Glencore Run the Ruler over Anglo

Rio plot to win global copper crown, remain coy on Anglo

May 03, 2024

G’day GC #

The Pre-Start

  • Capstone Copper reported Q1 revenue relatively unchanged from a year ago, producing 42kt at a relatively high C1 cost of US$2.88/lb. Operating cash flow (before working cap changes) was US$62m (CSC). We’d expect somewhat stronger cash flow for a business with a A$9b EV

  • Investor Samuel Terry released a presentation for their Karoon Energy activist campaign, with Fred Woollard pointing to Horizon Oil as an example of what aligned incentives lead to (Tweet, Presentation) and Sandon Capital similarly released a letter (Letter)

  • Patriot has acquired Azimut Exploration, in a bid to expand its land package around Corvette (PMT)

  • The CFO of Adriatic Metals has stepped down amidst ramp up at Vares (ADT)

High Grade It

  • Reuters said Glencore is studying an approach for Anglo American, despite still processing its US$6.9b Elk Valley transaction

  • BHP is attempting to woo South Africa in its pursuit of Anglo, sending a team of senior execs to win over government officials (The West)

  • Rio Tinto aims to become the world’s top copper producer, though it stayed quiet about competing for Anglo. It again ruled out development of Jabiluka, near the former mine Ranger (The West)

  • Austral, the Queensland copper hopeful, has fallen into receivership (IQ Queensland)

  • BHP has said its deal structure is not a negative reflection of South Africa, saying the structure reflected priorities and synergies (FT)

  • Mining services provider Macmahon won a three-year contract extension worth $352m at Boston Shaker (The West)

  • Albemarle said it may lower capex in the coming years if lithium prices stay low, after reporting revenue down 47% year-on-year (Mining.com)

  • MP Materials reported a wider-than-expected Q1 loss on the back of weak rare earth prices and low concentrate sales (Reuters)

  • BHP’s pursuit of Anglo highlights a global copper problem, with new mines essential to meeting future demand, say the FT. Is it possible to shorten the discovery-to-production timeline, or is buying producing assets the only option for majors?

Copper futures trading at a premium

Copper futures trading at a premium

  • Zimbabwe’s sole nickel mine, Trojan, has been placed under administration, seven months after halting production (Mining.com)

  • Zinc smelters in Europe are restarting following months-long hiatuses, with prices nearing a 13-month high (Reuters)

Wheelin’ n Dealin’

  • Pan American has agreed to sell its 100% interest in the La Arena gold property in Peru to Jinteng Mining, a Zijin subsidiary (Mining.com)

  • Brazilian rare earth explorer Axel REE has launched an IPO roadshow (AFR)

  • It’s a done deal for Azure Minerals, yesterday afternoon the scheme with Rinehart and SQM’s SG Mining became effective (AZS) The “Withdrawal of Takeover” announcement that came first definitely had our heart rate elevated

Rattlin’ the Tin

  • Sunstone Metals is raising $6.3m for its Ecuadorian gold-copper project (STM)

  • Boab Metals has received binding commitments for a $5m placement to progress Sorby Hills (BML) silver is back

Word on the Decline

  • We continue to hear that the oil and gas space is primed for M&A activity. In the aftermath of the fallout of the proposed Woodside- Santos merger, one of the prospects explored by Santos was rumoured to be a tie-up with Beach Energy. We hear that a prohibitive factor in getting this over the line was the challenge of splitting the Cooper Basin from the LNG assets. How Santos emerges, we look forward to seeing.

In the Weeds

  • Microsoft is set to power data centres by agreeing a US$10b renewable electricity project with Brookfield Asset Management, needed to satisfy cloud computing’s voracious power demands (FT)

  • A query on ChatGPT requires 10x the energy of a Google search leading to a surge in power contracts (see above) by Big Tech (FT). Will nuclear become a greater portion of the solution here? It certainly has the support of the world’s biggest (tech) companies.

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Today’s Top Tweet

Devil’s in the Detail

It’s interesting that CY23 was the most profitable year for most commodity trading businesses (see FT). And yet today we see that Macquarie’s commodities business, which has grown massively over the last decade, declined for the full year ending 31 March.

Operating income of Macquarie’s CGM business

Operating income of Macquarie’s CGM business

On a separate note, we have been paying attention to the sale of shares from directors at market-darling gold producer, Capricorn Metals. We can’t fault their execution to date delivering Karlawinda. But we wonder what the read-through is on Mt Gibson vs market expectations.

  • 5 Dec 2023 - Mark Clark sold 5 million shares and David Okeby sold 2 million shares

  • Today - Myles Ertzen sold 2 million shares

The same could be said for recent sales at Ramelius and Bellevue too, just something we are paying attention to.

Disclaimer

All information in this newsletter is for education and entertainment purposes only and is of general nature only. The hosts of Money of Mine are not financial professionals. Money of Mine are not aware of your personal financial circumstances. Before making any investment decision, you should consult a licensed financial, legal or tax professional, along with considering any relevant Product Disclosure Statement. Money of Mine does not operate under an Australian financial services licence and relies on the exemption available under the Corporations Act 2001 (Cth) in respect of any information or advice given. Money of Mine strives to ensure the accuracy and currency of the information contained in this newsletter but we do not make any representation or warranty that it is accurate, reliable or up to date. Any views expressed by the hosts of Money of Mine are their opinion only and may contain forward looking statements that may not eventuate. Money of Mine will not accept any liability whatsoever for any direct, indirect, consequential or other loss arising from any use of information in this newsletter

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