Global markets last week were shaken by U.S. President Donald Trump's announcement to pull out of the 2015 nuclear deal with Iran and impose new sanctions on the country.
Washington also threated to penalize European companies that continue to do business with Iran.
Alongside concerns over Iran restarting its uranium enrichment program, a potential escalation of tensions in the Middle East, in particular between Israel and Iran, sent shockwaves across the globe, pushing oil prices to a 3.5-year high.
Even though European leaders and other parties of the 2015 deal vowed to keep the agreement operational, geopolitical uncertainty ruffled global markets amid first signs that Iran was flexing its muscles.
Meanwhile, preparations for historic talks between North Korea and the U.S. were underway, raising prospects that sanctions on Pyongyang could be lifted if the country agrees to dismantle its nuclear weapons program.
The recent U.S. dollar rally ran out of steam, boosting sentiment for metals as expectations receded that the Federal Reserve will launch a number of quick rate hikes this year.
Price ring
Low inventories and speculative buying helped base metals retrieve some of the losses from the previous weeks, with copper gaining 1.5% to US$6,884/t, zinc and lead booking growth around the 1% mark and aluminum shifting 0.5% higher to US$2,327/t.
Nickel was the only base metal that ended the week in the red, plummeting 1.1% to US$13,820/t, though the metal is still up 8.8% year-to-date and trading nearly 49% above levels 12 months ago.
Iron ore remained widely flat and closed at US$65/t, while precious metals saw a slight upswing. Gold reached US$1,322/oz on May 11, a marginal 0.6% higher, while silver rose 1.2% to US$16.70/oz.
Talking points
First-quarter M&A deal values in the mining sector jumped as much as 86% compared to the same period in 2017, according to new analysis by EY, even though deal volumes saw a drop of 16% to 101 deals.
Transactions surged to US$25 billion, driven in particular by the merger of fertilizer giants Agrium Inc. and Potash Corp. of Saskatchewan, which formed US$36 billion Nutrien Ltd.
Potash and phosphate were the most targeted commodities by value in the quarter, accounting for about US$18.5 billion, while activity in other commodities remained slow in what EY described as a "wait-and-see mood."
Gold, aluminium and coal were the next most popular sectors, attracting total funds of US$2.0 billion, US$1.9 billion and US$1.7 billion, respectively, while other commodities did not exceed US$600 million.
Transactions across all sectors were largely linked to ongoing debt-reduction strategies on the divestment side, while buyers cited consolidation and strategic acquisitions.
"As investment-led strategies continue to gain momentum on the back of strengthening balance sheets, we expect consolidative deals to drive an uptick in transactions through the year," EY's team said. "However, a handful of divestment-led deals will be executed as portfolios continue to be reviewed. Strategic and financial investors alike position for growth in new world commodities, with activity in battery metals set to increase."
Financings
Larger financing deals last week included the closing of Nemaska Lithium Inc.'s senior secured callable bonds offering through which the company raised US$350 million. The U.S. dollar-denominated bonds have a five-year term and bear 11.25% interest per annum. Proceeds will go toward developing the Whabouchi lithium project in Quebec.
First Majestic Silver Corp. signed an amended and restated credit agreement with Bank of Nova Scotia, Bank of Montreal and Investec Bank PLC, giving the miner access to a US$75 million senior secured revolving term credit facility. It will replace an existing US$25 million revolving credit line and a US$35 million term loan.
Altech Chemicals Ltd. received an indicative mezzanine debt term sheet for up to US$120 million from an international investment bank for its proposed Johor Bahru high-purity alumina plant in Malaysia and associated kaolin mine in Meckering, Western Australia. Securing additional funding is a condition precedent to drawing down from a US$190 million senior loan secured from Germany's state-owned KfW IPEX-Bank in February.
Cokal Ltd. secured a financing package of at least A$67 million to fully fund the development of its BBM coking coal project in Indonesia to a capacity of 2 million tonnes per annum of coking coal. The package from Asian minerals development company Domain International Holdings Ltd. includes an equity component of US$30 million for a 50% interest in Cokal unit Cokal-BBM Pte. Ltd., which holds 60% of the project.
Boliden AB secured a €770 million two-tranche credit line from a banking syndicate to extend the maturity of existing facilities. The first tranche of €408 million has a five-year term, and the second tranche of €362 million has a three-year term. The facilities also include two additional options for a one-year extension.
KEFI Minerals PLC mandated the bond arranger for the placement of US$160 million of Luxembourg-listed infrastructure bonds, which will fund KEFI's Luxembourg-regulated Finance SPV's ownership of the gold processing plant and ancillary infrastructure at the Tulu Kapi gold project for lease to Tulu Kapi Gold Mines Share Co. Ltd. TKGM is jointly owned by KEFI Minerals (Ethiopia) Ltd. and the Ethiopian government.