Monsters of Rock: China wants to grow its iron ore empire overseas and Chalice extends palladium rich Julimar discovery

A State backed Chinese news service has put hard numbers on China’s plan to reduce its reliance on western suppliers of iron ore, saying it wants to raise its equity share in overseas mines to 220Mt by 2025.

That would be a more than doubling from 120Mt in 2020, although Chinese companies including state owned enterprises also have stakes in mines owned by majors like BHP (ASX:BHP) and Rio Tinto (ASX:RIO) in Australia.

According to reports in the China Metallurgical News quoted by Reuters, the China Iron and Steel Association wants to boost its share of overseas production, increase domestic output by 100Mt to 370Mt and bolster scrap steel consumption by 70Mt to 300Mt by 2025.

The plan has its foundation in concerns about the overall supply of steel raw materials and that the concentrated nature of the major Australian and Brazilian producers gives them pricing power in the market.

The report follows suggestions China wanted to set up a centralised iron ore purchasing platform to guard against so-called “speculation” it blames for driving another spike in prices to US$150/t earlier this year after it used environmental controls to crush a bull run that hit US$237/t in May 2021.

Although it is true BHP, Rio and Vale have a larger market share in iron ore supply than the individual steelmakers do in that end of the market, China has also stirred rising demand for iron ore after producing more than 1Bt of crude steel in each of 2020 and 2021.

How have China’s recent attempts at controlling prices in their trade battle with Australia gone? Not great. After a dip over the past fortnight they are back in positive territory.

Iron ore prices were up sharply overnight, rising to healthy levels of around US$143/t amid the Russia-Ukraine conflict and solid February manufacturing data in China, which pointed to growing industrial demand following bank rate cuts designed to stimulate the Chinese economy.

Dalian and Singapore Futures were both up today, with Singapore iron ore contracts for April poking their head above US$150/t.

Iron ore producers responded in kind, with BHP (ASX:BHP) up 3.8%, Rio Tinto (ASX:RIO) 4.62% higher, FMG (ASX:FMG) up 4.67% and star junior Grange Resources (ASX:GRR) up almost 7%.

Those gains drove the Materials sector to a 3% gain, with strong performances also from coal and gold stocks.

Monsters share price today:

Chalice extends underground potential at palladium rich Julimar find

Russia produces around 40% of the world’s palladium, a fact that has sent prices of the rare but significant precious metal on a canter since Russia invaded Ukraine, raising the prospect of sanctions and supply chain delays for almost half of global output.

Prices were up 3.1% to US$2567/oz overnight after days of solid gains.

Never has the importance of having a diversity of metals supply been so stark.

It is a point not lost on Chalice Mining (ASX:CHN) boss Alex Dorsch, who it seems has picked the right time to be drilling out the palladium-rich Gonneville deposit near Perth.

“The polymetallic PGE-nickel-copper-cobalt Resource defined at Julimar is already very significant on a global scale, however recent troubling developments in Ukraine have highlighted the strategic importance of this critical minerals deposit and the new West Yilgarn mineral province to support the decarbonisation of the global economy and to de-risk critical supply chains,” he said today.

Dorsch was talking about the release of new results from drilling at Gonneville.

The Julimar discovery was unveiled as one of the world’s largest nickel sulphide deposits of the last 20 years back in November, as well as the largest PGE (platinum group elements) find in Australian resources history.

Given that was on the back of less than two years of admittedly well funded drilling, you’d be silly to think the initial Gonneville resource, comprising just 7% of the 26km long Julimar intrusion, is where it ends.

New results from extensional drilling have identified high grade sulphide intersections of more than 0.6%NiEq suphides up to 400m beyond the limit of the Gonneville pit shell, highlighting its underground potential.

They included strikes like 16m at 2.9g/t palladium, 0.6g/t platinum, 0.4g/t gold along with nickel, copper and cobalt values, and a high grade stirke of 3.7m at 7.3g/t Pd, 1.2g/t Pt, 0.7g/t Au, 0.6% Ni, 1% Cu and 0.04% cobalt (a 4.5% NiEq grade).

Infill drilling into the shallow inferred resource at Gonneville down to around 250m has also occurred, with Chalice aiming to upgrade it to a higher confidence category as part of its next resource update due in May.