Australia's mining sector during last week

Although some sectors are harder hit than others. Nickel companies suffered more than most, and a glimpse at the five-year nickel price chart reveals several reasons why the depth. Back in mid-2006 nickel color sold under U.S. $ 10 per pound. Today, this color is more than U.S. $ 10 per pound. Prices, however, is only part of the problem for Australian nickel miner. They have also been hit by higher costs felt in the mining industry, and exchange rates rise.

With a real squeeze on profits.

A very nasty squeeze actually, which can be measured using the exchange rate alone. Back in June, 2006, the Aussie dollar exchange rate against its US cousin was US74 cents. Today, it’s US$1.06. To put it another way, the Australian dollar price of nickel five years ago was around A$13.50 per pound. Today, it is A$9.40, a real decline of around 30 per cent for a miner with costs in Australian dollars, and perhaps a lot more after cost inflation is factored in.

Well, thanks for that piece of news - it’s just what we didn’t need to hear.

Sorry for bearing bad tidings, but that background explains why a number of nickel companies hit 12 month share price lows last week. Mincor (MCR) dropped to A98.5 cents on Friday, before closing the week at A99 cents for a loss of A10 cents. At this time last year Mincor was trading above A$2.00. Panoramic (PAN) lost A9 cents to close the week at a new low of A$1.83. Last October it traded as high as A$2.97.

Before running through more prices, perhaps a big picture snapshot.

Overall, both the base metals and the gold markets weakened by around 1.5 per cent. That was a better performance, moderately, than that delivered by the all ordinaries index on the ASX, which lost two per cent. And for our superstitious readers we have a few numbers which might send a chill through their spines. The all ordinaries index closed on Friday at 4666.6, which is the Devil’s triple 6, plus an extra 6 for good measure. And, if that doesn’t catch your eye the official exchange rate on Friday, as published by the country’s central bank, the Reserve Bank of Australia, was 1.0666.

Let’s leave all that sort of stuff for someone else to worry about, and focus on share prices.

Certainly, but you must admit it was an interesting coincidence. Still, moving on, and given that the trend was down across most sectors, it might lighten our readers’ days to hear first about companies which did not fall. There were a few interesting upward moves too that are worth talking about, thanks largely to discovery and production news.

Top of the list was Navarre Minerals (NML), a company not mentioned here before. The company seems to have drilled through a few gold nuggets at its Bendigo North project in Victoria, sending the gold bugs in its home state into a frenzy. The official rise over the week was a gain of A20 cents to A31.5 cents, which translates to a rise of 173 per cent, though that tells only part of the story. On Friday alone, after a management requested trading suspension, Navarre rose by A17.5 cents, or 125 per cent on the day, with 17 million shares exchanged out of an issued capital of 25 million shares. Put another way, 68 per cent of the shares in issue were swapped in a trading flurry on a single day.

Even so, and interesting as those market numbers are, it is worth pointing out that at its Friday closing price Navarre is still only capitalised at A$7.9 million, and while the top assay of 161.2 grams a tonne looks fabulous, the historic Bendigo goldfield is rich in nuggets, which will make it hard to ever prove a resource that satisfies modern banking or reporting requirements.

That really is a rather silly state of affairs, isn’t it?

Could not agree more. The gold is obviously there, but it’s in nuggets which do not fit comfortably into the code constructed by the Joint Ore Reserves Committee (JORC).

There were some other eye-catching moves in gold too. Northern Star (NST), a company we will be hearing more about at our June 23rd forum, closed A10 cents higher at A50 cents, a 12 month high. Gold Road (GOR), which we took a closer look at last week, rose by A4 cents to A64 cents, but did get as high as A71 cents early in the week. And Kingsrose (KRM) recovered recently lost ground by adding A5 cents to A$1.43. Resolute (RSG) put on A6 cents to A$1.11.

Best of the copper companies was Sandfire (SFR) which released a very positive feasibility study, adding A11 cents A$7.20. Metro Coal (MTE) was the strongest among the coal companies, putting in a rise of A12.5 cents to A63 cents. Alkane (ALK) led the way among the rare earth stocks with a gain of A21 cents to A$2.05.

