Monsters of Rock: A game of two halves for big ASX miners

Iron ore stocks took a dive in afternoon trade to send what was looking like an alright day for big mining stocks heavily into the red.

Fortescue Metals Group (ASX:FMG) was off 5.34%, erasing gains from earlier in the week, with Rio Tinto (ASX:RIO) slipping 3.19% and BHP (ASX:BHP) off 1.03%.

After a week of rebounds the iron ore price dropped from US$135/t to US$129/t, with the top traded January contract on the Dalian Commodities Exchange flagging by 4.8% as of 4.30 AEDT.

Attention is again turning to China’s debt-ridden property market after Evergrande missed another round of bond payments on Tuesday.

There are diverging opinions on whether China will allow its property and infrastructure sectors to go into decline.

Some market watchers, like Fastmarkets index manager Peter Hannah and Fenix Resources boss Rob Brierley are doubtful given the continued importance of infrastructure to China’s five year plan.

Capital Economics senior Japan, Australian and New Zealand economist Marcel Thieliant, who believes iron ore prices will fall to US$60/t by the end of 2025, sees China’s infrastructure sector heading into a structural slowdown.

“The fact that Japan’s steel demand has fallen by 30% since the early-1990s highlights what’s at stake,” he said.

“A slowdown in China’s property sector is the biggest headwind as residential construction accounts for around one-third of China’s steel usage.

“We also think that infrastructure investment, which absorbs another 20% of steel, is bound to slow.

“China accounts for 57% of global steel output and other countries are unlikely to fill the void. Indeed, we expect global steel demand to fall over the coming years.”

Mooning uranium stocks Paladin (ASX:PDN) and Energy Resources of Australia (ASX:ERA) were the top large and mid cap miners after prices for the nuclear fuel rose by $3/lb overnight.

SANDFIRE RESOURCES (ASX:SFR)

British Australian firm Adriatic Metals (ASX:ADT) has sewn up a US$244 million funding package with Orion Resource Partners for its Vares silver project in Bosnia and Herzegovina.

That has proved a boon also for copper miner Sandfire Resources, which will bank a handy $97 million from the sell down of its 34,600,780 CHESS depositary interests at $2.80 a pop.

The funding will be a handy add-on for Sandfire, which last month announced a U$1.865 billion deal to buy the 100,000tpa MATSA copper complex in Spain from Trafigura and Mubadala Investments.

KALIUM LAKES (ASX:KLL)

Kalium Lakes last week announced it had become the first sulphate of potash producer in Australia, a milestone moment for a new Australian industry that has had its fair share of hiccups so far, notably Salt Lake Potash’s (ASX:SO4) struggles to get its Lake Way project up and running.

Today Kalium Lakes announced it would restructure its debt and raise $50m in two tranches to boost production at its Beyondie SOP project in WA from an initial 90,000tpa to 120,000tpa by the foruth quarter of 2022, which is expected to cost around $45.3 million.

“Today marks another exciting milestone for the Beyondie SOP Project following first production of SOP delivered last week. The expansion further strengthens the Company on a number of fronts including the ability to take advantage of economies of scale, provision of working capital facilities, more robust earnings and operating leverage and improves the Company’s balance sheet strength,” Kalium Lakes CEO Rudolph van Niekerk said.

“The funding will expand Beyondie from 90ktpa to 120ktpa which is well timed into a rising SOP price environment and several potential upside opportunities with COVID-19 impacts normalising. With the additional production to 120ktpa, Beyondie remains a long-life, low-cost operation with the potential to further expand production.”