Metals & Mining Monitor | Gold Advances to Record Highs; Rio Tinto Considers Acquisition of Canadian Mining Giant Teck Resources

Moomoo News AU wrote a column · Jul 16, 2024 20:28

Metals & Mining Monitor | Gold Advances to Record Highs; Rio Tinto Considers Acquisition of Canadian Mining Giant Teck Resources

Hello mooers! Check out the latest market dynamics of the metals and mining industry over the past week.
•Base metals: Copper prices slip amid economic concerns in china and a strengthening dollar
•Energy metals: Nickel prices retreat from nine-month peak
•Precious metals: Gold prices surge 1.9% in a week

Spot Price Snapshot

Key Price Moves

Over the past week, the price of gold has increased by 1.9%, reaching approximately $2,430 per ounce on Tuesday. This upswing is propelling the precious metal towards unprecedented peaks, fueled by comments from Federal Reserve Chair Jerome Powell that have intensified speculations of an upcoming interest rate reduction. Powell, in his address on Monday, suggested that recent indicators "add somewhat to confidence" in the inflation rate reverting to the target level, and he assured that the Fed would initiate rate cuts prior to inflation reaching the 2% mark. $Gold Futures(FEB5) (GCmain.US)$

Market participants are now focusing on the forthcoming U.S. retail sales data, scheduled for release on Tuesday, along with additional statements from Federal Reserve officials, which are expected to provide deeper insights into the trajectory of monetary policy. A September rate cut is almost entirely factored into market expectations, with the possibility of two subsequent decreases before year's end.

However, gold's rally could be tempered by a strengthening U.S. dollar and climbing Treasury yields, following a thwarted assassination attempt on U.S. presidential candidate Donald Trump. This incident has unexpectedly bolstered Trump's election prospects for the upcoming November elections.

Copper prices declined to approximately $9,680 per ton on Monday, continuing the downward trend from the previous week, driven by disheartening economic indicators from China, the leading consumer. The market's mood dampened as data revealed that China's economy expanded at a rate below expectations in the second quarter, marred by an ongoing slump in the property sector, faltering domestic consumption, and escalating trade conflicts with Western nations. $Copper Futures(MAR5) (HGmain.US)$

As investors process these developments, they are looking ahead to the outcomes of the "Third Plenum," a critical meeting where Chinese leaders will deliberate on strategies for reform and modernization. In the meantime, the value of copper is also being influenced by the US dollar's surge, which has attracted safe-haven investments in the aftermath of the attempted assassination of former President Donald Trump.

Adding to the bearish sentiment, the London Metal Exchange reported a rise in copper stockpiles to 206,778 tons last week, marking the highest level since October of the previous year. With these factors at play, traders remain hopeful that China might introduce additional economic stimulus measures to mitigate the impact on demand for the red metal.

Nickel prices have receded to approximately $16,420 per tonne, marking a notable shift from the nine-month zenith of $21,615 per tonne observed in May. This downturn is attributed to investment funds exiting their long positions, influenced by a robust US dollar and disappointing manufacturing figures emerging from China. Despite the occurrence of ostensibly bullish developments, such as the European Central Bank's decision to reduce interest rates, a cessation of production activities in New Caledonia, and looming permit expirations in Indonesia, the nickel market has experienced a pronounced decline. Market analysts foresee persistent hurdles, primarily due to an oversupply in the market. Projections indicate that the total inventory of primary nickel may ascend to a peak unseen in four years by 2024. Such a surplus is anticipated to constrain any substantial resurgence in nickel pricing for the duration of the current year.

Top Company News

Rio Tinto Considers Acquisition of Canadian Mining Giant Teck Resources

$Rio Tinto Ltd (RIO.AU)$, the world's second-largest mining entity, is reportedly evaluating the prospect of submitting takeover proposals for competition, notably $Teck Resources (TECK.US)$ – Canada's premier diversified mining corporation. Teck Resources notably thwarted a substantial acquisition effort by Glencore, valued at $23 billion, in the preceding year.

According to Sky News, which sourced information from unnamed individuals, Rio Tinto has engaged in preliminary discussions with financial advisors regarding a potential bid for the Canadian company. However, there is no immediate intention to initiate an offer.

The prospect of such an acquisition raises questions about regulatory approval from the Canadian government. Recently, the Minister of Innovation, Science and Industry, François-Philippe Champagne, expressed that foreign acquisitions of significant Canadian mining firms would be sanctioned only "in the most exceptional of circumstances." This statement casts doubt on whether Rio Tinto, an Australian-based conglomerate, would receive the necessary approval to proceed with the purchase of Teck.

Rio Tinto Announces Second Quarter Iron Ore Operations Affected by Mid-May Rail Incident

$Rio Tinto Ltd (RIO.AU)$ has disclosed a modest 2% year-over-year increase in Pilbara iron ore shipments, amounting to 80.3 million tonnes, alongside a corresponding 2% decrease in production, which totaled 79.5 million tonnes for the second quarter. The company attributed these figures to operational disruptions caused by a train collision that occurred in mid-May. This incident led to an approximate six-day suspension of rail operations, consequently resulting in congested stockpiles at several mining locations. Furthermore, the quarterly report highlighted a substantial 18% rise in mined copper output, reaching 171,000 tonnes, as compared to the same period in the previous year.

BHP to Cease Operations of Australian Nickel Division Amid Market Surplus

$BHP Group Ltd (BHP.AU)$ has announced the cessation of its unprofitable Australian nickel operations until at least the beginning of 2027, in response to a worldwide excess of nickel that has disrupted the market. From October, the mining giant will place its Nickel West division into a state of "care and maintenance" due to the depressed prices of nickel, which is a critical component in electric-vehicle batteries. Concurrently, BHP will suspend progress on its West Musgrave nickel project. The company is allocating A$450 million ($304 million) annually to maintain the infrastructure and assets, facilitating a potential resumption of operations should the nickel market and prospects show signs of improvement.

IGO Anticipates Up to AU$295 Million Asset Write-Down in FY2024

$IGO Ltd (IGO.AU)$ has announced a projected asset impairment of approximately AU$275 million to AU$295 million for the fiscal year 2024. This anticipated write-down pertains to the company's exploration assets, specifically the "Silver Knight" and "Mt Goode" nickel projects, in conjunction with a strategic review and rationalization of its broader exploration portfolio. According to the company's disclosure, this non-cash impairment charge is not expected to affect its earnings before interest, taxes, depreciation, and amortization (EBITDA) for the specified fiscal year.