Australian budget introduces 10% tax credit for designated critical minerals, aiming to boost sector growth
Gold, silver rebound strongly to near-highs; copper up 17% YTD
US Senate bans Russian uranium ban while making US$2.7 billion available to expand domestic production
Stock of the Week: Renegade Exploration (ASX:RNX) pursues copper exploration in Queensland’s Cloncurry district
‘Guy on Rocks’ is a Stockhead series looking at the significant happenings of the resources market each week. Former geologist and experienced stockbroker Guy Le Page, director, and responsible executive at Perth-based financial services provider RM Corporate Finance, shares his high conviction views on the market and his “hot stocks to watch”.
Some good news for the Australian critical minerals sector in the Australian budget with designated critical minerals (including nickel and lithium) receiving a 10% tax credit per year for up to 10 years per project.
This has an estimated cost of A$17.6b until 2041 and will kick in from mid-July 2027.
Unfortunately, there will not be so much as a weak pulse in the nickel industry by then unless we see a sustained lift in nickel prices which have recovered from around US$15,500/tonne to US$19300/tonne but probably need something north of US$25,000/tonne to get the industry back on its feet.
In addition to Indonesian rapidly increasing supply, Russia, China, Australia, and Canada have also been increasing LME nickel inventories (figure 1).
Figure 1: Share of LME nickel inventories by origin (Source; LME, May 2024).
After consolidating for the last two weeks, gold put on just under US$63 to close US$2,364/ounce despite a stronger US dollar on the back of bad unemployment numbers and geopolitical issues. (figure 2).
Last Friday’s Michigan’s preliminary consumer sentiment survey showed optimism declining to a five-month low, while inflation expectations rose to a nearly two-year high.
Figure 2: 5-year gold price chart (Source: https://tradingeconomics.com/commodity/gold, 12 May 2024.)
Money markets were flat last week with the DXY up just 26 basis points to finish at 105.40 with little movement in US 10-year Treasuries closing at 4.50%.
Volatility remains at low levels with the VIX closing at 12.6 on Friday.
As Mickey Fulp (The Mercenary Geologist) pointed out on Friday, it is good to see Dementia Joe has his finger on the pulse claiming that inflation was 9% when he came into office. The real number at the end of the Trump administration was 1.4%.
Interestingly, the FedWatch tool has a 60% chance of a September rate cut which I believe should be closer to zero.
Another great step forward earlier this week was the imposition by the US of broad ranging new tariffs on Chinese imports affecting Chinese goods to the value of US$18bn worth including a quadrupling of tariffs on Chinese electric vehicles to a whopping 100%.
In an interview with Kitco, Ole Hansen from Saxo Bank believes that we are seeing a “technical break to the upside, supported by signs the U.S. labor market is cooling. With inflation being controlled, the expected number of U.S. rate cuts has been lifted to two from one”.
Obviously, much hangs on this week’s CPI data.
Figure 3: 5-year silver price chart (Source: https://tradingeconomics.com/commodity/silver, 12 May 2024.)
Othe precious metals also performed well with Silver (figure 3) finishing the week at US$28.17/ounce up 6.3%.
Platinum was 4.5% stronger to US$955/ounce and palladium closed up nearly 3.5% to finish at US$964/ounce after a report from Johnson Mattey and talking about a significant platinum deficit in 2024 in the order of 600,000 ounces or 8% of annual production attributable to the cessation of Russian selling.
Figure 4: 5-year copper price chart (Source: https://tradingeconomics.com/commodity/copper, 13 May 2024.)
Copper (figure 4) was volatile late in the week trading at US$4.54/lb for a 3-cent gain on the week. Copper is now up 17% year to date.
Plenty of speculation in oil markets with TWI closing at US$78.40 for a 33-cent gain for the week but was trading at just under US$80/BBL in earlier trading on Friday-supply demand/Chinese imports up.
In the US exploration rigs were -2, production was flat at 3.1M BOPD and inventories were flat at 15.8m BOPD per day.
The Trans Mountain Oil Pipeline expansion in Canada is now complete (or TMX pipeline as it is better known) and is a multiple product pipeline that carries crude oil and refined products from Edmonton (Alberta) to the coast of British Columbia (Canada).
Operations commenced earlier this month and it is now shipping around 900,000 BBLS out of the port of Vancouver bound for China.
The expansion cost a whopping US$35B with Mickey Fulp politely suggesting (like Australia’s own white elephant the NBN) that a return on capital this side of the next ice age is extremely unlikely….
Figure 5: World uranium production v reactor requirements (Source: https://world-nuclear.org/information-library/nuclear-fuel-cycle/uranium-resources/uranium-markets, 12 May 2024.)
The most significant event last week was the US Senate passing a ban on Russian uranium ban while at the same time making US$2.7 billion available to expand domestic production of nuclear fuel including the high-assay low-enriched uranium or HALEU needed for certain advanced nuclear reactor designs.
Russia currently accounts for over 30% of the world’s annual enriched uranium production with pressure mounting on new supply as more reactors are brought online (figure 5).
Not surprisingly uranium was up over 1% for the week to close at US$93.38/lb (figure 6).
Equity markets were broadly stronger with even our poor cousins in Toronto having a slightly better week with the TSX-Venture exchange losing at 597 for a 15-point gain. This is the highest close since mid -August of 2023.
