Stocks to Watch: October

WEAKNESS in iron ore, gold and even 2014 market favourite nickel last month slowed the positive momentum starting to be felt in the resources sector.
Stocks to Watch: October Stocks to Watch: October Stocks to Watch: October Stocks to Watch: October Stocks to Watch: October


Kristie Batten

Nickel was one of the worst performers for September after rising about 35% this year.

It was down 13.2% last month to $US16,241.50 per tonne overnight, a six-month low.

The iron ore spot price dropped another 11.8% in September to a new five-year low overnight of $US77.50 per tonne but the general consensus is that the price will pick up towards the end of the year.

Gold fell nearly 6% last month and was sitting at a nine-month low of about $1208 an ounce this morning, though with a weakening Australian dollar, the local spot price is about $A1383/oz.

Macquarie last week downgraded its price forecasts for coal, copper, manganese, platinum and uranium, while slightly lifting its forecast for aluminium.

Fortescue Metals Group director Owen Hegarty described the current state of commodities as no more than a “pause”

“In my mind, we continue to be in for a long period of commodities demand growth led by China, followed by India, with the rest of developing countries all chipping in from the edge of the green, all revving their engines looking to get on the super highway of economic growth and prosperity,” he told MiningNewsPremium in Melbourne last week.

“You’re going to have punctuations and humps and bumps and so on along the way and that’s what one of these is I suppose in a way, but the direction of the force is perfectly clear.”

The catalyst for commodities, particularly iron ore, could be the end of the Chinese holiday period next week.

Atlas Iron boss Ken Brinsden described it as the “witching hour” in iron ore pricing, with little activity until after the break.

“Everybody’s nervous, everybody’s tense – and in some ways we are too but we’re confident,” he said last week.

“When it turns, it will turn quickly. The buyers will be back – I’m pretty confident of that.”

BC Iron’ takeover of Iron Ore Holdings is heading towards completion this month with BC achieving an 81.3% interest as of Monday.

IOH said yesterday that its third-largest shareholder Sumisho Iron planned to accept the offer next week, which would boost BC’s stake to 85.3%.

The offer has a 90% minimum acceptance condition and IOH reaffirmed its recommendation that shareholders accept.

Also on the mergers and acquisitions front, Papillon Resources was suspended from the Australian Securities Exchange last week and its takeover by Canada’s B2Gold will become official on Friday.

Newcrest Mining will hold its strategy day next week and new CEO Sandeep Biswas has made it clear he is unsatisfied with the company’s current performance.

Biswas is expected to provide an update on the review of the troubled Lihir mine in Papua New Guinea, which could be a catalyst for the stock.

Like all other producers, Newcrest will release its quarterly results in October and will also hold its annual general meeting at the end of the month.

Aside from reporting season, Aurizon Holdings and partner Baosteel Resources are set to release an updated development plan for the West Pilbara iron ore project.

And speculation is set to continue on the sale of BHP Billiton’ Nickel West asset and Cliffs Natural Resources’ Koolyanobbing iron ore mine, with Glencore and Mineral Resources respectively slated as the likely buyers.