InvestorIntel Report: Arafura stock boosts rare earths image; Gold miners re-ranked; Discoveries galore
A rare earth company seeing its shares rise by 53.06% in a week? It’s an extraordinary event, and even more so because it seems to have entirely skipped the attention of the Australian financial press (so far as I can see from a news search).
Such was the case with Arafura Resources Ltd. (ASX: ARU) which saw its shares gain from A$0.049 at the close on July 8, to have them at A$0.075 when trading finished on the following Friday, July 15 (and there were trades as high as A$0.079 on that day). Moreover, there was no big news announcement regarding the company’s Nolans project in the Northern Territory.
Some of the investor comment suggested some reasons, including that the line of stale bulls wanting to get out had finally been exhausted, and those who had bought or were holding long term were not going to let go cheaply, especially when the news from Arafura had been improving. While the outlook for rare earth prices is not cheerful for the short term, Arafura has over recent years been working towards a much leaner project, with there having been a succession of budget trims and technical changes that reduced capital costs.
Indeed, Arafura referred to the latest one when replying to a price query from the Australian Securities Exchange. It pointed to the announcement of June 28 outlining the latest round of operational and cost efficiencies. These included the addition of merchant-grade phosphoric acid added to the potential product range that could be offered to the fertilizer industry once the Nolans project got going. (In fact, when I first began reporting on Nolans back in 2004, phosphate was considered almost on the same level of importance as rare earths so far as Arafura was concerned — and uranium was in the mix too). Also, in June the company reported it had adjusted its proposed REE mining plan to target the preferred elements only and thus defer some capital spending.
(There may be another point worth mentioning: Arafura has sold a gold project in the Northern Territory to Ark Mines (ASX: AHK). This deal includes a 2.5% royalty on any of the metal produced by Ark — and, as we all now know, any news about gold tends to glister.)
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But the response to the ASX last week also made another point, which perhaps caught investor eyes as the week ended.
Arafura made reference to the decision by an international arbitration court in The Hague ruling against China and in favour of the Philippines in relation to territorial claims in the South China Sea. “The company notes that similar geopolitical events have previously impacted global rare earth supply,” it told the ASX.
This presumably refers to the 2010 incident over an island dispute by China and Japan, which led to China banning all REE exports to the Japanese customers. That was one of the triggers for the explosion in rare earths prices that made them soar through 2011.
It is a point worth considering. While it would be foolish to suggest that we would see a repeat of the 2011 frenzy, any uncertainties about the availability of Chinese-sourced rare earths would, at the very least, be music to the ears of companies such as Arafura, Peak Resources (ASX: PEK), Alkane Resources (ASX: ALK | OTCQX: ANLKY) and Hastings Technology Metals (ASX: HAS) in that REE end-users would probably be even keener to knock on their doors.
Gold stocks rerated
There’s further evidence that gold stocks are really starting to move as investors see a floor seemingly being put in place under the metal’s price. We have the rankings of the world’s top 25 metals and mining companies compiled by SNL Metals & Mining Research, of Charlottesville, Virginia.
As of June 30, 2015, Australia’s largest home-owned gold miner Newcrest Mining was ranked 42nd in the world; a year later it is No. 17. In the three months to the end of the latest June quarter its market capitalization rose by 31.3%; over the year to that date, it was up 71.3% (to $13.12 billion)
Barrick Gold went from No. 18 to No. 5 over the 12 months to June 30, and Newmont Mining rose from No.20 to No. 9. Even more spectacular was the rankings change for Russia’s largest gold miner, Polyus Gold International: it went from No. 60 to No. 13.
The four top rankings remained unchanged over the 12 months with BHP Billiton in first place, Rio Tinto second, Glencore third and Coal India fourth.
Discovery rates over the centuries
I this week happened upon a 1934 news item in The Washington Post. “Only nine of the ninety-two elements were known before Christ,” the report began. It was quoting a paper from the American Chemical Society. Those elements were the metals copper, gold, iron, lead, mercury, silver and tin, and the non-metals carbon and sulphur.
No more were discovered for more than 12 centuries when, in 1250, the world happened upon arsenic (now No. 33); the human race first heard about antimony in 1450.
As of the report appearing in 1934, the Post noted the more rapid speed of discovery. “Fifty of the ninety-two elements have been discovered in the past 200 years, and every decade in these two centuries except one (1850-59) had seen the discovery of one ore elements.”
The first decade of the nineteenth century (1800-09) was a bumper period with scientists identifying potassium, sodium, calcium, barium, strontium, magnesium and gallium.
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