Monsters of Rock: Big resources stocks recover as Evergrande staves off creditors, for now
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It’s good news at least for now on Evergrande, the Chinese property giant swimming in debt that has transfixed global markets in recent days.
The underwater property giant said in a statement today that it would make a scheduled bond payment, allaying some fears that a default is imminent.
That appeared to provide positive sentiment for major miners who are quite obviously tethered to the property sector in China and the commodities it consumes to maintain economic growth.
China’s markets reopened today after a couple days off for the Mid-Autumn Festival, with the most traded January iron ore contract on the Dalian exchange opening down in morning trade before swinging to a ~3% gain in the afternoon session.
Fortescue Metals Group (ASX:FMG) recovered from several tough days of trade to lead the large caps with a gain of more than 4%, with other companies sold off in Monday’s bloodbath like Rio Tinto (ASX:RIO), BHP (ASX:BHP), Pilbara Minerals (ASX:PLS) and Lynas (ASX:LYC) also among the big movers.
Is Evergrande a factor in iron ore price volatility though? Some experts think it’s a red herring, with steel production cuts the main driver.
Striking chart, but I think #Evergrande is a red herring in #ironore‘s demise. If concern around property sector was causal we’d surely see #steel prices in #China selling off too, but we haven’t been. Iron ore collapse still much more linked to enforced steel output cuts IMO. https://t.co/shwxT8zSqV
— Peter Hannah (@PHmetals) September 22, 2021
Copper miner Sandfire Resources is set to open the Motheo copper mine in Botswana in 2023.
And it is getting bigger, with the company today releasing a maiden probably ore reserve from its A4 deposit, 8km west of Motheo, of 9.7Mt at 1.2% copper and 18g/t silver for 114,000t of copper metal.
Sandfire says it will be a high grade source of supplementary ore feed for Motheo, which will underpin an expansion in its processing capacity from 3.2Mtpa to 5.2Mtpa within two years of beginning mining operations.
That will see a 116% increase in pre-tax NPV to US$672m and internal rate of return of 36% for the project, which will have a mine life of 10.5 years and peak production of 60,000t of copper a year.
While capex will increase to US$366m in its new expansion PFS with the additional development costs and higher purchase prices for steel, life of mine all in sustaining costs will be 15% lower at US$1.56/lb.
A DFS is due on the Motheo expansion in the third quarter of FY2022. Sandfire expects to begin site works on the expansion in the first quarter of the 2023 financial year, with copper concentrate due in the first quarter fo FY2025.