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Top Stories This Week: Gold Price Dips Below US$1,900, Lithium M&A Heats Up
Aug. 18, 2023 10:00AM PST
The gold price continued moving lower this week, falling below US$1,900 per ounce. Meanwhile, Azure Minerals rejected a bid from major lithium miner SQM.
Gold fell below the US$1,900 per ounce mark this week, continuing a downtrend that began about a month ago.
The US Federal Reserve was in focus once again as the minutes for its July meeting came out. The central bank hiked rates by 25 basis points at that gathering, as was widely expected, and some market watchers believe it will be the last increase.
The minutes from the Fed indicate that may not be the case — they show that most participants still see "significant upside risks to inflation, which could require further tightening of monetary policy." However, it's tough to say. Experts have pointed out that Fed officials are starting to seem less unified than they once were.
For example, while the decision to raise rates in July was unanimous between the Federal Open Market Committee's 11 voting members, two people among the broader panel of 18 were in favor of leaving rates unchanged or "could have supported such a proposal." Aside from that, some Fed officials have expressed contrasting views on what will happen next with rates.
Going back to gold, many pundits the Investing News Network has been speaking with believe the yellow metal will remain under pressure until the Fed clearly indicates that it's done hiking rates.
“As soon as (the US Federal Reserve pauses) and then starts receding, I think investors will get in the game” — Rich Checkan, Asset Strategies International
If that's the case, those looking for a price breakout likely have at least a little longer to wait — the Fed's next meeting isn't scheduled to run until September 19 to 20.
Azure Minerals rejects bid from lithium miner SQM
Lithium M&A activity has been running strong this year, with the biggest deal being the US$10.6 billion mega merger between major producers Livent (NYSE:LTHM) and Allkem (ASX:AKE,OTC Pink:OROCF).
But this week news hit that ASX-listed explorer Azure Minerals (ASX:AZS) has rejected a bid from Chilean miner SQM (NYSE:SQM). According to Azure, it has received more than one expression of interest from SQM, the most recent of which came on July 12 and had an indicative offer price of AU$2.31 in cash per share of Azure.
Azure has several assets in Western Australia, with its main project being the Andover lithium and nickel-copper-cobalt project. Azure has a 60 percent stake in the asset, and said in a release that its "rapidly developing understanding" of Andover's potential is part of the reason it rejected SQM's advances. Even so, the companies will continue working together — SQM is currently Azure's largest shareholder with a 19.99 percent stake.
It's worth noting that, although the transaction between SQM and Azure didn't work out, lithium experts are calling for further M&A in the future — in fact, Joe Lowry of Global Lithium has specifically pointed to small explorers in Western Australia as important to watch. "I think you might see some of the better small exploration plays in Western Australia just get absorbed sooner than they would have otherwise, just because it’s a grab for the rock now," he said.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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