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Bulk Buys: FMG fields green queries and banks review iron ore prices

Westpac is the latest major financial institution to knock down its iron ore forecasts after prices dived below US$100/t again … Read More
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This article was originally published by Stockhead

Westpac is the latest major financial institution to knock down its iron ore forecasts after prices dived below US$100/t again on a slowdown in steel production in China it describes as the largest since 2008.

It revised its price forecasts down by US$10/t this week to US$100/t for the end of 2021 and US$80/t for the end of 2022.

That comes off the back of one of the steepest falls in Chinese steel production seen since the nation became the world’s largest steel producer early this century.

Pic: Westpac IQ

“The Chinese steel production correction continued through September. Pig iron production fell 9% to be down 14%yr, the largest annual fall since -16%yr in November 2008 (at that time 62%fe was US$61/t),” Westpac senior economist Justin Smirk said.

“And it is not just the base output of blast furnaces that has fallen.

“Crude steel production fell 11% in September to be down 21%yr, the largest annual fall in the history of the data we have. The next largest fall was -18%yr in September 1994 then -16%yr in October 2008.”

According to the China Iron and Steel Association, its members’ late October steel production figures showed they were turning out just 1.7353Mt a day from October 21 to 31, down 7.43% on mid-October and well below the 3.2Mt/day they were producing at the industry’s peak earlier this year.

Iron ore prices have been extremely volatile in response to these shifts, sliding from a record US$237/t in mid-May to just US$94/t yesterday for benchmark 62% fines.


Will Chinese producers put a floor under prices?

Some quarters of the market believe a floor is coming for iron ore prices.

That is because there are a number of domestic iron ore producers, whose production is rising as the Asian economic powerhouse and its steel mills aim for greater self-sufficiency.

(i.e. They fear their supply has become monopolised by Australian and Brazilian majors BHP, Rio Tinto and Vale).

“In the year to September, Chinese ore production is up 15%,” Smirk noted.

“Chinese iron ore production (on an Fe62% basis) declined from over 500mt almost 10 years ago to less than 250mt in 2018 due to pollution mitigation campaigns along with a focus on health and safety issues.

“From the trough in 2018, Chinese ore production is set to rise to over 320mt this year then continue on to 380mt by 2025.”

These mines are lower in quality but higher in cost, meaning if the Chinese Government allows iron ore prices to fall too far it will start to hurt its own businesses.

“Given the re-emergence of China’s relatively high-cost iron ore mines, what does this imply about the cost base, or floor price, for iron ore?” Smirk said.

“Does the return of these mines mean we are moving up the cost curve resulting in a base cost price? Our current thinking is that this floor price is around US$75-85/t out to 2024 but rising Chinese ore production could push it to US$80-100/t.”

Smirk issued a note of caution though, that Chinese companies and more importantly the Communist Party, could tolerate lower prices to pursue its aims of decreasing its reliance on Australian producers.

“Long time watchers will remember Chinese iron ore supply being somewhat resilient even when prices fall below cost. In 2015, when stimulus packages were reduced just as property activity slowed, there was a collapse in iron ore prices below US$40/t; at that time the estimate cost curve was US$60/t,” he said.

“Furthermore, the CISA has vowed to accelerate the development of domestic and overseas iron ore supplies (e.g Simandou) as part of the 2021-25 Five Year Plan.

“Given that domestic self-sufficiency is easier and faster to implement than offshore green field projects, along with many mines being integrated with domestic steel mills, there is every reason to suspect that high-cost Chinese supply will again be resilient in the face of falling prices.”


FMG sticking with Scope 3 targets

Fortescue Metals Group (ASX:FMG) held its AGM in Perth yesterday and if you’re in the camp that get a little uneasy with Andrew Forrest et. al. and their grandstanding about green hydrogen and missed it, that may be a good thing.

You may be even more uneasy if you’re an investor watching billions of dollars in green hydrogen projects being announced with zero scrutiny outside of its ASX announcements.

