Ground Breakers: China delivers for major miners on big morning of gains

China’s factory activity grew at its fastest rate since April 2012, giving hope to miners
Big iron ore stocks and South32 lead the way as materials gains 2.4%
St Barbara faces mothballs in Canadian gold business on approval delays

China is back in swing. At least that’s what their totally reliable purchasing managers index tells us.

At 52.6, any number above 50 tells us factories are ordering more equipment, materials and the like than they were last month, the highest number since April 2012.

The NBS’ official number, which incorporates large state-owned enterprises, is often considered less reliable than the independent Caixin survey, where small enterprises reported a 51.6, indicating a smaller but still substantial lift in factory activity in February, up from 49.2 in Jan.

But it was a propellor for base metals and iron ore, with the first indications that China is recovering from its Covid lockdowns and Lunar New Year lull.

Copper lifted 1.6% above US$9000/t to US$9101/t, while nickel was up 0.4% to US$24,890/t with zinc and aluminium also up.

Iron ore swaps rose 2.5% to US$126.50/t according to ANZ Research.

“This was the first set of comprehensive data released since COVID-19 restrictions ended late last year. It comes ahead of next week’s National People’s Congress where a new growth target will be disclosed,” ANZ’s John Bromhead said in a note.

“Expectations of lower demand from the electric vehicle sector may need to be reset, after Deputy Finance Minister Xu said China will extend the sales-tax exemption for new energy vehicles and is looking at new policies to further support the sector. The Ministry of Commerce is also looking at measures to expand consumption.”

Iron ore futures were boosted by a first rise in Chinese home sales in 20 months, with MySteel reporting two-thirds of steel companies expect sales to improve after a 1.7% fall in steel production to 1.018Bt in 2022, Bromhead noted.

It comes after a rough month for commodities in February, with only uranium a winner as China’s emergence from Lunar New Year failed to fire metals higher.

Singapore iron ore futures were up slightly this morning to US$126.45/t, with Dalian futures up around 1.5% so far today.

That’s great news for the materials sector, up 2.4% this morning, and the major mining stocks who are hogging the top of the leaderboard in the ASX 200 today.

Fortescue Metals Group (ASX:FMG), Rio Tinto (ASX:RIO) and BHP (ASX:BHP) were all up between 3-4%, with South32 (ASX:S32) gaining 4.92%.

MinRes (ASX:MIN) lifted 2.17% with gold miners also in favour, as all of Newcrest (ASX:NCM), Northern Star (ASX:NST) and Evolution (ASX:EVN) posted solid gains.

Ground Breakers share price today:

Impaired to buggery, Nova Scotia assets face more struggles St Barbara barely has to care about

There remains little doubt St Barbara (ASX:SBM) overpaid handsomely for its Atlantic Gold Operations in Nova Scotia.

One of a collection of questionable moves into North America that placed a massive handbrake on ASX gold miners, St Barbs paid $768 million, in cash no less, to acquire the 2.4Moz gold miner of the same name in 2019.

After years of permitting issues exacerbated by closed borders during Covid which left company management stranded from regulators they needed to schmooze, it booked a $402m impairment on the mines ($298m after tax) last month on route to a $407.1m half year loss.

The big struggle at Atlantic now is tailings capacity. It wants to tip its mine waste into the well-worn Touquoy open pit.

In order to do so it needs some more approvals. Unfortunately today SBM announced it received requests for information from the Nova Scotian Minister of Environment and Climate Change in response to the environmental assessment of the in-pit tailings solution.

The Minister’s questions are apparently quite detailed, and will take more time to address than it takes for the tailings capacity to run out in early FY24, prompting a period of care and maintenance.

This is all non-sensitive of course, since St Barbara is heading into a merger with Genesis Minerals (ASX:GMD) and spinning off the troublesome Atlantic Gold and Simberi asset in PNG into Phoenician Metals.

The new Hoover House business, led by legendary gold executive Raleigh Finlayson, will have the task of turning around St Barbara’s historic Gwalia gold mine.

Atlantic and its permitting issues will be someone else’s problem, aside from those SBM shareholders who’ll enjoy what was described on the merger deal as the premium of a stake in the spinoff.

The Atlantic ops are expected to deliver 40-50,000oz of gold this financial year.