Battery Metals

Copper rallied to the highest in 14 months as investors flock to the bellwether industrial metal in response to rising supply risks and hopes for a global recovery in demand.

Prices climbed as much 1.5% on Thursday after dovish comments from Federal Reserve Chair Jerome Powell added impetus to a rally that began in early February on fast-mounting risks to supply.

Disruptions at major mines have left smelters paying historically steep prices to get hold of mined ore, and Chinese plants — which produce more than half of the world’s refined copper — are moving closer to implementing a joint output cut in response.

At the same time, tentative signs of a return to growth in the global manufacturing sector are raising hopes that tightening market conditions could help power copper to new records.

To be sure, worries about demand in China’s property sector and other key industries still loom large, and a seasonal slowdown in activity is lasting longer than bullish investors would hope. But beyond China, there are growing hopes that India’s massive infrastructural spending splurge and the global AI frenzy will open up sizable new areas of demand growth.

On the supply side, there are ongoing doubts about whether Chinese smelters will make meaningful cuts to output, but production risks are continuing to stack up at mines around the world. On Wednesday, Ivanhoe Mines reported a 6.5% quarterly drop in output at the giant Kamoa-Kakula mining complex in the Democratic Republic of Congo, while drought conditions in neighbouring Zambia are also putting the country’s major planned expansion of mined output at risk.

Copper rose 1.1% to $9,361 a ton on the LME as of 5:21 p.m. in London. Aluminum advanced 0.8% and zinc added 3.4%. Chinese markets are closed for holidays.

US nonfarm payrolls data will be released on Friday, and will possibly firm up expectations for when the Fed will pivot to cut interest rates.

(By Mark Burton and Annie Lee)

Prices for gallium are close to their highest since 2011 as China’s export restrictions crimp global supply and hurt buyers of the metal used in a swathe of high-tech applications.

Beijing last year placed gallium and germanium under stricter government oversight — largely seen as a tit-for-tat response to the US-China trade war on technology. Gallium exports ground to a halt in August and September of 2023 and, while flows have restarted since then, volumes are still significantly lower.

International prices for gallium are now more than double where they were when Beijing’s new export curbs were announced, according to Fastmarkets data. That means higher costs for making equipment where gallium is a crucial material, from semiconductors and radar devices to solar panels and smartphone screens.

Gallium metal by end-March was selling at $575 a kilogram delivered to Rotterdam — more than 100% higher than when China announced the export controls.

Gallium chips find widespread use in defense and aerospace equipment, and China hinted that at a desire to ensure exports went only to civilian applications. Rather than facing an outright ban, gallium shipments are now subject to licensing requirements. China later also put graphite under the same export scrutiny and halted outbound sales of a range of rare-earth technologies.

The Asian nation refines some 94% of the world’s gallium, according to EU figures. That makes it among the minerals most dependent on Chinese supply, just as Western nations seek to reduce their reliance.

China shipped out about 2,760 kilograms of gallium in the first two months of 2024, down from 8,865 kilograms a year earlier. The biggest buyers were Japan at 1,000 kilograms, South Korea at 900 kilograms and Germany at 500 kilograms.

Gold continued its historic rally on Monday by setting another record high, as the latest US inflation data further boosted expectations of a Federal Reserve interest rate cut this coming June.

Spot gold hit an all-time high of $2,265.53 per ounce in the early hours of trading, an increase of 1.6% on Thursday’s closing price, before paring some gains to $2,247.16 per ounce by 8:15 a.m. ET.

Meanwhile, US gold futures shot up 1.2% to $2,265.70 per ounce in New York.

The Fed’s preferred gauge of underlying inflation — the core personal consumption expenditures index — cooled in February, data showed Friday, when many markets were closed. That added to the case for a reduction in borrowing costs, and importantly, for investors to pivot towards the non-yielding bullion.

A host of positive drivers have already pushed up bullion by around 14% since the middle of February. These include the prospect of monetary easing by major central banks and elevated tensions in the Middle East and Ukraine.

There’s also been strong buying by central banks, particularly in China, where consumers have been loading up on the metal amid ongoing problems in Asia’s largest economy. Its central bank has added substantial volumes of bullion to its reserves, boosting holdings in each of the past 16 months.

After the inflation figures, Fed Chair Jerome Powell said the prints were “pretty much in line with our expectations,” and there wasn’t any rush to cut rates. Swaps markets are currently pricing in a 61% chance of a Fed cut in June, up from 57% on Thursday.

Later this week, investors will get a further chance to gauge the outlook for the US economy and central bank policy, with monthly payrolls expected to increase by at least 200,000 for a fourth straight month.

“Inflation data, and Powell’s comments in particular, have provided a further boost to gold, with the market becoming increasingly convinced that the Fed will start to cut rates in June,” said Warren Patterson, head of commodities strategy at ING Groep NV.

However, “it wouldn’t take much of a catalyst to see a pullback in the short term,” and that could be a stronger-than-expected US jobs report, Patterson warned.

No. 1 commodity pick

The metal’s positive prospects have been endorsed by a slew of leading banks.

Among them, JPMorgan Chase said last month that gold was its No. 1 pick in commodities markets, and the price may reach $2,500 an ounce this year. Goldman Sachs Group has said it sees potential for $2,300, highlighting the benefits from a lower interest-rate environment.

“The slightly lower than expected US inflation figure last Friday is supporting the outlook of a mid-year rate cut by the Fed,” said UBS analyst Giovanni Staunovo, in a note to Reuters Monday.

