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November 23rd, 2020 | 11:16 CET

Rio Tinto, BHP Billiton, Almonty Industries - Base metals for the upswing

  • Base metals
Photo credits: Almonty Industries

Last week, Canadian star economist David Rosenberg said: "Base metals are generally the most correlated with the Chinese economy, so I would say that base metals have performed very well. The correlation between Chinese GDP and commodities is incredible. It is not difficult for me to take a constructive stance towards the base metals sector when I believe that they are the primary source of demand worldwide and that China consumes half of the world's metals."

Looking to the future, Rosenberg said that the US and the rest of the Western world must confront China's growing power and influence. "I hate to say it, but whoever the president is, he is currently facing the challenge of preventing China from capturing an ever-increasing share of global GDP."

The message is clear: In China, Covid-19 seems to have already been overcome; it is essential not to lose the connection because of the pandemic-related downturn. Overall, raw materials will, therefore play a huge role in this environment.

time to read: 4 minutes | Author: André Will-Laudien
ISIN: CA0203981034 , GB0007188757 , GB00BH0P3Z91

Table of contents:

    Rio Tinto - From old to new

    Rio Tinto announced that it would soon begin producing aluminium alloys, which should enable North American die casters to make greater use of recycled components in the manufacture of automotive parts. In a press release, Rio said the new alloy line was designed for high-pressure vacuum die casters to mix with their own scrap and recycled materials. The products have been developed at the Company's Arvida Research and Development Center.

    Rio expects to produce up to 100,000 tons of the new alloy series per year at its Canadian sites. "We have developed this new series of alloys to help die casters not only produce the highest quality automotive parts but also to improve their competitiveness and contribution to a more sustainable, circular economy," Rio Tinto Aluminium vice president of sales and marketing, Tolga Egrilmezer, said in the media brief.

    As an alternative to purchasing inferior secondary remelt ingots, the final blend will cost less, have a lower carbon footprint and meet more stringent industry standards. It is a positive step that Rio is taking in favour of decarbonizing our planet. The Company currently has a market value of £59.6 billion and has a proud dividend yield of 6.8%.

    BHP - openness instead of compartmentalization

    BHP Group CEO Mike Henry has urged the Australian government to maintain its trade relations amidst tensions with China. While Beijing has made no official comment on the ban on Australian coal imports and raw materials such as copper ore, lobster and barley, China has responded to Canberra's call for an international investigation into the origins and early response to the Coronavirus pandemic.

    The BHP chief said that tensions in international relations were at odds with the prosperity of Australia and the world. "It is a trend that is in all our interests to work towards a turnaround," Henry said in a media statement. It is, therefore, clear that the industry wants a good relationship with China because it guarantees the prosperity of the West and secures the existence of established procurement markets.

    The Australian government's leadership role together with China and other nations in the conclusion of the Regional Economic Partnership (RCEP) is one such example. The RCEP was signed by ASEAN nations, including Australia, New Zealand, China, Japan and South Korea, and serves as a commitment to closer trade and open markets.

    Henry said that the principles of the Bretton Woods Agreement - free markets, open trade and economic development - must be revitalized and renewed to once again meet the challenges facing the world today. Other nations may strive to succeed in self-sufficiency and autonomy, a clear signal to the new US administration to reverse the encapsulation of the United States as quickly as possible. BHP Billiton is one of the world's largest commodities companies; its market capitalization is currently GBP 34.7 billion. If you are looking for a commodity standard value, BHP is a good investment.

    Almonty - On the way to the tungsten giant

    The main business of Almonty Industries Inc., based in Toronto, is the mining, processing and shipping of tungsten concentrate from the Los Santos mines in western Spain and Panasqueira in Portugal. The promising development of the Valtreixal tin tungsten project in northwest Spain is also underway. Almonty acquired the Los Santos Mine in September 2011. The Panasqueira Mine, which has been in production since 1896, was acquired in January 2016. Both produce tungsten concentrate and are thought to be among the few producers of this rare metal, at least in Europe.

    With the assistance of Deutsche Rohstoff AG, the Sangdong Mine, historically one of the largest and highest-grade tungsten mines in the world outside of China, was acquired in September 2015 through the acquisition of a 100% interest in Woulfe Mining Corp. This acquisition secured Almonty's long-term share of the global tungsten market for years to come.

    Commenting on the latest results, Lewis Black, Almonty's Chief Executive Officer, said: "Having reported six weeks ago, our outlook for the year remains unchanged. Despite the numerous COVID-19-related delays and the last-minute negotiations that we have worked through, we will be pleased to issue the last and final news release regarding the financing of our Sangdong project imminently. Meanwhile, construction has commenced at site, with 120 metres of the Monty B portal almost completed, to be followed by the second phase of 600-metre mine development, which will continue on from the portal." Almonty understands the desirability of its tungsten deposits and is accelerating the expansion in South Korea. The investment costs added up to a net loss of CAD 5.9 million after 9 months.

    The speculative value currently has a capitalization of CAD 121 million at a price of CAD 0.66 per share. The analysts of First Berlin Research rated the share as "buy" with a target price of CAD 1.45. The share has corrected from above by about 20% and should soon be back on track.

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    Der Autor

    André Will-Laudien

    Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.

    About the author