Base metals outlook 2019

Investing
Opportunity
Using Base Metals
Prices and Base
Metals News
A collection of articles from Copper, Iron, Lead, Nickel
and Zinc Investing News By Charlotte McLeod

Base Metals Prices 2019
© 2019 Base Metal Investing News 1
Table of Contents
Copper Trends 2018: The Year of the Trade War.....................................................................3
Copper Forecast 2019: CEOs Confident Copper Will Prevail ....................................................6
Copper Outlook 2019: No End in Sight for Trade War Woes..................................................10
Zinc Trends 2018: The 12-month Rollercoaster.....................................................................15
Zinc Outlook 2019: A Year That Has to Be Better ..................................................................20
Nickel Trends 2018: Becoming a Battery Metal.....................................................................27
Nickel Outlook 2019: No Boom, but Batteries Loom .............................................................32
Iron Outlook 2019: Premium Prices for Premium Grade .......................................................38
Lead Outlook 2019: Mines Back Online as Prices Dither........................................................41

Copper Trends 2018: The Year of the
Trade War
A look back at the main copper trends of 2018, from supply
and demand dynamics to price performance over each
quarter of the year.
For copper, 2018 was a year clearly split into
two halves: before the US-China trade
war and after, with investor sentiment
markedly different before and after.
In the first half of the year, copper bumbled along
without much in the way of drama before its
value spiked at the end of Q2. But then the trade
war locked in and the copper price dropped by
over 17 percent between June and July.
With 2018 rapidly drawing to a close, here the Investing News Network (INN) takes a
look at what the trends for copper were in each quarter, how prices performed
throughout the year and what analysts said about developments quarter by quarter.
Copper trends Q1: Relative calm before the storm
Between January and March, copper prices declined by almost 7 percent, having
started well up at US$7,180.50 per tonne and rounding out the quarter down at
US$6,683.
At the end of the quarter, analysts noted that the supply disruptions of 2017 didn’t
appear to be carrying into the new year. Meanwhile, warehouse inventories were up
and weaker Chinese demand meant that copper was lower — and combined with an
expected uptick in production, it was due to stay that way.
“Having been more or less static last year, copper mine production is seen growing by
2.5 to 3 percent this year, which is expected to help facilitate an increase of similar
magnitude in refined output,” Karen Norton, base metals analyst at GFMS Thomson
Reuters, said at the time.
Norton noted that the big projects of the year would be First Quantum Minerals'
(TSX:FM) Cobre Panama project, and Southern Copper’s (NYSE:SCCO) Toquepala
expansion in Peru.

Copper trends Q2: Big news and rumblings
In the second quarter of the year, copper hit a four-year high as the supply disruptions
of 2017 returned to haunt the markets, forcing prices upwards as the prospect of BHP’s
(ASX:BHP,NYSE:BLT,LSE:BBL) Escondida grinding to a halt became slightly too real.
Price wise, the downward trend from Q1 continued through Q2, with copper starting the
quarter at US$6,755 and ending it at US$6,645 — though a downward pitch would
continue through to Q3 as the trade war hammered all commodities.
Despite the beginnings of the trade war downturn, analysts were optimistic about
developments in copper in Q2, with the supply side looking rosy thanks to big deals by
CITIC (HKEX:0267), adept problem solving by Glencore (LSE:GLEN), Southern Copper
(NYSE:SCCO) announcing a production start date for Michiquillay and Anglo American
(LSE:AAL) finding a partner for its Quellaveco project in Peru.
Analysts said that a fall in prices was expected over the quarter — though the trade war
would end up hitting much harder than expected.

