Metal prices were a mixed bag in the week that ended Oct. 4 as the U.S. and China reportedly moved closer to holding talks over an ongoing trade war that has roiled markets.
China and the U.S. are set to meet in Washington on Oct. 10-11 as the two countries try to resolve differences over trading policies and tariffs, according to a CNBC report. Meanwhile, Chinese State Councilor and Foreign Minister Wang Yi said China is willing to buy more U.S. products as both sides temporarily ease trade measures ahead of the reported negotiations.
In the U.S., weak manufacturing economic data continued to support widespread expectations that the Federal Reserve will cut its benchmark rate in October to help support the U.S. economy.
S&P Global Ratings also pointed to high levels of corporate debt amid a slowdown in earnings. "While low interest rates are keeping speculative-grade default rates low (at 2.1% in first-half 2019), high debt levels and slowing economies portend a future spike," Ratings credit analyst Terry Chan said.
Price ring
In base metals, the price of copper fell 2% to US$5,608/t, zinc slid 1% to US$2,336.50/t and lead jumped 5% to US$2,162.50/t. Aluminum was down 1% to US$1,708/t.
The price of iron ore climbed 3% to US$92.18/t.
In precious metals, gold and silver each ticked up 1% to end the week at US$1,507.51 per ounce and US$17.61/oz, respectively. Platinum dropped 6% to US$873/oz, while palladium fell 1% to US$1,661/oz.
Talking points
BMO Capital Markets analyst Andrew Kaip noted that gold miners appear to trade at a discount to historical averages.
"Overall, the large precious metal producers are currently trading at an average 7.3x one-year forward price-to-cash flow, closer to trough-cycle multiples and suggesting that the risk is to the upside for gold equities, even at current prices," Kaip said in a Sept. 30 note.
Kaip broke down the performance of individual gold mining companies and noted that among larger "outperform"-rated companies, Barrick Gold Corp. is in an uptrend, while Newmont Goldcorp Corp. is in a downtrend.
But Newmont's lackluster share price performance may reverse course as it starts to deliver on a merger with Goldcorp, which closed earlier this year, Kaip said.
He also said Agnico Eagle Mines Ltd. tended to trade at a premium, with investors attracted to its track record in building and operating gold mines.
As for companies trading at a discount, Kaip said AngloGold Ashanti Ltd. and Gold Fields Ltd. had the potential to move into an uptrend should they execute well on ongoing projects.
Financings
Among larger financings in the week ended Oct. 4, Gerdau SA secured a US$800 million loan with a five-year maturity, Reuters reported, citing security filings.
Metinvest BV said a US$440 million tender to buy some of its 2023 notes was oversubscribed with US$639.4 million having been tendered by a Sept. 30 deadline.
PJSC Polyus priced 20 billion Russian rubles of 10-year bonds at a coupon rate of 7.40% per year.
Ferroglobe PLC said a revolving credit agreement was lowered to US$150 million from US$200 million following an agreement with lenders.
In the junior sector, Heron Resources Ltd. outlined plans to raise A$91 million to complete the Woodlawn zinc-copper project in Australia.
Wesdome Gold Mines Ltd. refinanced a C$45 million revolving senior secured credit facility to replace a C$36 million three-year revolver.