Forrest himself is still in Glasgow after his sortie at COP26 while other board members remain stuck behind WA’s hard border.

His big-ticket item came when he proudly announced Tom Petty’s family gave him the rights, for the first time ever, to use his music to promote a company. Right on, my dude.

Fortescue is sticking with its ambitious carbon reduction targets in the face of questioning from shareholders who, like the rest of us, are wondering where all the money for Forrest’s projects is going to come from.

FMG’s green energy arm Fortescue Future Industries is currently being funded by sequestering 10% of FMG’s profits each year and is well stocked for its research activities after record iron ore prices broke the company’s bank in 2020-21.

When will it generate profits, one erstwhile shareholder asked yesterday?

“At the core of the activities of FFI is actually the decarbonisation of Fortescue, and we see that as a very important part of FFI’s activities,” CEO Elizabeth Gaines said.

“If you think about our goal to be carbon neutral by 2030 we see that as a significant commercial opportunity for Fortescue to generate more profits, to lower our costs, to get a premium for our iron ore, which will be green.

“So absolutely we see that we will generate significant profits. There is some time between now and then but if we don’t decarbonise, not doing that puts at risk that we’ll lose the diesel fuel rebate, we’ll see a new carbon charge introduced, the cost of offsets will skyrocket.

“So not doing it will have a significant detriment on our overall profitability.”

Fortescue was up 1.8% at the close after announcing it plans to sell green and social bonds to raise funds in line with its new “sustainability financing framework”.


Pearl Gull Iron up on high grade hits

Pearl Gull Iron (ASX:PLG) has wavered since listing, timing its run at the ASX boards to coincide with a big drop in the iron ore price.

The company is exploring for high grade extensions of the Cockatoo Island iron ore mine off WA’s north coast.

While iron ore prices have worked against the explorer it has had a bit of joy, striking grades of as high as 69.5% iron ore (well above standard pricing indices) in drilling so far at its Switch Pit prospect.

Yesterday assays from the project were announced to the market, with Pearl Gull striking 65.9m at 55.5% Fe from surface including an interval of 11.8m at 65.5% Fe.

The company, which listed in late September, has completed an initial 19-hole drill program at its Cockatoo Island targets at the Switch Pit, Magazine Pit and North Bay prospects.

Also in the news at the junior end of the sector yesterday, Magnetite Mines (ASX:MGT) announced it had received access to historical data including data related to over 16,000m worth of drilling for the Muster Dam tenement near its Razorback project in South Australia it was awarded by the State Government in March.

Magnetite Mines plans to assess the data, which boasts a JORC 2004 inferred resource of 1.5Bt, alongside its continued DFS work at Razorback.