Copper trends Q3: Rock-bottom prices
It was during Q3 that copper hit bedrock, falling all the way to US$5,822 in September.
At the time, analysts interviewed by INN doubted copper’s value could go any lower
anytime soon.
Copper slowly inched its way back up from those lows through Q3 and into Q4,
increasing above US$6,000 before the end of the third quarter, but still below its Q3
starting point of US$6,594.50, which was also its quarterly high.
The Escondida drama concluded in a happy ending for BHP, with workers agreeing to a
new contract, and supply disruptions disappearing from a long list of investor concerns.
Despite the languishing of base metals values, there were still plenty of transactions
going through.
China’s Zijin Mining (HKEX:2899) made two big purchases in Serbia: it entered into a
partnership with Belgrade over the RTB Bor copper complex, and made a friendly
takeover bid for Canada’s Nevsun Resources (TSX:NSU), the owner of the sought-after
Timok copper project nearby.
Copper trends Q4: More deals, slow recovery
In Q4, the copper price made a slow recovery back upwards. The red metal has stayed
above US$6,000 for the entire quarter so far — it started at US$6,170 and as of
December 4 was trading at US$6,277, representing a 1.7-percent increase.
During Q4, companies indicated that the trade war was hurting them — and if it wasn’t
hurting, it certainly wasn’t helping. Canada’s Teck Resources
(TSX:TECK.A,TSX:TECK.B,NYSE:TECK) revealed that low commodities prices were
chewing into its bottom line, while for operators in Chile guidances were being trimmed
due to grades and jobs cut due to “restructuring.”
The copper price is clearly good enough for new projects in the US though, with
Excelsior Mining (TSX:MIN) announcing it would go ahead with its Gunnison project in
Arizona in October, while over in Nevada, Nevada Copper (TSX:NCU) is making
progress on its Pumpkin Hollow project, which it gave the green light to in Q3.
Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any
company mentioned in this article.
Editorial Disclosure: Nevada Copper is a client of the Investing News Network.
This article is not paid-for content.

Copper Forecast 2019: CEOs Confident
Copper Will Prevail
Execs from Western Copper and Gold, Nevada Copper,
Trilogy Metals, Copper Fox Metals, Commander Resources
and Thunderstruck Resources share their copper forecast for
2019.
Optimism was the opening act for copper in
2018, but the trade war burst onto the scene and
smothered expectations in what turned out to be
a two-part year for the base metal.
The vital commodity didn’t get too far above its
starting point of US$7,180.50 per tonne on the LME
this year, and after reaching out to execs in the
industry, the Investing News Network (INN)
found that the overall sentiment was that 2018 should have been better.
But while the trade war soured what should have been a glorious year for the red metal,
the CEOs polled said investors will be back because everything needs copper.
Matt Gili, president and CEO of Nevada Copper (TSX:NCU); Rick Van Nieuwenhuyse,
president and CEO of Trilogy Metals (TSX:TMQ); Copper Fox Metals
(TSXV:CUU) Chairman, President and CEO Elmer B. Stewart; Robert Cameron,
president and CEO of Commander Resources (TSXV:CMD); Bryce Bradley, president
and CEO of Thunderstruck Resources (TSXV:AWE); and Paul West-Sells, president
and CEO of Western Copper and Gold (TSX:WRN), each shared their thoughts on
2018, and the year that is ahead for copper.
Copper forecast 2019: Looking back on 2018
Before exploring how company CEOs feel about 2019, we asked what they thought
about 2018. As mentioned, the consensus was: it should have been better.
“We expected a more bullish copper market — I think everyone did,” said Trilogy Metals'
Van Nieuwenhuyse, who added that while there was promise early in the year that a
trade war might be averted, it was not to be. He quipped, “Dr. Copper can’t provide a
good diagnosis when the patient is unresponsive.”

