuters, miners were on strike from February 22 to March 6 which affected waste-stripping and ore mining at the asset. A spokesman for the Vedanta Resources (NYSE:VEDL) subsidiary told the outlet that the Skorpion zinc refinery continued to operate during the strike, clearing out ore stocks on hand.

“It has therefore been decided to shut the refinery for a period of five weeks to allow the mine to rebuild adequate stock levels,” the spokesman said.

3. Heron’s Woodlawn Zinc-Copper Project Faces Production Delays

In an update on its Woodlawn zinc-copper project, Heron Resources (ASX:HRR) reported that ore processing will be delayed to 2019’s second quarter.

Earlier this month, Heron announced the start of process plant wet commissioning, which left feeding ore through the plant as the final step of the project’s commissioning. In Tuesday’s (March 12) update, the company stated that contractor Sedgman had advised of the delay at the beginning of March, and that the asset would see first concentrates ready for shipment by May.

Woodlawn had been previously docketed to begin production in 2019’s first quarter.

Also in the news

Making waves in the base metals sector this week was major miner BHP (ASX:BHP,NYSE:BHP,LSE:BLT) after it was revealed that brakes had been applied to the wrong train moments before last November’s disastrous derailment.

According to a preliminary report from the Australian Transport Safety Bureau, communication errors led to maintenance teams applying brakes to the wrong train. This allowed for the 268-wagon runaway train to travel 92 kilometers in Western Australia’s Pilbara region with no driver before being purposely derailed.

Despite copper’s price growth this week on the back of strengthening supply, it’s been a different story for MMG (ASX:MMG,HKEX:1208), who said production at its Las Bambas mine in Peru could decline “in the near term.”

The prediction came after a road blockade was constructed by a nearby community that had been relocated for the copper mine.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.