MGU Magnum Mining & Exp 0.093 37 60 -44 94 $ 40,765,882.95
RLC Reedy Lagoon Corp. 0.041 32 86 116 310 $ 21,601,046.64
DRE Drednought Resources 0.044 19 19 76 83 $ 118,938,209.12
HAV Havilah Resources 0.21 14 14 0 2 $ 56,661,287.18
SRK Strike Resources 0.115 10 -8 -57 10 $ 32,400,000.00
LCY Legacy Iron Ore 0.014 8 0 -13 75 $ 89,666,339.24
EQN Equinoxresources 0.23 7 $ 11,250,000.25
HAW Hawthorn Resources 0.0545 7 -3 9 -47 $ 18,176,600.91
MAG Magmatic Resrce Ltd 0.1 4 0 -50 -53 $ 25,448,679.80
FMG Fortescue Metals Grp 14.49 1 2 -37 -12 $ 44,121,567,274.94
FEX Fenix Resources Ltd 0.2275 1 1 -36 75 $ 108,609,201.60
BHP BHP Group Limited 36.73 1 -3 -27 6 $ 107,330,145,713.72
SHH Shree Minerals Ltd 0.01 0 0 -33 -23 $ 10,632,368.92
PLG Pearlgullironlimited 0.12 0 -17 $ 5,927,452.19
MDX Mindax Limited 0.049 0 -2 1533 1533 $ 95,246,788.75
JNO Juno 0.125 0 -11 $ 16,957,250.13
GRR Grange Resources. 0.56 0 1 2 138 $ 642,322,977.39
CZR CZR Resources Ltd 0.0075 0 -6 -38 -46 $ 24,404,262.94
AKO Akora Resources 0.195 0 3 -36 $ 10,468,691.20
ADY Admiralty Resources. 0.014 0 -7 -22 8 $ 19,553,687.30
ACS Accent Resources NL 0.055 0 0 45 450 $ 25,631,500.57
HIO Hawsons Iron Ltd 0.078 -1 -6 73 115 $ 55,059,077.15
TLM Talisman Mining 0.1425 -2 -5 -8 30 $ 26,283,529.58
EFE Eastern Iron 0.053 -2 43 430 416 $ 44,392,797.88
MIN Mineral Resources. 38.35 -2 -12 -19 46 $ 7,249,959,600.29
RHI Red Hill Iron 2.79 -2 -14 276 1618 $ 172,974,283.79
RIO Rio Tinto Limited 88.94 -2 -11 -30 -5 $ 33,093,925,478.10
GWR GWR Group Ltd 0.105 -5 -28 -65 -32 $ 31,792,576.52
MIO Macarthur Minerals 0.36 -5 -20 -18 -23 $ 51,271,845.93
FEL Fe Limited 0.033 -6 -18 -40 18 $ 27,555,595.68
FMS Flinders Mines Ltd 0.65 -6 -16 -35 -24 $ 110,595,817.94
MGX Mount Gibson Iron 0.39 -6 -16 -58 -42 $ 478,174,373.04
IRD Iron Road Ltd 0.19 -7 -14 -12 28 $ 150,972,155.86
MGT Magnetite Mines 0.022 -8 -12 -68 144 $ 69,206,431.38
BCK Brockman Mining Ltd 0.044 -8 10 -28 83 $ 408,286,213.76
VMS Venture Minerals 0.042 -9 -14 -63 20 $ 60,950,372.30
CIA Champion Iron Ltd 4.16 -9 -10 -40 9 $ 2,051,292,097.80
GEN Genmin 0.15 -9 -23 -47 $ 38,108,859.75
PFE Panteraminerals 0.24 -11 -21 $ 9,625,000.00
SRN Surefire Rescs NL 0.011 -15 -21 -58 -62 $ 12,147,414.50
TI1 Tombador Iron 0.033 -18 -18 -67 10 $ 35,774,410.82


Allegiance Coal soars as Stanmore joins big leagues

With met coal prices around record highs and major mining companies souring on the coal sector it is little wonder juniors are in expansion mode.

Stanmore Coal (ASX:SMR) stamped its claim to join Australia’s coal mining big leagues after emerging as the surprise buyer of BHP’s 80% stake in the BHP Mitsui coal joint venture in Queensland.

The US$1.2 billion (and up to US$1.35b) acquisition came in at almost six times Stanmore’s market cap, expanding its proforma met coal production by almost the same magnitude.

Allegiance (ASX:AHQ) meanwhile has spent the past year buying up a string of mines in the United States including the Black Warrior operation in Alabama.

It announced late last week that it had completed an agreement for the first 80,000t cargo from Black Warrior to head to an Asian customer.

Allegiance is waiting for a pilot coke oven test to be completed on its premium Mary Lee and Blue Creek Top coals, but has moved quickly to get the Black Warrior coal product onto the seaborne market to take advantage of the current strong pricing environment for met coal.

“The price was agreed at a discount to high-vol B due to the untested nature of the coal pending results of the pilot coke oven tests,” the company said in a statement.

Allegiance, which is also ramping up operations at the New Elk mine in Colorado and last month bought the Short Creek underground mine in Alabama, is up 20% over the past week as lower thermal coal prices have knocked down coal miners selling into energy markets.