West-Sells of Western Copper and Gold said that like Van Nieuwenhuyse, he expected
a rising copper price throughout 2018.
“While this was true for the first half of the year, in the second half of the year copper
dropped after the US introduced tariffs and the growth expectations for China
diminished.”
Van Nieuwenhuyse added that with the trade war raging, investor apathy was main
challenge for 2018 — an opinion shared by Commander Resources’ CEO.
Stewart of Copper Fox Metals said that copper majors' ability to smoothly negotiate
wages at large-scale mines meant that supply disruptions were taken off the table,
forgoing a repeat of 2017 when markets jumped as operations ground to a halt.
Copper forecast 2019: “Consumers won’t stop consuming”
Copper fell off a cliff in the middle of 2018 as the reality of the trade war hit home,
wiping out any gains it had made since January (which were modest anyway), and for a
few weeks it languished below US$6,000.
But even with that calamity, the general consensus from CEOs was that as a
commodity vital for electronics and consumables, demand for copper will hold values
higher going forward.
“Consumers won’t stop consuming,” said Van Nieuwenhuyse. “The transition to electric
vehicles, alternative energy and battery metals may slow down, but it won’t stop, and
copper is a primary metal to make all that happen.”
Van Nieuwenhuyse said that while in 2018 investors might have thought copper could
wait, “everyone knows there is a copper deficit coming.”
Cameron said that what had started as a bullish outlook on copper in 2018 was
undermined by the trade war, and 2019 “will be a difficult year to predict from a market
or commodity perspective.”
He said that a tightening of the market thanks to the aforementioned deficit, along with a
lack of supply disruption in 2018, means that any price rise for copper “is now being put
off to 2020 or later.”
“By the end of the year [2019], at least for copper, we will have a clear view of the
anticipated supply shortfall that will translate into investor interest in anticipation of
copper price recoveries.”
Stewart said the same, but is more optimistic for copper to improve through 2019,
saying that the market is already in a deficit “not related to supply disruption due to labor

disputes,” which he observed were avoided in 2018 compared to 2017, when supply
disruption was a primary price driver.
West-Sells had similar sentiments, predicting that values will push higher through 2019.
“I think that the copper market in 2019 will look similar to what we’ve seen over the past
couple of months — a slow increase in price," he said.
“The fact that there has been a shrinking supply of concentrate in 2019 was validated
with the recent agreement on TC/RCs [treatment and refining charges] by Jiangxi
Copper and Antofagasta (LSE:ANTO), and this, combined with a continued decrease in
copper stockpiles, will continue to push copper higher.”
In Nevada, Nevada Copper's Gili is well and truly bullish — as he should be with a
major copper mine due to come online in 2019. He told INN that going forward “the
positive market fundamentals for copper haven’t changed: demand growth looks robust
and supply growth is limited by the small number of new projects that could come online
this cycle.”
Bradley of Thunderstruck Resources, which also focuses on zinc, has the same
approach, noting that because copper and zinc are needed for infrastructure projects,
investor sentiment can only ebb so low.
“I’ve stopped trying to predict the future, other than having the clear conviction that
developing economies will continue to build skyscrapers and bridges, and that the
world’s population will continue to climb,” she said.
“Unless some kind of disruptive technology makes these metals obsolete, zinc and
copper will be in demand for the foreseeable future.”
Copper forecast 2019: What’s ahead for companies
Just because investors kept their money in their pockets doesn’t mean explorers,
developers and miners didn’t get on with the job of polishing prospects, projects and
operations around the world. INN also asked each CEO what their company has in the
works for the next 12 months.
As mentioned, Nevada Copper is currently working on its Pumpkin Hollow copper mine
in Nevada, which it made the decision to go ahead with in August after the successful
completion of a C$108.5-million public offering.
Gili said that Nevada Copper has lots of work ahead of it in the year to come at
Pumpkin Hollow — which is actually two distinct projects; underground and open pit.
“We aim to publish a prefeasibility study for our open-pit operation in Q1 2019, which
will include an updated resource estimate,” said Gili.

