A QUICK flick around the stock prices this morning shows that some of the speculative end of the mining sector has steadied - at least for now - after yesterday’s selling.
That investors are not panicking, and looking at each story individually, was shown this morning by the 3c gain to 20c for Argent Minerals. It said the scoping study at its Kempfield, NSW, silver-gold-lead-zinc project was very positive. There will be a 10.5 year mine life, with total production of 12 million ounces of silver and 42,000 tonnes of lead-zinc. The cost structure looks good, too. Silver closed last night at $US17.73/oz. The project cash cost of production at Kempfield is US$9.24/oz. If the white metal falls to that level, then we’ll all be heading for the investment hills.
It won’t have helped the general investment sentiment, however, that base metal prices eased further overnight. Aluminium had the biggest drop, down 2.7 per cent to $US2369/tonne. Tin, which had defied Friday’s fall, capitulated last night, losing 2.1 per cent to $US18,805/tonne.
Something that may of interest to those who follow aluminium, or Alumina, may be the latest metals report from Fortis Bank Nederland and Virtual Metals of London. While it doesn’t mention Australian (or New Zealand) refineries, the thrust is that many Western smelters are under a great deal of pressure.
Under the heading "Aluminium: twilight for the West”, the report states:
“The global recession did more than push half of the world’s aluminium supply into the red; it also accentuated the shift of production to lower cost of subsidised jurisdictions - a move that is unlikely to be reversed. Aluminium prices may have recovered from their nadir in 2009, but there seems little inclination by Western smelters to significantly increase utilisation or restart idled capacity. New low-cost supply from the Middle East, and soaring Chinese capacity expansion will, in the medium term, see smelters in the US and Europe placed under increasing pressure from imports of primary or semi-finished aluminium products.”
Meanwhile, Citigroup’s commodities man in London, David Thurtell, emailed Pure Speculation overnight with these observations:
“I still think some base metals can set fresh highs for the cycle. Notably copper and aluminium. Last week's Chinese March copper import numbers were truly remarkable. It's amazing to see how bearish European based FX analysts are becoming on the Aussie. The reasoning goes that a revaluation decreases China's competitiveness and hence their exports of manufactures. Hence Australia suffers (as a supplier of the coal and metals used to make those manufactured goods).
"But this ignores two things. Much of China's metal consumption is for home consumption. (The electricity transmission networks and rail infrastructure being installed are simply breath-taking). Second, the revaluation impacts are likely to be swamped by the impact of the recovery in the West, which has already seen a sharp recovery in Chinese exports,” Thurtell concluded.