AHQ Allegiance Coal Ltd 0.56 20 -14 -2 90 $ 181,454,244.59
TIG Tigers Realm Coal 0.023 10 -12 229 105 $ 287,467,452.10
PAK Pacific American Hld 0.017 6 -15 -17 -30 $ 7,096,470.75
NHC New Hope Corporation 2.04 4 -21 73 91 $ 1,635,581,666.13
NCZ New Century Resource 0.15 3 -3 -25 -9 $ 206,374,402.01
TER Terracom Ltd 0.19 3 27 96 31 $ 135,649,373.40
JAL Jameson Resources 0.086 1 1 -10 -28 $ 26,086,542.54
CRN Coronado Global Res 1.355 1 -11 161 74 $ 2,212,918,923.60
SMR Stanmore Resources 1.06 0 1 56 44 $ 319,079,482.38
LNY Laneway Res Ltd 0.005 0 0 0 -29 $ 19,520,329.67
CKA Cokal Ltd 0.16 0 -9 150 167 $ 149,933,170.08
NAE New Age Exploration 0.011 0 -8 -39 -15 $ 16,512,837.47
WHC Whitehaven Coal 2.58 -2 -20 102 137 $ 2,540,304,810.72
BRL Bathurst Res Ltd. 0.77 -2 -13 126 83 $ 129,068,475.37
BCB Bowen Coal Limited 0.17 -3 -13 164 241 $ 206,070,593.54
AKM Aspire Mining Ltd 0.084 -5 -20 0 20 $ 39,595,684.83
PDZ Prairie Mining Ltd 0.225 -5 -26 -9 19 $ 52,054,895.03
YAL Yancoal Aust Ltd 2.73 -7 -25 31 43 $ 3,551,982,085.53
ATU Atrum Coal Ltd 0.039 -9 -20 -29 -86 $ 27,509,533.44
MCM Mc Mining Ltd 0.105 -13 -16 -9 -54 $ 16,214,053.28

At Stockhead, we tell it like it is. While Magnetite Mines and Allegiance Coal are Stockhead advertisers, they did not sponsor this article.

The post Bulk Buys: FMG fields green queries and banks review iron ore prices appeared first on Stockhead.

Author: Josh Chiat

Precious Metals

Palladium One Extends High-Grade Mineralization 250m SW of Kaukua Open-Pit Resource

Palladium One Mining (TSXV: PDM) (FRA: 7N11) (OTC: NKORF)  
continues to advance its Läntinen Koillismaa (LK) platinum group element-copper-nickel…


Palladium One Mining (TSXV: PDM) (FRA: 7N11) (OTC: NKORF)  

continues to advance its Läntinen Koillismaa (LK) platinum group element-copper-nickel property in Finland — this week announcing that initial down plunge drilling has extended mineralization 250 meters southwest of the open-pit constrained resource estimate at the Kaukua deposit.

Hole LK21-101 intersected 1.5 g/t palladium equivalent (PdEq) over 74.5 meters starting at 273 meters down hole, and returned a higher-grade 2.2 g/t PdEq over 19.6 meters.

Other high-grade intercepts included:

  • Hole LK21-102, @ 3.2 g/t PdEq over 13.7 meters, within 1.6 g/t PdEq over 113.6m, with individual samples grading up to 9.6 g/t PdEq over 1m;
  • Hole LK21-100, @ 3.3 g/t PdEq over 9.6m, within 1.5 g/t over 113.4m, with individual samples grading up to 5.9 g/t PdEq over 1.5m.

“The high-grade ‘Core Zone’ of the Kaukua deposit has been extended to the southwest and remains open for expansion. These are among the thickest intercepts to date within the Kaukua deposit and will add significant tonnage to our existing resource endowment,” said Palladium One’s CEO, Derrick Weyrauch, in the Nov. 23 news release.