Time to call the card, starting with gold, and then roam across the other sectors, as you please.

Notwithstanding the risers in gold that we’ve already mentioned, the trend was weaker. Among the handful of other companies that rose was Gryphon, up A4 cents to A$1.61, and Troy (TRY), up A1 cent higher to A$3.47. The fallers included Medusa (MML), down A17 cents to A$8.07, Integra (IGR), down A2.5 cents to A42.5 cents, Focus (FML), down A0.6 of a cent to A6.7 cents, Silver Lake (SLR), down A16 cents to A$1.71, and Kingsgate (KCN), down A27 cents to A$7.67. Beadell (BDR) was also weaker, down A4.5 cents to A78.5 cents, despite announcing a decision to mine its Tucano project in Brazil.

After Sandfire, the best of the copper companies was OZ Minerals (OZLDA), which rose by A6 cents to A$13.61. Incidentally, the new code is a result of its recent one-for-10 share consolidation. Metminco (MNC) climbed a modest A1 cent to A36.5 cents, and Hot Chili (HCH) also managed a rise of A1 cent to A60 cents. Then came a long list of small fallers. Among them were Marengo (MGO), down half a cent to A29.5 cents, Horseshoe Metals (HOR), down half a cent to A24 cents, and Rex (RXM), down by A1 cent to A$2.66.

Nickel companies were weaker across the board, as we’ve said. Only Mirabela (MBN) managed to rise, adding A4 cents to A$2.05. It was a mixed picture in the zinc space. Perilya (PEM) rose A5.5 cents to A64.5 cents. And Terramin (TZN) rose by A3.5 cents to A33.5 cents on news of a boardroom spill and speculation that former Normandy Mining boss, Rob de Crespigny, might be mixed up in the fracas.

Iron and coal next, please.

It was generally down in both of those areas. BC Iron (BCI) was the best of the iron ore companies, putting in a rise of A14 cents to A$3.00. Fortescue Metals (FMG) added A6 cents to A$6.46 after its founder, Andrew Forrest, shuffled the deck chairs and swapped the chief executive’s office for the chairman’s suite, in what most observers down this way see as a spot of window dressing ahead of a final legal decision on his future as a director. Among the fallers were Atlas (AGO), down A2 cents to A$3.58, Mt Gibson (MGX), down A7 cents to A$1.78, and Murchison (MMX), down A4 cents to A95 cents.

In coal, Metro was the star, as we’ve said, but also on the rise were Carabella (CLR) and Aston (AZT). Carabella rose A6 cents to A$2.04 and Aston rose A10 cents A$10.00. Fallers included Macarthur (MCC), down A41 cents to A$11.25, Coal of Africa (CZA), down A1 cent to A$1.17, and Stanmore (SMR), down A13 cents to A$1.14.

Uranium and minor metals to close.

It takes a lot of finding, but there was one uranium company in the black. Extract (EXT) added A4 cents to A$7.76, even as it awaits the next instalment of its takeover travails. Berkeley (BKY) continued its slide, losing another A9.5 cents to A39 cents. Manhattan (MHC) dropped A15 cents lower to A42 cents, and Paladin (PDN) shed A18 cents to A$3.03.

In potash, Potash West (PWN) caught the attention of a few punters after it put out a positive report on its west coast exploration program. Its shares hit a 12 month high of A31 cents, before closing the week at A25.5 cents, an overall gain of A6.5 cents.

In minor metals, Metallica (MLM) released a positive report on its nickel, cobalt and scandium project, and also traded up to a A38 cents 12 month high, before closing at A37 cents for a rise on the week of A6.5 cents. Tin companies were weaker. Among the fallers was Venture (VMS), down A3.5 cents to A40.5 cents. Lithium companies also fell. Galaxy (GXY) slipped half a cent lower to A85.5 cents, and Orocobre (ORE) lost A1 cent to A2.15.

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