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Gold and copper sectors alive and kicking, other miners playing catch-up

Gold is the perennial safe haven, and copper is the economic bellwether, but what about the others?
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Solgold's Nick Mather, left
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The international mining markets continue to struggle for direction, as a combination of mixed economic data and uncertainty about the future of global trade unsettles traders.

There’s action at the top end of the market, to be sure, as the enlarged Randgold, otherwise known as Barrick (NYSE:GOLD) has tabled, then withdrawn a hostile bid for its major rival Newmont (TSE:NMC), and instead come to amicable terms in the key battleground, Nevada.

Cynics might wonder whether Barrick’s hostile bid wasn’t just a ploy by new chief Mark Bristow to bring Newmont to the table, and fast, to negotiate a Nevada deal. Among other things Newmont had to lose, aside from its own independence, was the collapse of its own acquisition plans to acquire Goldcorp.

So, after Bristow blasted a major shockwave through the BMO conference a couple of weeks ago, things are back to normal, just about, and US$4.7bn worth of synergies have now been secured in Nevada.

Throughout this, gold has remained roughly-speaking rangebound at the US$1,300 level, reassured by a dovish Fed, skittish on US-China trade negotiations, and still the market’s favourite fall-back asset in bouts of volatility.

The gold majors can strut their stuff confidently enough against this backdrop, and even the mid-tiers and gold juniors have grounds for cautious optimism, although no-one’s expecting the kind of price hikes we witnessed a few years ago when quantitative easing was at its height.

Other consolidation is also on the cards, with Chaarat Gold Holdings (LON:CGH) looking to create a major consolidated Central Asian champion following the acquisition of Kapan from Polymetal. And juniors across the board, from Bluebird Merchant Ventures (LON:BMV) in Korea to  Avesoro Mining in West Africa are on the march.

In exploration news, the Paterson range in Western Australia continues to attract attention and big bucks, as Newcrest doubled down on its already existing portfolio of blocks there with the acquisition of a new parcel of land, following a joint venture with Greatland Gold (LON:GGP). Newcrest was attracted in large part by a 275 metre intercept grading at significant gold and copper levels, on a tenement that had already produced encouraging exploration results.

So the gold sector is alive and well.

On the wider mining markets, with the possible exception of copper, caution remains the watchword. Zinc had a good run, but it’s not clear if the recent easing off of growth is a sign that the metal is topping out, or just a pause related to the ongoing US-China trade talks.

Tin is currently in vogue with broker SP Angel, which is in turn citing an old MIT report arguing that it’s going to be the metal most in demand for the future. But although the tin price has had a good run in the last six months, it’s broadly flat on both a 12-month and a five-year timeline. In any case, there are very few pureplay tin opportunities for investors to buy into.

The shine has come off lithium too, as the broader investment community wakes up to the straightforward fact that the element is abundant in the earth’s crust. It remains an open question whether demand will still outstrip supply, but certainly the unbridled optimism of a few years ago has now given way to a more tempered approach.

Nickel too remains broadly in the doldrums. There has been some improvement in the price in recent months, but that’s come off a very low base.

So, aside from gold, it’s only really copper that’s really gaining any traction at the moment. Rio Tinto (LON:RIO)  and BHP Group (LON:BHP) have both made it very clear that they are actively hunting for more copper opportunities. And Solgold’s big discovery at Cascabel in Ecuador has tempted in not one, but two majors – Newcrest and BHP.

So copper explorers like Aisamet (LON:ARS), which continues to deliver up good grades from its Indonesian assets, can maintain a degree of confidence that when the time comes a partner will be out there waiting for them.

Others, like Bacanora in the lithium space, and Sirius (LON:SXX) in the fertiliser space, continue to struggle with finance.

Hardly surprising then that smaller companies, like Dunnedin Ventures (CVE:DVI) are switching into the copper-gold space. The success companies are having in gold and copper will only serve to encourage more to do so.


© mining Capital 2019

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