“For the underground deposit, we are on target to commence production in late 2019.”
Van Nieuwenhuyse said that Trilogy Metals has a whole shopping list of developments
ahead in 2019, saying it will be expecting more drill results from its Bornite deposit in
Alaska, where it has an option agreement with South32 (ASX:S32) that gives the
Australian company the option to form a joint venture with Trilogy.
He said that Trilogy expects “the resource update for Bornite [to be] followed by a
preliminary economic assessment, and then feasibility and permitting updates for Arctic
[also in Alaska]. And then a decision by South32 to invest US$150 million at the project
level to form a 50/50 joint venture.”
For his part, West-Sells said that Western Copper and Gold will see construction begin
on the access road to its Casino copper project in Canada's Yukon — “the best
undeveloped copper-gold project not owned by the majors in the Americas.”
He said shareholders will be keeping an eye on the copper price, and that Western
Copper and Gold will be anticipating merger and acquisition activity to increase.
The CEOs of both Commander Resources and Copper Fox Metals said that their
companies will be pushing forward with their respective projects through 2019 in North
America; Commander with a portfolio of projects open for option agreements, and
Copper Fox highlighting its Schaft Creek (BC) and Mineral Mountain (Arizona) projects
as stars to keep an eye on.
Finally, Bradley said that Thunderstruck Resources will be looking to secure a first
partner for its base metals projects in Fiji, where it has three early stage prospects as
well as a gold project. She expects the company to be very attractive to potential
partners when the gold price increases.
Editorial Disclosure: Commander Resources, Copper Fox Metals, Nevada Copper,
Thunderstruck Resources and Western Copper and Gold are clients of the
Investing News Network. This article is not paid-for content.
The Investing News Network does not guarantee the accuracy or thoroughness of
the information reported in the interviews it conducts. The opinions expressed in
these interviews do not reflect the opinions of the Investing News Network and do
not constitute investment advice. All readers are encouraged to perform their
own due diligence.

Copper Outlook 2019: No End in Sight
for Trade War Woes
What’s the copper outlook for 2019? Read on to learn what
analysts see coming for the red metal next year.
Market watchers expected the copper price to be
much higher in 2018, and the trade war has been
blamed for what turned out to be a lousy year for
the red metal.
But what ended up being a downer of a year started
out on a tame note. Copper bumbled through the first
six months of 2018 not going anywhere in particular,
barely reaching above its starting value of US$7,180.50
per tonne.
It took US President Donald Trump and his campaign promises to make its value
change course — though not in a direction market participants wanted it to head.
With the year at an end, the Investing News Network (INN) has asked analysts in the
field for their thoughts on what’s ahead for the vital base metal. Read on for their
predictions.
Copper outlook 2019: Price performance review
When 2017 came to a close, analysts predicted that the copper price would pick up
through 2018 and into 2019 — pointing to demand from China and a possible
continuation of that year’s labor anguish.
As 2018 rolled on, copper hit a high point in June, peaking at US$7,261.50 right before
the US-China trade war kicked in. That yearly high wasn’t much to shake a stick at
though, at only 1.13 percent above where the copper price began on January 1.
As can be seen on the London Metal Exchange chart below, the main feature for the
copper price in 2018 was a huge fall between mid-June and late July as investors
realized that the trade war was for real.

The yearly low was US$5,822 on September 4, a fall of almost 19 percent year-to-date
at the time.
Dan Smith, head of commodities research at Oxford Economics, told INN that analysts
were “too optimistic about copper” in 2018. “Chinese demand turned out to be weaker
than expected and the drag from [the automotive sector] has been significant,” he said.
At the end of 2017, Oxford Economics was “optimistic about the macro story” for
copper, pointing to Chinese demand increasing and copper stockpiles depleting.
While stockpiles are indeed falling and the supply line is thin, Chinese demand took a
slight hit through the year with growth numbers not as high as anticipated — and don’t
forget the impact of investor sentiment through the trade war.
Staying with the trade war, Stefan Ioannou of Cormark Securities said it was the story of
2018 — and not just for copper. “It was definitely the trade war in there that dominated
copper and the greater base metals sector this year.”
He said that while supply disruptions dominated 2017 — and to an extent early 2018 —
the trade war soon took over, pushing copper down to a rock-bottom value, which
Ioannou suggested was a hard low.
“The prices did come down [in 2018], but I think there was some rationalization as well
that it can only go so low before it starts getting a bit ridiculous," he noted.