“Markets will now want to see if the payroll data will confirm a soft landing from the job market in the US. Ongoing solid demand is helping the yellow metal as well, although higher prices may weigh on jewellery demand,” Staunovo added.

Still, gold’s ascent has yet to strike a chord among investors who favor exposure to the metal through exchange-traded funds. Worldwide holdings in bullion-backed ETFs shrank by more than 100 tons in the first quarter, hitting the lowest level since 2019 in mid-March, before a small uptick, according to a Bloomberg tally.

Horizonte Minerals (AIM, TSX: HZM) sank further this week after the company detailed additional funding that will be needed to complete the construction of its Araguaia nickel project in Brazil.

In an update on Thursday, the nickel developer said the total funding required is in the region of $567-$592 million, which is at least $100 million more than the cost-to-complete capital of $454 million estimated in its February 19 release.

The new cost estimate now includes $89 million for pre-production and ramp-up of the nickel mine, general and administration, and working capital required to bring the operation to positive cash flow. It also takes into account $25-$50 million related to transaction costs and a minimum cash contingency.

In addition to these costs, the company said it will need to reach a restructuring solution for the group’s existing liabilities, which, as of March 15, were approximately $418 million. These are comprised of $241 million in senior debt, a $27 million cost over-run facility, $68 million to trade creditors and $82 million of convertible loan notes.

Horizonte said it will also need a restructuring solution for its existing royalties arrangements. In 2019, the company signed an agreement with Orion Mine Finance for an upfront funding of $25 million to advance the Araguaia project. In return, Orion would receive a 2.25% royalty.

In Thursday’s news release, Horizonte said “it continues to hold discussions to restructure the group’s debt in conjunction with seeking a fully funded solution and is actively engaging existing and new potential investors.”

Horizonte’s lack of funds drew the concern of shareholders last fall, when it revealed that costs for the Araguaia project has increased by over a third and first production will be delayed. At the time, it had spent $429 million on Araguaia. The company started building the mine in May 2022, with the aim of producing up to 29,000 tonnes of nickel a year for the stainless steel market.

After announcing the project cost overrun, Horizonte saw its stock price plummet, going from C$2.22 a share in Toronto to trading at C$0.34 within the space of a week. Since then, its share price has continued to decline, now trading at its all-time low of C$0.03 with a market capitalization of C$8.1 million.

Evidently, efforts to raise more funds and alleviate the situation did little to boost investor confidence.

In December, the company secured an interim funding of $20 million, consisting of loans from its three biggest shareholders Orion, Glencore and La Mancha, to keep the Araguaia project alive.

Meanwhile, most construction activities at the nickel project have been paused while Horizonte seeks new sources of funding. Being developed as Brazil’s next major ferronickel mine, the project is subject to a feasibility study confirming the potential for a Tier 1 project producing 14,500 tonnes of nickel annually over a 28-year mine life.

Newmont (NYSE: NEM, TSX: NGT, ASX: NEM) said on Thursday that it is walking away from the Appaloosa project in Nevada held by Canadian junior Gunpoint Exploration (TSXV: GUN). A notice to terminate an option and earn-in agreement signed in September 2022 between Gunpoint and Newcrest Mining, now part of Newmont, has been issued.

Appaloosa is a 7-km-long mineralized structural zone situated within Gunpoint’s flagship Talapoosa gold-silver property in central Nevada. The entire land package at Talapoosa totals 60.17 square kilometres, with history of exploration dating back to the late 1970s. Gunpoint took over the project in 2010.

Under the prior arrangement, Newcrest had the right to acquire, in multiple stages, up to a 75% interest in Appaloosa for cumulative exploration and development expenditures of $35 million, cash payments totaling $5 million to Gunpoint, and completing a minimum indicated resource estimate of 1.0 million gold ounces.

For the past 18 months, the Australian miner has conducted a property-wide, reconnaissance exploration program on Appaloosa that confirmed the existence of a large, mineralized hydrothermal gold-bearing system.

Surface exploration and initial drilling in two areas identified a large potential hydrothermal cell related to and peripheral to the Talapoosa deposit, while reconnaissance work undertaken on Talapoosa indicated potential extensions of the existing deposit in multiple directions.

Newcrest also recently discovered an unexplored vein trend with a 450-metre strike length with rock chip samples up to 4 g/t gold.

Following Newmont’s termination, Gunpoint will now look to advance the project alone. With this new data, it plans to focus on follow-up exploration of the newly identified Talapoosa targets and prioritize drilling to expand the known deposit and test the new vein systems.

Prior to Newcrest’s involvement, the Talapoosa property was optioned to Timberline Resources between 2015-2018. During that period, Timberline completed a preliminary economic assessment (PEA) on the project, indicating an after-tax net present value of $136 million (5% discount rate) and an internal rate of return of 38.8%. The capital payback was 3.1 years.

The PEA envisioned an open-pit mining operation with an 11-year life, producing on average 55,000 oz. of gold and 679,000 oz. of silver per year.

Forming the basis of the study was a revised, NI 43-101-compliant mineral resource estimate issued in 2013. The MRE had measured and indicated resources of 1.0 million gold ounces and 13.6 million silver ounces contained within 31.3 million tonnes grading 1.11 g/t gold and 14.97 g/t silver. There is also 11.2 million tonnes inferred grading 0.72 g/t gold and 6.65 g/t silver.