The news from Kaukua alters the geological model, in a good way. As Palladium One explains,

Previous geological interpretations suggested that the Kaukua deposit was cut-off by a northwest trending fault, occupying a distinct magnetic low and topographic lineament. Drilling has demonstrated that the magnetic low is the result of a later cross cutting dyke (now referred to as the high-titanium gabbro dyke) and that the Kaukua deposit remains open to the south.

Resource definition drilling at Kaukua and the western half of Kaukua South (together known as the Kaukua area) is complete, with an updated NI 43-101 resource estimate scheduled for the first quarter, 2022.

While the Haukiahio trend is more copper-nickel rich, the Kaukua deposit contains mostly platinum group elements, with two-thirds of the value in palladium and platinum.

Historic and current drilling in the Kaukua and Kaukua Southwest area. Assays have been received for holes up to LK21-103, the remainder are pending. Background is induced polarization (IP) chargeability.
Cross sections showing holes LK21-102, 107, along with historic holes KAU07-005, KAU12-057 and 068, and their position with respect to the 2019 Kaukua open-pit resource estimate.

The Kaukua mineralized system is also much larger than previously understood, as evidenced by last year’s major discovery about 500m away at Kaukua South, which hosts a >4 km-long IP chargeability anomaly, of which 3.5 km had never been tested prior to Palladium One’s drilling work.

Initial drilling last year, therefore, focused on expanding known mineralization to the east of existing drill intercepts in the Kaukua South Zone, taking priority over the planned drilling to upgrade and convert the historical resource estimate at Haukiaho.

(As announced in a Sep. 7 news release, results from a 2,000m drill program at the Haukiaho Zone significantly increased this area’s resources (NI 43-101-compliant) to 32.7 million tonnes grading 1.15 g/t PdEq for 1.21 million ounces of contained PdEq. This resource update essentially doubles the resource endowment of the entire LK project, which now boasts 11 million tonnes of indicated resources grading 1.60 g/t PdEq (600,000 oz PdEq) and 44 million tonnes of inferred resources grading 1.19 g/t PdEq (1.7 million oz PdEq))

Kaukua South drilling successfully confirmed the eastern extension and the over-4 km strike length, insinuating the presence of a large-scale, shallow mineralized system with significant continuity.

Phase 2 drilling by Palladium One this year continued to return significant PGE grades and widths, including 47m at 2.3 g/t PdEq and 53m @ 2.1 g/t PdEq, and was successful in extending the strike length of the Upper Zone mineralization.

These results added to the company’s belief that it could add a significant amount of open-pit resources to the upcoming NI 43-101 resource estimate upgrade.

Last month the company announced the highest-grade hole to date at LK, which intersected 4.07 g/t PdEq over 24m within 2.08 g/t Pd_Eq over 112m, starting at 171.5m depth.

The question is not if, but by how much, the Kaukua drilling will add to the already doubled mineral resources at the LK property.

The Kaukua Zone at LK is mostly a palladium-platinum-gold play, however it may surprise readers to learn there are significant base metal values particularly at Haukiaho, where two-thirds of the zone’s value is in nickel and copper compared to Kaukua where 66% of the value is in palladium and platinum.

Indeed Haukiaho hosts some of the highest nickel grades on the LK project. At 17 km in length, the Haukiaho trend currently represents the largest continuous patch of blue-sky potential.

The latest resource estimate of 1.2 million ounces PdEq grading 1.15% g/t, comprises only 3 km of strike length; 2 km of strike extent, immediately east of the Haukiaho resource estimate, contains two significant IP chargeability anomalies with sufficient historic drilling to potentially be upgraded to inferred resources with modest additional drilling.

The remaining 12 km of the Haukiaho trend has not been drill-tested by the company, though widely spaced historic drilling has demonstrated that the trend is mineralized. This drilling provides a high level of confidence for potential additional nickel-copper resources to be delineated, Palladium One said.

