Ground Breakers: Few safe havens as global growth concerns hit metals

OECD hits metals sentiment, slashing global growth forecast by 1.5%
Copper leads the way for base metals with 0.3% rise to US$9730/t
Fenix Resources locks in more hedges for Iron Ridge iron ore mine

Dr Copper is seen as a thermometer for the state of the world economy, but we might need a second diagnosis as copper prices rose while negative commentary on economic growth torched the mining sector.

The OECD cut its global growth outlook from 4.5% to 3% yesterday, briefly sending gold higher last night before a stronger US dollar cut the safe haven investment off at the legs.

Most mining stocks are down today despite increased demand out of a Covid-exiting Chinese economy sending a positive signal for commodities.

The aformentioned copper lifted 0.3% to US$9730/t and is trading around 8% higher than its seven-month low on May 12.

To no avail for the locally listed copper stocks, with 29Metals (ASX:29M), Sandfire Resources (ASX:SFR), Austral Resources (ASX:AR1) and OZ Minerals (ASX:OZL) all very much in the red.

The recent run for copper, which has coincided with Goldman commodities forecaster Nick Snowdon’s suggestion decarbonisation could make US$50,000-100,000/t copper a reality some time in the future, has come with warehouse stocks at extremely low levels.

Speaking to Reuters, Ole Hansen, the head of commodity strategy at Denmark’s Saxo Bank, said the market is putting in a “tentative recovery on the prospect of normalisation in China”.

He said investors were still wary about global growth though, because who isn’t?

“Last week’s big jump was primarily driven by shorts finally surrendering, however, the turnaround to putting on long positions seems quite a bit more hesitant.”

Copper stocks share prices today:

Fenix restocks hedges to keep iron ore dreams running

Iron ore prices have lifted steadily as China’s lockdowns have subsided, with prices circling the US$145/t mark for benchmark 62% iron ore fines.

That is good news for junior iron ore miner Fenix Resources (ASX:FEX), which made headlines last year for hedging part of its production at $230/t (Aussie), cannily locking in profitable sales as iron ore prices tanked through the latter part of 2021.

With iron ore prices again on a leg up, Fenix has doubled the dose, locking in 35,000t a month of sales at $180/dmt to June next year.

The iron ore swap arrangements includes contracts that are cash settled and have no margin calls, security, cash at call or deposits involved.

“Fenix is a highly profitable iron ore producer focused on maintaining a strong margin throughout the iron ore price cycle. Our hedging arrangements are sensible risk management which secure a solid margin on a base level of our production out to June 2023,” Fenix MD Rob Brierley said.

Fenix is up 14.29% year to date on the improved iron ore outlook, having last year made an NPAT of $49m and paid a maiden dividend of 5.25c a share on just 500,000t of production from its small but high grade Iron Ridge mine in WA.

Whether the junior scales those heights in 2021-22 after generating only $14m in NPAT through the first half of the financial year remains to be seen, but it did record a strong turnaround in the March quarter with $33m of net operating cashflow on 295,000t of shipments.