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Monsters of Rock: Guinea military coup opens door for ASX aluminium and bauxite stocks

The African nation of Guinea has just experienced its third Coup D’Etat in under 40 years, ending the 11 year … Read More
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The African nation of Guinea has just experienced its third Coup D’Etat in under 40 years, ending the 11 year reign of President Alpha Conde, who was captured in the maelstrom.

What happens in Guinea will be closely watched by the iron ore majors, given it is the home of the Simandou iron ore project, the proposed mega mine backed by Chinese interests that holds the moniker of the “Pilbara killer”.

Along with the logistical challenges of setting up a multi-billion dollar iron ore mine, port and rail project from scratch in harsh and inhospitable terrain, it was this very political instability that has led many experts to have their doubts that Simandou will be exporting tens of millions of tonnes of high-grade iron ore by the middle of the decade, as its proponents suggest.

More pressing for investors in the near-term however is the aluminium sector. Backed by China, Guinea has become the world’s leading supplier of bauxite in recent years, the feedstock refined into alumina for downstream industries.

Prices for aluminium briefly hit 10 year highs overnight as the coup unfolded.

The Shanghai Futures Exchange’s October contract moved up to 3.2% higher to $3,405.64/t, the highest since July 2008. And even before last night’s drama aluminium prices have been doing pretty well in 2021.

Pic: LME

Commbank analyst Vivek Dhar said political instability in Guinea had the potential to both disrupt the global aluminium supply chain and the timeline of supply ructions for iron ore miners.

“In the 12 months to July 2021, China’s bauxite imports from Guinea surged by 34%/yr,” he wrote in a note. “That has helped Guinea account for just over half of China’s bauxite imports.

“If the political instability in Guinea disrupts its bauxite exports, we expect bauxite prices to lift. Australia stands to benefit the most given its position as the world’s second largest bauxite exporter. Australia accounts for 33% of China’s bauxite imports.”

Gold miners enjoyed a good start to the week after prices hit 4 week highs in US dollar terms late last week, but the big iron ore miners were down, with Fortescue (ASX:FMG) losing almost 11 per cent as it went ex-dividend to weigh down the materials sector.

Pilbara Minerals (ASX:PLS) took a 5% hit despite a big resource upgrade at the Pilgangoora mine as word emerged Mineral Resources (ASX:MIN) had cashed in its 5.4% stake in its neighbouring lithium miner for $328 million to redirect into its growing Pilbara iron ore business.

 

ALUMINA LTD (ASX:AWC) & SOUTH32 (ASX:S32)

Alumina Ltd is the go-to stock on the ASX for pure play exposure to the aluminium market, and has a relatively cushy job as the 40% owner of the Alcoa World Alumina and Chemicals business managed by America’s Alcoa.

In trying conditions at the start of the year AWAC still delivered a net profit of $201.7 million, down from $246m in the first half of 2020. Alumina’s share of the profits came in at $73.6 million, helping boost its interim dividend to 3.4c a share.

Boss Mike Ferraro said this even before the Guinea situation began to unfold.

“Primary aluminium demand has recovered in 2021 and prices are at multi-year highs,” he said in last month’s half year results. “We expect ex-China aluminium production to increase in the second half to meet demand and this will be positive for alumina prices.

“In addition, we expect to see the non-China alumina surplus to contract which should further positively impact alumina prices.”

South32, which owns the Worsley alumina business in WA was also up today, but no one enjoyed the terrible news as much as minnow Metro Mining (ASX:MMI). Metro exports bauxite, making Guinea’s miners a direct competitor in the seaborne trade.

Its shares were up almost 30%.

 

EVOLUTION MINING (ASX:EVN), NORTHERN STAR RESOURCES (ASX:NST) & NEWCREST MINING (ASX:NCM)

The ASX’s three biggest Australian gold miners enjoyed the spoils of a good week or so for the gold price.

All of them broke or circled around milestone price levels with Newcrest and Evolution punching above $25 and $4 respectively and Northern Star closing on the $10 mark.

Gold was trading at $2457/oz Australian and US$1827/oz this afternoon according to commodities trader Kitco.

The post Monsters of Rock: Guinea military coup opens door for ASX aluminium and bauxite stocks appeared first on Stockhead.

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BPM finds two walk-up drill targets at its Claw gold project

Special Report: BPM Minerals has won the historical data lottery after identifying two walk-up drill targets at its Claw Gold … Read More
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BPM Minerals has won the historical data lottery after identifying two walk-up drill targets at its Claw Gold Project in WA.

The company found the Lewi and Chickie anomalies by reviewing all the available open file data sets from exploration drilling completed by Reynolds Australia Metals more than 30 years ago.

The historical data included 138 air core and rotary air blast holes for a total of 3,882m targeting the same structure that hosts Capricorn Metals’ (ASX:CMM) Mount Gibson gold project.

“It is rare for a junior exploration company to acquire such highly prospective ground directly along-strike from a 2-million-ounce gold project,” BPM Minerals (ASX:BPM). CEO Chris Swallow said.

“Perhaps even rarer is to find walk-up RC drill targets from an initial data review.

“We have signed a contract for an aeromagnetic survey to be completed later this year.”

