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Copper surges on China imports; Trump derides Canadian PM in trade spat

In the middle of the G-7 summit, U.S. President Donald Trump lashed out at allies on trade and excoriated the meeting's host, Canadian Prime Minister Justin Trudeau.

Trump called Trudeau "dishonest" and "weak" in a June 9 series of tweets. Then in TV interviews June 10, two of his advisers ratcheted up the criticism, with Peter Navarro suggesting Trudeau belonged in hell and adviser Larry Kudlow saying Trudeau had stabbed Trump in the back.

The comments came after Trudeau, during a news conference at the G-7 summit after Trump departed early, reiterated Canada's position on U.S. steel and aluminum tariffs. Canada plans to counter them with similar tariffs starting July 1.

Trump railed against Canada's protected dairy market and suggested that further U.S. trade actions were inevitable. "Change is coming!" he tweeted June 10. A day earlier, he tweeted that the U.S. was looking at tariffs on "automobiles flooding the U.S. Market!"

Shortly after the summit, German Chancellor Angela Merkel said the EU would also introduce countermeasures to U.S. tariffs, which the U.S. has justified on national security grounds.

The dust-up over trade came just days before Trump's meeting over denuclearization with North Korean leader Kim Jong-un in Singapore. The two are set to meet June 12 at 9 a.m. Singapore time.

Price ring

The price of copper jumped during the week ended June 8 after Chinese customs data showed an increase in copper concentrate imports in May. Copper surged 7% to end the week at US$7,261.50/tonne.

Otherwise, price movements in the metals market were relatively muted by Friday's close. Nickel, zinc and lead were up 1%, 3% and 2%, respectively, to close at US$15,235/t, US$3,182.50/t and US$2,466/t.

In precious metals, gold was about even at US$1,298.40/oz, while silver inched up 2% to close the week at US$16.74/oz.

In bulk commodities, iron ore was also steady, ending the week at US$64.74/t.

Talking points

There is a contrarian trade in the North American gold sector with below-average valuations acting as an appetizing entry point, RBC Capital Markets analysts said in a June 6 note titled "Opportunity still knocking: Discounted valuations revisited."

"The North American precious metal producers continue to trade at a discount to recent trading levels at spot commodity prices and currencies," the RBC team said. "While multiples on key valuation metrics remain attractive, the discount to more recent trading levels has narrowed since bottoming earlier this year."

Taking the average price-to-net asset value ratio since 2014, the RBC analysts said the sector traded at a 14% discount. Within the sector, the intermediate and junior miners traded at the biggest discounts at 25% and 26%, respectively, to the average price-to-NAV ratio.

"With the sector appearing to be ignored by many investors, we believe the disconnect between valuations and metal prices could reverse if gold prices strengthen and investor interest in the equities returns, especially if gold can surpass the US$1,360/oz resistance level," the analysts said.

The RBC analysts also noted that precious metals may have a place in portfolios for some investors wary of geopolitical risk. "With global uncertainty on the rise, precious metal producers could provide investors a low-beta alternative within a broader portfolio."

Financings

In larger financings, Vale SA reportedly signed a US$700 million streaming deal covering cobalt production from its Voisey's Bay nickel-copper-cobalt complex in Newfoundland and Labrador, with Bloomberg News citing several sources in a June 8 report. The possible transaction is yet another sign of the intense jockeying by financial groups and manufacturers to secure cobalt supply, which is largely produced in the Democratic Republic of the Congo.

In other streaming news, Sibanye Gold Ltd. said it is in the market for a US$500 million streaming deal and a US$100 million financing with an eye to cut back debt on its balance sheet. President and CEO Neal Froneman reportedly said that in doing so, investors will be pleasantly surprised.

Baffinland Iron Mines Corp. and Baffinland Iron Mines LP want to buy back some or all of C$350 million in 12% notes due 2022. It was reported that noteholders representing about 70% of the debt had agreed to tender notes.

In precious metals, Harmony Gold Mining Co. Ltd. raised US$82 million from a planned US$100 million share sale. Lion One Metals Ltd. signed a term sheet for a US$40 million financing facility with Sinosteel Equipment & Engineering Co. Ltd. and Baiyin International Investment Ltd. to help develop its Tuvatu gold project in Fiji.