Pic: John W Banagan/Stone via Getty Images
Mining
It was a rough day for the Australian market and even more unfortunate for miners, with the materials sector eating a 1.94% loss.
Look no further than tepid displays from iron ore and gold miners, suffering the after effects of a rough day of commentary from overseas.
In China PMIs failed to excite, with official data from the National Bureau of Statistics suggesting more weakness in manufacturing activity over yonder.
Iron ore slid 1.6% to US$111.20/t, but could be in for a better performance today, with Singapore futures up 1.45% to US$112.30/t.
Gold prices fell slightly as Jerome Powell of US Fed fame said more rate hikes were needed to calm inflation.
That sent the All Ords gold sub-index down 2.29% to 6676.3 points, a more than 1000 point drop since hitting 12 month highs on April 13 as prices have fallen back from the vicinity of record highs.
If there was a bright spot it was copper, where prices lifted 0.6% to US$8603/t yesterday on signs physical demand for the metal is improving.
“Premiums paid for immediate delivery rose to their highest since October, while the futures curve moved into backwardation, where spot prices are higher than futures,” ANZ’s Madeline Dunk said.
“China’s power grid investment rose 10% y/y in April, while solar capacity additions were 48GW against 16GW a
year ago. There has also been a sharp drawdown in inventories at Shanghai Futures Exchange warehouses.”
The reality is that most explorers struggle to make a go of it.
Those that do can be spectacular success stories.
Look no further than De Grey Mining (ASX:DEG), which is up 734.38% over the past five years on account of its 9.5Moz Hemi gold discovery in the Pilbara.
Ironically it was another company that really made the running there in 2017/2018 off the back of the “Pilbara gold rush” when investors went irrationally batty off the discovery of so-called watermelon seed nuggets and ‘conglomerate gold’ found by TSX-listed Novo Resources.
The theory went that the Pilbara had ancient but untapped links to the world’s greatest gold basin in South Africa, the Witwatersrand.
As it transpired the watermelon seed thing petered out, and Novo went on to become an unspectacular and conventional gold miner operating in the Pilbara and exploring in Victoria.
Now De Grey, which had a solid but less remarkable run in that initial Pilbara madness, is Australia’s fifth biggest gold exposure and is set to become the largest shareholder in Novo, which finally has plans to list on the ASX.
A combined $35 million investment will see De Grey subscribe for 11.6% of Novo’s shares, something it can increase in the proposed dual-listing.
That accounts for $10m of the investment from the bigger brother in the deal. Another $25m to be spent over the next four years could be outlaid to claim 50% of Novo’s Egina project.
How the tables turn.
At Stockhead, we tell it like it is. While De Grey Mining is a Stockhead advertiser, it did not sponsor this article.
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