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Essential IR Insights Newsletter - June 2023

Copper stands out as only gainer in bleak week for metals

It was a turbulent week for the United Kingdom last week when the snap elections took place just days after London was hit by another deadly terrorist attack.

Prime Minister Theresa May had called early elections to strengthen her mandate ahead of negotiations for a deal to exit the European Union. However, in a surprise result, her governing Conservative Party failed to secure a majority in parliament, forcing her to look for support from Northern Ireland's Democratic Unionists Party to continue to govern.

Global markets had widely expected a different outcome, and the pound plummeted against both the U.S. dollar and the euro as a result. Stocks also reacted to the weakened sterling and possible policy changes.

"General lack of visibility should increase expectations of Bank of England stimulus and hence keep bond yields low," RBC Capital Markets team noted in the aftermath of the elections. "Weaker Sterling would imply more inflation."

In the Middle East, tensions were on the rise as Saudi Arabia, Kuwait, the United Arab Emirates and Egypt imposed a blockade on Qatar amid allegations that the country supports terrorism. The four countries cut diplomatic ties and closed trade borders with their former ally, ordering the expulsion of Qataris from their countries.

The developments prompted concerns about a new crisis erupting in the Gulf region. President Donald Trump took credit for the Saudi move against Qatar, which came shortly after he visited the country in his first presidential trip abroad.

Meanwhile, there was enormous global interest in a U.S. Senate hearing of former FBI Director James Comey amid allegations of Russian meddling in U.S. presidential elections and the handling of an investigation into the matter by the Trump administration.

Price ring

It was a bleak time for metals last week as most major mined commodities booked losses.

Iron ore slipped as much as 5.8% last week, closing at US$54.4 per tonne. Year-to-date, the steelmaking ingredient is down 31.0%.

Among the precious metals, gold, platinum and silver all booked losses last week. Gold closed at US$1,268 an ounce June 9, down by 0.9%, while platinum fell 1.4% to US$941 an ounce and silver tumbled to US$17.3 an ounce, down 1.7%.

Most base metals also declined, with zinc and nickel being the worst performers, dropping 2.6% and 1.3%, respectively, while aluminum and lead lost 0.7% and 0.3%, respectively.

Copper stood out with a 1.1% gain, closing at US$5,704 per tonne June 9, helped by concerns over Chilean supply as the country's state miner, Codelco, restarted operations at mines in the northern part of the country following a storm that had caused precautionary closures.

Talking points

According to RBC Capital Markets, the unexpected Qatar crisis has further added to the geopolitical risk premium for gold, which lags 0.1% on an annual basis.

"We do think the rise of regional tensions in the Middle East with the dire deterioration in [Gulf Cooperation Council] relations with Qatar added to the geopolitical risk premium priced into gold," the team wrote June 8. RBC added that the Qatar dispute was one of the factors that helped drive up demand for gold exchange-traded products by more than 20 tonnes in June, and temporarily boosted prices to about US$1,295 an ounce.

"The unexpected crisis ... reiterates our recommendation to expect the unexpected. Outside of geopolitical risks, gold's fair value is lower, but both the potential for the Qatar dispute to drag on and for today's James Comey testimony to have political fallout means that gold could maintain its bid for now."

The U.K.'s political turmoil added to the uncertainty.

Investment firm The Pure Gold Company saw a 68% jump in physical gold sales a week before the U.K. went to the polls amid predictions that the gap between Theresa May and rival Jeremy Corbyn was narrowing.

Hours before the result was announced, gold sales at the firm jumped 87% as people sought a last-minute hedge against unpredictability, specifically removing exposure to sterling.


Last week saw a significant number of financing and refinancing deals going ahead.

Rio Tinto noted an early oversubscription of its cash tender offers to purchase up to about US$781 million of the outstanding securities launched in May. The two units offers were due to expire June 19 but were already oversubscribed June 5. The deals were in line with Rio Tinto's ongoing debt reduction plan.

Polymetal International Plc extended an existing US$400 million credit facility with Sberbank for seven years until June 2024. The effective tenor of the facility will be five years.

Royal Gold Inc. secured a US$1 billion credit facility to replace a US$650 million credit facility scheduled to mature in March 2021. The company repaid the previous facility using US$50 million from cash on hand and US$250 million under the new facility, leaving US$750 million available.

In a bid to raise up to C$51.3 million, Alphamin Resources Corp. launched a private placement, with Sprott Capital Partners and Tamesis Partners LLP acting as agents, and a separate nonbrokered private placement with 44.4% shareholder Tremont Master Holdings Ltd. Proceeds are earmarked for the continued development of Alphamin's majority-owned Bisie tin property in the Democratic Republic of the Congo and for general working capital.

PJSC Polyus, Russia's largest gold producer, launched a secondary public offering for a 7% stake in existing and new shares. The company sought to raise US$400 million in proceeds from the sale, which will go toward repaying outstanding debts and financing operating activities.

Lithium Americas Corp. entered into a US$172 million funding deal with a unit owned by Jiangxi Ganfeng Lithium Co. Ltd., which will see the Chinese company becoming the largest Lithium Americas shareholder. The company will sell 75 million common Lithium Americas shares for US$47 million and will also receive a US$125 million credit facility. The two also closed an off-take agreement for the purchase and sale of lithium products.

KAZ Minerals PLC extended a pre-export finance loan facility to US$600 million, pushing maturity by 2.5 years, from December 2018 until June 2021. Under the revised repayment schedule, principal repayments will start in July 2018 and continue in equal monthly installments over three years until final maturity in June 2021.

BHP Billiton Group's majority-owned Minera Escondida Ltda., which operates the Escondida copper mine in Chile, secured loans of US$500 million from a group of Japanese lenders.

PJSC Norilsk Nickel Co. closed a US$500 million bond offering, allowing the company to achieve its key objectives of repricing and extending its debt.

Taseko Mines Ltd. priced its offering of US$250 million worth of senior secured notes due 2022, which will accrue at an annual rate of 8.750%, payable semiannually, and will be issued at 99% of their principal amount.