Also worth noting is the fact that the Haukiaho Zone’s resource estimate contains cobalt. There is a reasonable expectation that the next resource estimate update at the Kaukua Zone where PDM is concentrating its drill program, will also contain notable values of the crucial lithium-ion battery component.


As for Palladium One’s Tyko nickel-copper project in Ontario, in a Nov. 16 project update the company says geophysical crews are on site conducting ground-based electromagnetic surveys on key areas; three new exploration permit applications have been filed for drill-testing the newly identified EM anomalies; and a fourth exploration permit application has been made to expand upon the existing Smoke Lake exploration permit, to allow for additional step-out drill pad locations.

“We eagerly await receipt of new exploration permits for Tyko so that we can get back to drilling and make additional discoveries.” said Derrick Weyrauch, President and CEO.

The project known for its high sufide nickel tenor, received the Bernie Schnieders 2020 Discovery of the Year Award, presented by the Northwestern Ontario Prospectors Association (NWOPA).  

It covers approximately 24,500 hectares within the highly prospective Mid-Continent Rift nickel province, including over 7,000 hectares of the mafic-ultramafic Bulldozer intrusion, which has seen virtually no geological mapping nor exploration.

The Tyko project is located 25 km north of the Hemlo mining complex, in northwestern Ontario.

The Archean-aged mafic-ultramafic intrusion is rich in nickel, containing twice as much the battery metal as copper, and equal amounts of platinum and palladium.

According to the company, the high tenor of the sulfide minerals suggests a valuable concentrate could be produced, and that even if the sulfides are disseminated, the deposit could still be economic.

Drilling in 2020 primarily focused on the Smoke Lake target, an EM anomaly identified through geophysical surveying. Magnetic survey undertaken shortly before drilling helped to refine the anomaly, resulting in the successful discovery of massive magmatic sulfides.

The first discovery of massive sulfide mineralization at Tyko was confirmed in January, when the company announced drill intercepts from massive magmatic sulfide of up to 9.9% nickel equivalent. Subsequent drill results reported from the 2020 program were a resounding success, confirming the high-grade nature of the deposit.

A second-phase, 2,000m drill program was initiated in April to follow up on these high-grade hits. The assays to date have been excellent, including massive magmatic sulfide intercepts grading up to 10.2% nickel equivalent, demonstrating a robust mineralization spread over a distance of at least 18 km.

In addition to the high-grade Smoke Lake Zone, Palladium One believes there are new zones of nickel-copper mineralization yet to be discovered.

Preliminary results of the recently completed airborne EM survey have identified as many as four significant multi-line EM anomalies on the Tyko nickel-copper project, which further support this hypothesis.

Of particular interest are two anomalies in the Bulldozer Intrusion. These are the first EM anomalies identified in this large mafic-ultramafic intrusion and hint at potentially large tonnage targets.

Assay results from the Phase 2 drill program at Smoke Lake are pending.

Palladium One Mining
Cdn$0.18, 2021.11.26
Shares Outstanding 248m
Market cap Cdn$43.4m
PDM website

Richard (Rick) Mills
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Author: Gail Mills

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2 Mining Stocks To Watch This Week

Will these mining stocks make your watchlist? At the moment, there are…
The post 2 Mining Stocks To Watch This Week appeared first on Gold Stocks to…

Will these mining stocks make your watchlist?

At the moment, there are concerns about inflation when it comes to mining stocks, and no one knows what impact this will have. However, if there is a significant amount of inflation, it will likely affect most, if not all, mining equities. There are still a lot of mining equities that are rising in value right now. These businesses often do well when the products they seek become more expensive.

Developing an investment strategy can be really useful. While more detailed information is accessible, let’s stick to the basics of mining business tracking. Keeping up with global happenings is crucial when investing in mining firms. This is especially true in 2021 due to the epidemic. Sector news is also important when it comes to investing in these shares. So which mining stocks are performing well right now?