Figure 6: Uranium spot price (Source: https://world-nuclear.org/information-library/nuclear-fuel-cycle/uranium-resources/uranium-markets, 12 May 2024.)
Iron ore, which almost every investment bank likes to talk down, touched $US120/t last week before slipping to US$115 in futures in Singapore early on Friday, down 1.4 per cent for this week (figure 7).
Figure 7: 5-year Iron ore price chart (Source: https://tradingeconomics.com/commodity/copper, 13 May 2024.)
In a Bloomberg interview last week, analyst Mengtian Jiang from Horizon Insights however is somewhat more bullish and believes prices will touch $US140/t this year.
The key drives according to Jiang are Beijing’s policy measures, including special bonds to fund infrastructure as well as a steel restocking cycle outside China are likely to underpin demand.
Citigroup however believes that iron ore will hover around $US110 over the next two quarters while Macquarie Group are projecting an average price of US$116/tonne over 2024.
Some important economic news out next week including PPI on Tuesday and CPI and retail sales on Wednesday. Apparently Federal Reserve Chair Jerome Powell is speaking in Amsterdam next week. Let’s hope he has a toke on something better than what Dementia Joe is having…
Stock of the Week: Renegade Exploration
Before I get into this weeks featured company a special mention on one of my earlier Stockhead companyies, namely Southern Cross Gold (ASX: SXG) which has rocketed from 20 cents on listing a few years ago to touch just under $3.50 a week or so on the back of some outstanding gold-antimony exploration results at its flagship Sunday Creek Project in Victoria.
The project is on its way to being a serious gold-antimony producer with drilling so far returning over 47 individual intersections grading >50 g/t gold equivalent.
I did have general manager, geologist, and former colleague Lisa Gibbons (who unsurprisingly has changed her name by Deed Poll to “Life’s Good”) as a page three girl for that issue until the fun police at Stockhead informed me that there was no such thing as a “page three girl” anymore.
Figure 8: RNX 2-year share price chart hydrogen formation (Source: CMC Markets, 14 May 2024).
Figure 9: RNX’s Queensland exploration portfolio (Source: www.renegadeexploration.com, 14 May 2024).
Renegade Exploration (ASX: RNX) (figure 8) is another copper hopeful chasing glory in the prolific Cloncurry district of Queensland (figure 9).
The company is chaired by Rob Kirtlan who relocated to Brisbane a couple of years ago on the belief that there was broader selection of white shoes, gold chains and Hawaiian shirts to choose from which suited his new corporate image.
Anyway, he cut a fine figure at Cigar Social the other week and was warmly welcomed by the Cigar Social Climate Change Sceptic Committee after a download of the One Nation manifesto.
The main interest centres around the Mongoose Deeps (RNX 29%: Glencore 71%) magnetic anomaly (figure 10) which is the focus of the current round of drilling.
The anomaly is interpreted to outline a magnetite rich breccia pipe, and, according to the company, has a similar configuration to the Ernest Henry copper mine (100% owned by Evolution Mining Ltd: ASX: EVN)) with annualised production of 80,000 ounces of gold and 50,000 tonnes of copper.
Previous drilling at the Mongoose Prospect has also outlined a JORC Resource of 3.1Mt @ 0.55% Cu and 0.07g/t Au for 17.0Kt Cu and 7.3koz Au (0.25% Cu cut-off).
Figure 10: Plan view showing the close to surface magnetic anomalism at Mongoose and Mongoose
West, rock samples 1,2 and drill holes 3,4. Background is Magnetics RTP utilizing a high pass filter (Source: RNX, ASX Announcement, 9 May 2024).
This blind target is interpreted as a crackle breccia zone situated above the primary pipe body. I can’t reproduce all the figures here but would recommend viewing their latest presentation on the website.
There are plenty of signs of encouragement with high grade copper-gold drill intercepts from over 3600m of RC drilling producing numerous encouraging intersections including:
RMG021:
10m @ 5.4% Cu, 0.88g/t Au, from 84m, within a broader zone of:
27m @ 2.2% Cu, 0.35g/t Au from 84m
RMG019:
74m @ 0.70% Cu, 0.19g/t Au from 68m; including,
5m @ 1.9% Cu, 1.01g/t Au from 68m; and
27m @ 1.1% Cu, 0.26g/t Au from 115m; including,
7m @ 2.3% Cu, 0.54g/t Au from 130m
At a market capitalisation of just over $21 million this is certainly one to keep an eye on as it tests the deeper targets in the hunt for an Ernest Henry lookalike in a prolific copper district.
Keep your Hawaiian shirt, gold chain and white shoes on standby just in case we have a red -letter day…
Guy Le Page is a director and responsible executive at Perth-based financial services provider RM Corporate Finance. A former geologist and experienced stockbroker, he is involved in a range of corporate initiatives from mergers and acquisitions, initial public offerings to valuations, consulting and corporate advisory roles.
He was head of research at Morgan Stockbroking Limited (Perth) prior to joining Tolhurst Noall as a Corporate Advisor in July 1998. Prior to entering the stockbroking industry, he spent 10 years as an exploration and mining geologist in Australia, Canada, and the United States.
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