Base Metals Round-Up: US Dollar Rebound Puts Pressure on Prices

Base metals were under pressure on Thursday (April 18) as the US dollar edged higher, with copper, nickel and zinc trading on a downward trend.

Copper started the week at US$6,455 per tonne on the London Metal Exchange (LME) and reached a nine month high on Wednesday (April 17) at US$6,508 after China released upbeat industrial data. The red metal lost some ground on Thursday, but was on track for a weekly gain.

Meanwhile, zinc prices hit a one month low on Thursday on the back of increasing inventories in LME warehouses and weak manufacturing data in Europe. Zinc was trading at US$2,767 per tonne by the end of the session.

“It’s a broader weakness across base metals, but zinc is definitely leading the way, because stocks are up 11 percent,” said ING Analyst Warren Patterson.

Nickel prices also suffered, falling to their lowest level since February at US$12,625 per tonne on Thursday.

Looking over to iron, prices have been performing on an uptrend since the start of the year, closing on Wednesday at US$92.96 per tonne.

Top news stories

1. Lundin to Buy Yamana’s Chapada Copper Mine

Through an agreement announced Monday (April 15), Lundin Mining (TSX:LUN,OTC Pink:LUNMF) is set to purchase the Chapada copper-gold mine in Brazil from Yamana Gold (TSX:YRI,NYSE:AUY).

The deal will see Lundin buy Yamana’s 100 percent stake in Mineração Maracá Indústria e Comércio, the company that owns Chapada, for US$800 million in cash. Yamana will retain a 2 percent net smelter return royalty on future gold production from Chapada’s Suruca gold deposit, and is also set to receive up to US$225 million in contingent considerations.

“The acquisition of Chapada complements Lundin Mining’s existing portfolio of high-quality mines and highlights our focus on disciplined capital allocation to create long-term shareholder value. Chapada is a well-run, established operation with an experienced local workforce,” Lundin President and CEO Marie Inkster said in a statement.

2. WoodMac: Vale Disaster to Impact Iron Ore for Years to Come

The effects of Vale’s (NYSE:VALE) January tailings disaster are likely to be felt by the iron ore industry for years, as seaborne supplies fall in an already tight market, and Brazilian authorities halt mining operations while they put the world’s largest iron ore producer under the microscope.

In an iron ore webinar, Wood Mackenzie analysts Paul Gray and Alex Griffiths said that a fall in Vale’s production and export numbers means that WoodMac is upping its iron ore price forecast by 22 percent to US$82 — up from its US$67 projection at the start of the year.

“That incident is going to have long-lasting repercussions; it’s caused a massive supply shock,” said Griffiths.

3. Copper Deficit to Come… Eventually: CRU Group

While the copper space has recently seen its fair share of concerns regarding a potential supply shortage, some analysts feel the issue is further off than has been suggested.

In a conversation with the Investing News Network, CRU Group Principal Analyst Robert Edwards shared his thoughts on a potential deficit hitting the copper market, saying that the questions that remain are “when” and “to what extent.”

“That’s a medium-term story that’s obviously been around for a number of years now. And I think it’s certainly true that, if you’re looking … at least five years ahead, there is, as we stand today, a shortage of copper coming,” he said.

Also in the news

In other base metals news this week, Nevada Copper (TSX:NCU) released a new preliminary feasibility study for its Pumpkin Hollow project near Yerington in Nevada.

“The results clearly illustrate the potential to put this large, open pit project into production with a further improved internal rate of return and continued low capital and operating costs,” said Matt Gili, president and CEO of Nevada Copper.

Meanwhile, on Tuesday (April 16), Mabiza Resources and its major investor Consolidated Nickel Mines announced the restart of mining operations at the Munali nickel mine in Zambia. The mine is expected to ramp up production to steady state levels of 60,000 tonnes per year by the fourth quarter of 2019.

In other news, Waterton Global Resource Management has started legal proceedings against Hudbay Minerals (TSX:HBM,NYSE:HBM). Waterton, which holds about 12 percent of Hudbay, alleges that there are misrepresentations in the miner’s management information circular, in respect of its annual and special meeting of shareholders to be held on May 7, 2019.

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

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

Editorial Disclosure: Nevada Copper is a client of the Investing News Network. This article is not paid-for content.