Eleni Joannides of Wood Mackenzie agreed that supply disruptions occurred “at a much
slower pace than we had anticipated at the start of the year,” though she said that
disruption instead came in the form of Vedanta’s (NSE:VEDL) Thoothukudi smelter in
India going offline, Glencore’s (LSE:GLEN) Pasar smelter in the Philippines suffering a
failure in early January and “slower-than-anticipated ramp ups at some of the new
smelters in China.”
Of course, Joannides also said the trade war didn’t help, while there was lots of focus
on Chinese policy around scrap imports and changes to emissions regulations
impacting production.
As of mid-December, copper was up off rock bottom, trading well above US$6,000, but
still almost 15 percent down on the start of the year at US$6,110.
Copper outlook 2019: Supply and demand dynamics
Joannides said that at Wood Mackenzie, analysts are detecting signals that both supply
and demand could be a concern in 2019, as “there are signs that the global economy is
continuing to slow and there is raising concerns about the overall health of demand in
the coming year.”
The culprit? Trade war.
“The ongoing trade spat between the US and China could have severe knock-on
implications on global growth,” she said, noting that the G20 summit in Buenos Aires
could act as a possible mitigator to negative sentiments.
As seen by the jump in stocks during the summit on the back of good vibes, and
Trump’s subsequent tweets that plunged the markets back into disarray — that didn’t go
so smoothly.
“There are no signs that the impact of the trade war on copper prices will ease in the
next 12 months,” she said. “In terms of supply, questions remain as to how the changes
to emissions limits for Chinese smelters will impact production."
She said it was also the case for Chile, with new sulfur capture targets that could limit
existing smelter capacity, while the Thoothukudi shutdown remains an unknown.
Ioannou said that looking into 2019 and what the future holds for the copper story, “with
Trump, never say never ... he continues to deal it.”
He added, “I think as long as Trump continues prodding the Chinese, the Chinese will
continue to respond, and that’s going to continue to cause uncertainty in the
marketplace.”

The fear factor around the trade war is wearing off now as investors have gotten used to
the rhetoric, said Ioannou. “I think it is to a certain point crying wolf now.”
Despite depressed prices, he added that a looming copper supply deficit has the
potential to raise prices in the medium to long term — a sentiment that has been noted
by analysts all through 2017 and 2018.
“[There are] not many new large-scale copper developments over the last five to 10
years,” said Ioannou.
“And so, as existing mines run their course and deplete reserves ... there are really not
a lot of new projects that are poised to come on quickly to replace the production when
it’s lost.”
There are still projects on the go though, he said, pointing to Zijin Mining’s (HKEX:2899)
splurge in Serbia on Nevsun Resources' (TSX:NSU) Timok project and the RTB Bor
copper complex.
“The good projects are getting loved.”
On Chinese demand, he isn't too worried, and noted that the world’s largest copper
consumer’s GDP growth is not falling, but is simply slightly behind expectations on a
percentage basis.
“Even if we were to see GDP growth drop significantly on a percentage basis, there’s
still a lot of copper that needs to go to China just to maintain their current demand and
growing demand going forward," Ioannou said.
Copper outlook 2019: Key factors to watch for
Joannides pointed to First Quantum Minerals' (TSX:FM) Cobre Panama asset as a
major new project coming online in 2019, calling it “the only greenfield project of note”
ready for startup through the next 12 months. “But this is unlikely to influence the
direction of the copper price.”
She also said that Peru’s Andean neighbor Ecuador is beginning to look promising for
copper, noting that it “looks as though it is encouraging mining investment, but from a
very low base, and long term.”
Besides the obvious market to watch — China — Joannides said that the rest of Asia
(excluding China) “is a region of project robust growth.”
Smith said that in terms of projects, Rio Tinto’s (ASX:RIO,LSE:RIO,NYSE:RIO) Oyu
Tolgoi project in Mongolia is shaping up to have a “lot of risk ... and this is important.”
Through 2018, Oyu Tolgoi has been dogged with development issues mostly due to
happenings in Ulaanbaatar.

