Ground Breakers: Where are the ASX’s major miners headed this morning?
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Welcome to Ground Breakers, our new column where we catch the morning moves for major miners in the ASX 200 and beyond.
Is China’s economy on track for a major slowdown amid the energy shortage?
Official numbers out of the world’s second largest economy suggest its manufacturing sector is contracting, with the National Bureau of Statistics’ official PMI sliding from a reading of 50.1 in August to 49.6 in September.
Anything below 50 indicates an economy moving backwards, although the independent Caixin-Markit survey was up from 49.2 to 50.
Indexes were worst for sectors impacted by shipping, Covid outbreaks and energy issues, including heavy industries like metal refining.
The surveys for the PMI were also carried out before last week’s dramatic escalation in China’s power rationing, meaning worse could be to come in October.
“We have already commented on the downturn in steel production and it seems likely that energy intensive industries, such as aluminium and steel, will be bearing more of the brunt of the recent power rationing in many provinces,” Capital Economics chief commodities economist Caroline Bain said.
What impact has this had – or will have – on the major miners? Iron ore producers FMG, BHP (ASX:BHP) and Rio Tinto (ASX:RIO), were all in the red as of midday AEDT, with Fortescue down 1.51%, BHP off 0.27% and Rio down almost 1%.
The iron ore price was off around 3% to US$115/t as Chinese restocking ended ahead of the week-long National Day festivities on Friday.
Champion Iron (ASX:CIA) and Mt Gibson Iron (ASX:MGX), which announced plans last week to put its Shine mine near Geraldton on ice, were also flat but Mineral Resources (ASX:MIN) was bucking the trend with a 1.92% gain.
With coal prices going haywire amid the energy shortage though, it is a good time to be in thermal coal.
Prices continue to rise to new records, with Newcastle thermal prices up 4.6% on Friday (and 27.4% over the month) to US$228/t on Friday.
Yancoal (ASX:YAL) is on a tear. After lifting by ~10% on Friday, the $4 billion capped coal exporter was up 44c or 14.67% to $3.44 this morning.
Gold Road Resources and Gold Fields have been through the ringer with production issues at the Gruyere gold mine in WA’s Yamarna Belt.
The mine produced 59,371 ounces of gold in the September quarter. While that’s up from the 53,312oz it turned out in June, Gruyere is still going to miss its 260,000-300,000oz production guidance for 2021, with the JV owners now forecasting it will produce 250,000-260,000oz.
That will depend on a massive December quarter, with output forecast to jump to 71,000-81,000oz. Costs are also under review.
The latest issue afflicting the mine’s processing plant was unscheduled maintenance of its ball mill last month.
FMG said it is resuming operations at the Solomon mining hub, after a drill and blast crew member died in an accident last week.
Ore processing is back online with mining operations to restart progressively, the company said.
“The health, safety and wellbeing of all Fortescue team members is the Company’s highest priority. A range of support services are available across all sites, including the Fortescue Chaplains and Employee Assistance Program and assistance is being provided to our Solomon operations team members to support them during this difficult time.”
West African Resources has been the poster child for mid-tier success on the African continent since opening its Sanbrado mine in Burkina Faso at the start of the pandemic last year.
Despite those challenges, the emerging mid-cap has performed admirably at Sanbrado, and is up 15% over the past six months, bucking the trend for producing gold miners.
It provided another positive update this morning, with gold production up 29% in the September quarter to a record 81,960oz, a result that means it expects full year production above the upper end of its 280,000oz guidance for 2021.