Ground Breakers: Traders ‘buy on rumour, sell on fact’ as metals run and Coronado tumbles
Link copied to
As if the adage “buy on rumour” could be more apropos in our strange and uncouth times, the ASX 200’s trademark resources giants are in rarefied air today as a market rush inspired by rumours China would unwind Covid restrictions makes its way south.
The news sent markets on a sugar rush in the States on Friday, with copper up a heavenly 7.1% to US$8099/t, zinc 5.7% higher at US$2874/t, nickel bounding 4.4% to US$23,811/t and silver crashing through the US$20/oz barrier.
Iron ore futures are back around US$85/t after crashing to a year-low of US$77.17/t last week, a move that prompted Westpac to slash its December forecast by 16% from US$100/t to US$84/t on Friday.
Gold was up over US$50/oz in the other big move, with job gains in the US still strong but rising at the slowest rate since December 2020, raising hopes last week’s 75bps rate rise could be the US Fed’s last at that level.
Beijing reiterated its commitment to Covid Zero over the weekend, potentially portending a pullback in the same commodities which soared on rumours of its imminent end last week.
For now the materials sector is basking in the afterglow of Friday’s delirium, up 3.2%, with goldies Northern Star (ASX:NST) and Newcrest (ASX:NCM) up 4.74% and 2.47% respectively and iron ore miners BHP (ASX:BHP), Rio Tinto (ASX:RIO) and Fortescue (ASX:FMG) all trading more than 3% higher.
Among the mid caps it’s all golden, with Capricorn Metals (ASX:CMM) leading the way, the $1.4 billion entity lifting 9.14%.
The Mark Clark led gold miner, which restarted operations last week more than a fortnight after the death of a contractor at its Karlawinda gold mine in the Pilbara, picked the right day to announce a 32% increase in resources at its undeveloped Mt Gibson gold mine in the Mid West to 2.755Moz.
CMM is one of the few gold miners in the green this year, with its low cost Karlawinda mine helping the former explorer to a 13.5% gain while the All Ords gold sub-index has collapsed 22.9% year to date.
Now for our big loser of the day, Coronado Global Resources (ASX:CRN), which has been heavily sold off after announcing the end of merger discussions with America’s Peabody Energy.
“Coronado Global Resources Inc. today announces that it has jointly agreed with Peabody Energy Corporation to cease discussions regarding a potential combination of the two companies,” CRN told the ASX this morning.
“Today’s announcement does not impact Coronado’s fourth quarter plans as outlined in our recently released Quarterly production report and subsequent conference call conducted last week.
“Coronado continues to pursue and implement its existing capital management plans and remains focussed on its existing capital investments and long-term development strategy.”
The proposed deal would have seen the two resurgent coal plays combine, bringing together assets in the US and Australia.
Peabody last week delivered a US$375.1m profit in the September quarter, up from a loss of US$44.2m in the same period of 2021, while Coronado raked in US$875m in revenue, announcing a surprise US$225m dividend for investors.
The deal would have married Coronado’s met coal dominant operations with Peabody’s large thermal coal portfolio, an area CRN boss Gerry Spindler has been looking to pivot towards with high energy thermal coal still enjoying a rare though tightening premium over top quality coking coal.
He famously said markets were not rewarding steelmaking coal producers for “purity of intent”, with CRN’s shifting tonnes of intermediary product that can go both ways into the thermal generation market.
CRN’s sales mix has shifted from 82.2% met and 17.8% thermal coal in 2021 to 78.4% met and 21.6% thermal year to date in 2022.
Elsewhere in coal land Nathan Tinkler and his seemingly endless array of investment vehicles are back after the disappointment of being edged out of the redevelopment of the Dartbrook coal mine in the Hunter Valley.
Check out more about that here.
His companies Oceltip Coal 1 and Oceltip Coal 2 will take a 19.92% stake in Canadian met coal developer Jameson Resources (ASX:JAL), with a $10 million placement at 11.55c per share, a 70% premium on its 15 day VWAP.
Reuben Adams reports Jameson shares have soared on the deal. Despite the run in coal stocks this year, Jameson has traded sideways until now.
It holds a majority interest in the Crown Mountain hard coking coal project and all of the Dunlevy project in Canada’s British Columbia territory.