On prices, Joannides said that Wood Mackenzie “expect[s] copper prices on an annual
average basis to trend higher on the basis that demand growth will outpace that of
supply, pulling stocks in days of consumption sharply lower."
However, she continued, "the extent of the price recovery could yet be capped by the
ongoing uncertainty over the health of the global economy, as well as the potential for
further US interest rate rises, which would lead to a stronger dollar and would weigh on
prices.”
Smith said he expects the US dollar to weaken, “which will boost copper and equity
markets.”
In their commodity price forecast for October 2018, economists at Oxford Economics
said that despite not being so fantastic for base metals, “fundamentals still look
supportive” through the sector. Copper stockpiles on the London Metal Exchange were
down 30 percent month-on-month at the time.
As of mid-December, copper stockpiles were sitting at 122,000 tonnes — their lowest
point in 2018 and well below a high of almost 400,000 tonnes in late May.
The economists predict that while there is still going to be lots of volatility for copper
going forward, “prices should trend higher overall” over the next few months into early
2019.
Ioannou expects the copper price to hover around US$3 per pound (or US$6,613.86 per
tonne).
Factoring in a thin line of supply and growing demand, he said, “I think as we get further
out, 2021, 2022, there is definitely an argument that the idea of US$3.75 to US$4
copper is not crazy”.
Editorial Disclosure: The Investing News Network does not guarantee the
accuracy or thoroughness of the information reported in the interviews it
conducts. The opinions expressed in these interviews do not reflect the opinions
of the Investing News Network and do not constitute investment advice. All
readers are encouraged to perform their own due diligence.

Zinc Trends 2018: The 12-month
Rollercoaster
What zinc trends rocked the market in 2018? We run through
what happened to the metal this year, from price activity to
supply pains.
While prices for zinc surged in
2017, increasing 24 percent through the
year to begin 2018 at US$3,375 a tonne,
that was about the extent of the good
news this year.
Zinc topped out in 2018 at US$3,617 on
February 16, but then began a tumultuous fall
in value as the trade war between the US and
China chomped down hard on all base
metals, with zinc falling the furthest
percentage wise.
At its worst, zinc was a full 32 percent below its January 1 value, when it languished at
US$2,285 in mid-September.
As you can see from the LME chart below, while zinc has slightly recovered since — as
of mid-December it was down just 23 percent down year-to-date at US$2,579 — the
base metal is very much stuck on the lower end in regards to value.

Zinc trends Q1: Early peak, supply pains
As mentioned, Q1 was the quarter that zinc hit US$3,617, its highest price of the year,
in a peak that was a continuation of 2017’s hike.
The metal set records early on though, with values at a 10-year high on the second day
of the year in what analysts were already calling a supply issue as larger, depleted
mines were already offline.
The increase in the metal’s value remained newsworthy well into the quarter.
“Demand growth is decent, but not spectacular from a historical perspective, which tells
me this is once again a supply side issue,” said Bernstein analyst Paul Gait at the time.
Healthy demand meant that early in the year, inventories were already falling
dramatically.
Despite the issues with supply there was news in the pipeline, with Arizona Mining —
bought out later in the year by South32 (ASX:S32) — showing off an attractive
preliminary economic assessment for its Hermosa project in Arizona.
Meanwhile, New Century Resources (ASX:NCZ) was keeping busy striking offtake
deals with traders for the former Century zinc mine (one of the huge mines the market
was missing), where it was looking to refine tailings.