Sandstorm Gold Ltd. (NYSE: SAND)

Sandstorm Gold is a gold royalty company that buys gold and other commodities from various mining companies. The companies in question are building or operating mines in varying stages of development. Sandstorm pays for gold streams or royalties in advance and has the right to purchase a portion of the mine’s output for the duration of the mine’s life.

On October 6th, the firm announced that it has increased its credit facility to $350 million. The ESG Revolving Loan includes terms for incentive pricing that are tied to sustainability. Sandstorm will be able to cut borrowing costs by up to 5 basis points if its sustainability goals are satisfied.

Chief Financial Officer of Sandstorm, Erfan Kazemi said, “We’re pleased to announce that Sandstorm is the first royalty company with a credit facility linked to sustainability goals. With this credit agreement, the Company is helping to lead a new era of corporate lending that benefits shareholders while promoting corporate responsibility.” Noting this info, will SAND be on your list of mining stocks to watch?

Eldorado Gold Corporation (NYSE: EGO)

Eldorado Gold Corporation is a company that specializes in mineral resource exploration, acquisition, development, production, and sale. Gold, silver, lead, zinc, and iron ores are among Eldorado’s key interests. It now operates five mines: Kisladag and Efemcukuru in Turkey, Lamque in Canada, Olympias and Stratoni in Greece.

Eldorado announced the start of a $500 million senior notes offering due in 2029 on August 9th. The money will be used to pay down the company’s $234 million 9.500 percent senior secured second lien notes, which are due in June 2024.

George Burns, President and CEO of Eldorado said, “This transaction provides Eldorado with immediate value for TZ, while also retaining meaningful exposure to future value creation through our equity stake in GMIN.” Based on this information, is EGO stock a contender for your mining stock watchlist in December?

Top Mining Stocks To Buy?

It might be tough to determine which mining stocks are the best to invest in. Because the market is so volatile right now, doing a lot of research before investing is crucial. In December 2021, it will be interesting to see how these equities perform. So, which gold mining stocks will you be monitoring?

The post 2 Mining Stocks To Watch This Week appeared first on Gold Stocks to Buy, Picks, News and Information |

eldorado gold corporation

Author: Jason Todd

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Nickel, Industrial Metals Rise As Optimism on China Returns 

Base metals are on the rise after a series of positive announcements…

Nickel, Industrial Metals Rise As China Property Optimism Returns 

Base metals are on the rise after a series of positive announcements over the week has brought new optimism to China’s property sector. 

On Thursday, Nickel paced gains by most industrial metals on the London Metal Exchange, rising 2.5%. As shown below, spot prices for Nickel are moving higher as inventories continue to shrink, pointing to mounting supply tightness. 

“Nickel now looks to be the new game in town with stocks falling daily,” Malcolm Freeman, a director at Kingdom Futures, wrote in a note. “For now the bullish mood persists and there seems little point in going against it in the very short term.”

As global refined-nickel inventories continue to draw down, prices face volatility, trending toward gains, Huatai Futures Co. wrote in a note. 

Earlier this week, iron ore futures trading in Singapore bounced back over $100/ton after reports of Chinese regulators dialing back crackdowns on the property market could soon lift steel demand and improve profitability for steelmakers. There’s also chatter the People’s Bank of China could unleash stimulus amid the economic growth slowdown in the world’s second-largest economy.  

“The market has higher expectations for steel production to resume,” Huatai Futures Co. wrote in another note. Property is a leading source of industrial metal demand in the country. 

Bloomberg Industrial Metals Subindex (BCOMIN) has broken out to an all-time-highs, surpassing 2007 and 2011 highs. 

Positive developments appear on the macro front as the PBoC could be close to easing and Beijing dials back on regulatory crackdowns. Institutional investors are also getting in on the action as China’s high-yield bonds have had a bid this month. 

Suppose the Chinese government continues to offer policy support to heal the ailing property market, which it crushed this year through regulatory crackdowns. In that case, this could mean industrial metals will rise some more, adding to inflation. 

Tyler Durden Thu, 11/25/2021 – 22:45

Author: Tyler Durden

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