Monsters of Rock: Paladin deal in limbo and coal mine nabs rare funding

Mining stocks rise again as Chinese stimulus powers iron ore, copper and more
Paladin hits another potential roadblock in Canadian uranium merger
Dartbrook mine “funded” after debt and equity raise from Australian Pacific Coal

Major mining companies are moving into hibernation, tabling up numbers for the September quarter ahead of reporting season.

But they’re shifting strongly upwards at the moment, with the void of information about their activities replaced by euphoria around Chinese stimulus measures, which have placed a rocket under a host of commodities, especially iron ore, met coal and copper.

Singapore had iron ore prices up 1.5% today to US$109.70/t, US$20 higher in roughly a fortnight.

Safe haven buying sent gold higher overnight thanks to the Middle East, also pushing oil prices up, while ANZ’s Feliz Ryan, Brian Martin and Daniel Hynes commented in a note that the Chinese economic shift and market tightness were supporting copper and aluminium.

“Copper led the base metal sector higher on the back of optimism over demand in China. Sentiment was boosted following a plethora of stimulus measures announced last week by the PBoC and Politburo,” they said.

“Beijing became the latest city in China to ease curbs on home buying, part of the government’s renewed push to rejuvenate the property sector. Sentiment has also been supported by the prospect of further cuts to borrowing costs.

“In the US, Powell said the central bank will continue to loosen monetary policy if the economy progresses as expected. A squeeze in the aluminium market appears to be building, with contracts for October delivery trading at a premium over November. This is being driven by a lengthy queue to withdraw inventories.”

The materials sector was up 0.52% at 4pm AEST, but there were some unusually large moves at its smaller end.

Chalice Mining (ASX:CHN) climbed over 8.5%, with a slight move up in palladium and platinum prices and substantial shareholder notice from UBS the only pointers.

Graphite miner Syrah Resources (ASX:SYR) was even starker, lifting almost 30% despite having nothing to report and continued weakness in graphite pricing.

In some positive news for the bruised battery metals market, China’s new energy vehicle registrations hit a record 1.01 million in August, making up more than half of the 1.94m cars registered in the mainland in a 3.32% YoY and 9.35% MoM rise. It was the second straight month when new energy vehicles accounted for over 50% of passenger vehicles sales.

Paladin hits possible roadblock

Paladin Energy (ASX:PDN) received, barely, shareholder approval for its takeover of TSX-listed Fission Uranium back in September.

The merger, intended to create a US$3.5 billion company, was supposed to pair the Aussie producer and its active Langer Heinrich mine in Namibia, with Fission’s PLS, a high-grade pre-development asset in Canada’s Athabasca Basin.

But some of Fission’s shareholders have been less than enthused, notably 11.26% holder China General Nuclear Power Corp, which has opposed the final court approval of the scheme.

The latest potential roadblock has come in the form of a notice from the Minister of Innovation, Science and Industry that a national security review had been launched into the arrangement.

That means consideration of the deal under the Investment Canada Act is yet to be cleared.

“Paladin is considering the Minister’s notice, exploring its available options and evaluating the prospects of obtaining ICA clearance in respect of the Arrangement,” PDN said in a statement.

“There can be no certainty that the Court will grant the Final Order, or that ICA clearance will be forthcoming, or that the Arrangement will be successfully completed.”

PDN, up 1% today (who likes being diluted by M&A), expects to produce 4-4.5Mlb and sell 3.8-4.1Mlb at costs of US$28-31/lb from Langer Heinrich in FY25.

New coal mine “funded”

It’s harder to get a coal mine funded in 2024 than finding where in the world Carmen Sandiego is, but Australian Pacific Coal (ASX:AQC) says it will be able to restart mining operations at the Dartbrook mine and finance ramp up after upping its senior debt facility from commodity trader Vitol from US$60m to US$90m.

A new $20m junior debt facility has also been issued for the mine’s rejuvenation, with AQC tipping in 50%, along with a $20m equity raise consisting of a $9.6m institutional placement and 1 for 6.16 non-renounceable entitlement offer to raise $10.4m.

$6m has been committed by Nick Paspaley’s Trepang Services.

Located 4km from the town of Aberdeen, the mine was shut by Anglo in 2006 due to operational and geological problems.

Commercial production of the mine, which will produce 2.4Mtpa of high quality thermal coal at its peak, is expected in the fourth quarter, with wet plant refurbishment expected to be completed by early 2025 and lab testing on lower grade met coal products (which carry a premium to thermal prices) under way.