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In This List

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Base metal prices make gains amid Trump's de-escalation over trade

U.S. President Donald Trump backed down from a threat to impose a steel tariff on Brazil during the week that ended Dec. 20 in another sign of U.S. de-escalation over certain trade-related issues.

The move comes on the back of a tentative "phase-one" trade deal between the U.S. and China that some analysts said may help calm recession fears and boost the 2020 outlook for metals such as copper.

The price of copper has rallied so far in December and continued to make gains, climbing 0.7% during the week ended Dec. 20.

China also pushed for trade talks with the EU, with China's Foreign Affairs Minister Wang Yi calling for the launch of negotiations. "Why aren't you talking to your largest trading partner? I cannot understand," Wang said, according to Euractiv in a Dec. 17 report.

As for the U.S. economy, the Commerce Department said Dec. 20 that the GDP grew at an annualized rate of 2.1% in the third quarter, confirming a previous estimate.

Price ring

In base metal prices during the week ended Dec. 20, copper climbed 0.7% to US$6,147 per tonne, while aluminum rose 1.0% to US$1,774/t from the week before. Zinc gained 4.1% week over week to US$2,344/t, lead increased 1.4% to US$1,918.50/t, and nickel rose 2.5% to US$14,469/t.

The price of iron ore decreased 0.6% week over week to US$91.74/t.

In precious metals, gold and silver inched up from the prior week by 0.4% and 0.6% to US$1,477.40 per ounce and US$17.04/oz, respectively. Palladium dropped 2.1% to end the week at US$1,930/oz, while platinum climbed 0.3% to US$936/oz.

Talking points

BMO Capital Markets revised down base metal and metallurgical coal price expectations for 2020, saying that next year may prove "tepid" in terms of commodity price action.

The BMO analysts cut their average 2020 price expectations for metallurgical coal from US$176/t to US$163/t, with copper decreasing from US$2.93 per pound to US$2.82/lb, and aluminum contracting from 86 U.S. cents to 83 cents per pound. BMO Capital Markets also raised its iron ore forecast from US$78/t to US$79/t.

Comparing average 2020 price forecasts to average fourth-quarter prices this year, BMO Capital Markets said Dec. 17 that it saw the biggest upside in metallurgical coal at 15.2% and the most downside in iron ore at negative 9.8%.

"Meanwhile, after cutting copper prices meaningfully, the BMO Commodities team now expects similar, albeit muted, pricing moves in both aluminum and copper over the next 12-18 months," BMO Capital Markets analyst David Gagliano said in the Dec. 17 note.

BMO Capital Markets expects copper prices to average 7.2% higher in 2020 than in the fourth quarter of 2019, with aluminum prices expected to average 5% higher against the fourth quarter of this year.

Assessing U.S. mining and metals companies in light of the price revisions, Gagliano pointed to Freeport-McMoRan Inc., Warrior Met Coal Inc., Arch Coal Inc. and Stelco Holdings Inc. as top picks for 2020.

Financings

Amid a merger with LeaGold Mining Corp., gold miner Equinox Gold Corp. secured a US$670 million financing package comprising a US$400 million revolving credit facility, a US$100 million term loan, a US$130 million convertible debenture and a US$40 million share subscription.

Northern Star Resources Ltd. plans to fund its US$800 million acquisition of Newmont Goldcorp Corp.'s 50% stake in the Kalgoorlie Super Pit gold mine in Australia with A$480 million in secured debt from an existing lending group, about A$765 million from an underwritten institutional placement, A$5 million in cash reserves and up to A$50 million from a share purchase plan.

Kinross Gold Corp. signed a definitive agreement for a loan of up to US$300 million to fund an expansion of its Tasiast gold mine in Mauritania. Orla Mining Ltd. secured a US$125 million project finance facility to develop its Camino Rojo gold project in Mexico. Alamos Gold Inc. increased a revolving credit facility by US$100 million, to US$500 million.

Prospect Resources Ltd. signed an indicative term sheet mandating African Export-Import Bank to arrange US$143 million in debt as the company focuses on its preproduction-stage Arcadia lithium project in Zimbabwe.

In debt-for-equity swaps, Shandong Gold Mining Co. Ltd. plans to launch a 1.5 billion Chinese yuan program as it seeks to deleverage, and Western Mining Co. Ltd. replaced 2 billion yuan in debt with a couple of state-owned lenders taking stakes in a Western Mining subsidiary.

As of Dec. 20, US$1 was equivalent to 7.01 Chinese yuan.