Chickie and Lewi anomalies

Key intercepts from the historic drilling at the Chickie anomaly include:

  • 11m at 0.1 parts per million gold (46-57m) including 1m at 0.54 parts per million gold (48-49m);
  • 1m at 0.24 parts per million gold (72-73m EoH); and
  • 10m at 0.17 parts per million gold (50-60m EoH).

At the Lewi anomaly, several anomalous values up to 90 parts per billion gold were reported within the weathering profile.

And the fresh rock – the potential primary source of mineralisation – was never tested below the regolith anomaly.

Plus, the Lewi anomaly is less than 1km from the Mount Gibson project.

Pic: The Claw gold project, with newly identified gold anomalies overlain prospective geology.

Rare exploration opportunity

The company is confident that the Claw project presents a rare exploration opportunity to cover the interpreted southern extension of the Mount Gibson shear zone.

Particularly since 80% of the tenement area regolith is covered and the project is largely unexplored.

The upcoming aeromagnetic survey is planned for Q4 once the Claw tenement has been granted in the coming weeks.

The company will then conduct an RC drilling program of around 3,000m, targeting primary gold mineralisation in the fresh rock.

 


 

 

This article was developed in collaboration with BPM Minerals, a Stockhead advertiser at the time of publishing.

 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

The post BPM finds two walk-up drill targets at its Claw gold project appeared first on Stockhead.

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Precious Metals

Metalstech encounters visible gold at Sturec drilling

 
The drill program on its fully owned Sturec gold project in Slovakia is now in full swing and although it is too early to expect assay results, Metalstech…

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The drill program on its fully owned Sturec gold project in Slovakia is now in full swing and although it is too early to expect assay results, Metalstech (MTC.AX) already provided a quick interim update after the drill bit intersected visible gold in hole 17. This hole is an infill drill hole meant to follow up on hole 14 where Metalstech encountered 10 meters of almost 17 g/t gold within a broader interval of 43 meters of 4.88 g/t gold and 11.8 g/t silver.

Hole 17 is an underground drill hole, drilled from Drill Chamber 2, and the hole is located close to the pit outline used in the 2021 mineral resource update As you can see on the image above, the location of hole 17 is important as it will basically be able to validate the findings in hole 10, 13, 14 and perhaps even hole 5 which ended at the bottom of the pit outline.

We will obviously have to wait for the official assay results from the lab which could be expected in a few weeks.


Disclosure: The author currently has no position in Metalstech. Metalstech is a sponsor of the website. Please read our disclaimer.

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Economics

How Evergrande the parent hurt Evergrande New Energy

One thing that has recently caught my eye has been the unravelling of China Evergrande Group – a conglomerate with over 100,000 employees spanning primarily…

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One thing that has recently caught my eye has been the unravelling of China Evergrande Group – a conglomerate with over 100,000 employees spanning primarily real estate development but also new energy, property services and health amongst other industries.

Keen market observers would be aware of the Chinese government’s recent crackdown on various industries. Most headlines have been focused around the tech giants and the for-profit education sector, but has also involved online gaming companies (gaming restrictions), the steel industry (push for decarbonisation) and most recently Macau casinos. It has also maintained its tightening bias toward the property sector, which has further dampened the prospects for rebar steel, and by extension iron ore.

Property cycles are nothing new in China, with development and prices waxing and waning based on policy and availability of credit and partially responsible for cyclical price movements in iron ore. The most recent slowdown however seems to have hit the highly indebted Evergrande extremely hard, as unravelling confidence in its ability to repay its lenders (split between onshore and offshore) has sparked a sell-off in both its bonds (now trading at 30 cents on the dollar) while the company’s equity value, which peaked at a market capitalisation of over US$50 billionn and was as high as US$47 billion in June last year is now just US$4.4 billion.

One of the more interesting subplots has been the fate of its New Energy Vehicle group, a listed subsidiary in which the China Evergrande parent owns 65 per cent. Early in the Evergrande Saga, the Group proposed selling a stake in its new energy vehicles (NEV) subsidiary as one way to reduce its debt load. In January 2021, the group sold a ~11 per cent stake in the subsidiary to six investors, valuing the business at ~US$34 billion. Amazingly, this transaction – along with the hype surrounding the potential EV market in China and the company showcasing 6 new cars – triggered a furious rally which saw the share price rise 140 per cent in under 3 weeks, while its market cap peaked at US$85 billion despite not selling a single car (shades of Nikola in the US, albeit the NEV subsidiary also holds Evergrande’s legacy assets in the healthcare space and was formerly known as Evergrande Health Industry Group).

China Evergrande New Energy Market capitalisation

Screen Shot 2021-09-17 at 2.48.49 pm

Source: Bloomberg

As concerns around its parent deepened, “investors” became concerned around the potential fate of its subsidiary with the Parent’s 6.35 billion NEV shares seen as a potential source of liquidity. This has seen a stunning collapse in Evergrande NEV’s market cap by ~US$80 billion since mid-April and has also caused liquidity issues in the NEV arm which just reported losses of more than US$742 million.

A good reminder to pay heed of any potential contagion and ripple effects, albeit most are hidden and only discovered after the fact (as well as the obvious lessons on the highs and lows of “investing” in pockets of extreme exuberance).

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