While the Century mine eventually re-entered production as a tailings refining project
during the year, early in 2018 a dearth of large projects was already biting smelters,
which were keen for product. During Q1, analysts predicted that treatment charges
could fall by at least 13 percent.
The quarter ended with a report by the International Lead and Zinc Study Group
predicting that zinc output was set to increase over 2018.
Zinc trends Q2: Falling value, treatment charges down
Zinc fell in value through the second quarter, reaching a quarterly low of US$2,894
towards the end of June, while a pipeline of new and reopened projects delivered the
goods.
During the quarter, Indian diversified miner Vedanta (NSE:VEDL) revealed its optimism
for zinc, with big plans to massively increase production in South Africa through the
construction of a smelter at its Gamsberg operations. The move is part of a push to
ensure its operations there remain viable as older mines are depleted, and new
deposits are exploited.
Canada’s Ivanhoe Mines (TSX:IVN) also made strides towards reopening its Kipushi
zinc mine in the Democratic Republic of the Congo — a mammoth project with
projected annual zinc production of 225,000 tonnes.
Meanwhile, Australian base metals miner MMG (HKEX:MMG) brought its Dugald River
project in Queensland up to commercial production. It will deliver 170,000 tonnes of zinc
per year when fully operational.
There were various smaller operations chugging along through the quarter as well, from
exploration to estimates to commissioning — such as Titan Mining’s (TSX:TI) Empire
State mine in New York.
Finally, on the development front, Australia’s South32 decided to buy Arizona Mining
during the quarter, spending a cool C$1.8 billion for the Canadian company and its
Hermosa project.
On the refining front, zinc smelters cut their treatment charges by 15 percent to US$147
a tonne in order to woo suppliers in May as a supply shortfall caught up with them.
As the quarter drew to a close, the trade war kicked into gear and zinc — along with all
the other base metals — took a dive in value.

Zinc trends Q3: Supply crunch on the horizon
During Q3 zinc continued to fall, losing another 11 percent of its value by falling from
US$2,914 at the beginning of the quarter to US$2,572.50 by the end. Q3 also included
the yearly low of US$2,285 — a price zinc touched on September 17.
South32 was quick to announce plans for its newly acquired Hermosa project in
Arizona, which is slated for production start in 2020.
Staying in the region, Consolidated Zinc (ASX:CZL) moved quickly to begin production
at its Plomosas project in Northern Mexico.
There were numerous other developments from smaller miners, and while that was
happening Ivanhoe Mines improved the resource estimate for its Kipushi zinc mine
(again), with the measured and indicated zinc resources up by 16 percent, from 10.2
million tonnes to 11.8 million tonnes, and an increase in zinc grade from 34.89 percent
to 35.34 percent.
During the quarter, the Century zinc mine also came back online, with New Century
Resources picking up where previous owner MMG left off in 2016. The company also
quickly began working on a mine expansion plan, which it announced in the same
quarter.
While all the miners were talking about new supply, stockpiles continued to fall, and
analyst Stefan Ioannou of Cormark Securities told INN that the ongoing effects of the
trade war were hiding a looming supply shortfall.
He said that even though there are projects moving forward, between 10 and 15 percent
of world supply has gone offline in the years prior as huge mines (like Century) have
shut down — meaning that the world is in for a supply crunch because big projects can’t
just be switched on overnight.
At the time, LME zinc stockpiles stood at 215,975 tonnes, while Shanghai had 37,239
tonnes in its warehouses.
Zinc trends Q4: Prices stay down
The fall in zinc stockpiles continued into Q4, with Scotiabank analysts noting that global
inventories of zinc were at “extreme lows — below the levels that were ringing industry
alarm bells in November 2017.”
Falling stockpiles made zinc miners work faster, with Azure Minerals (ASX:AZS) posting
an encouraging scoping study for its Oposura project in Mexico. The company's CEO
said Azure would move forward rapidly with the project to take advantage of the “strong
zinc thematic."

At the Mines and Money conference in Toronto, Pasinex Resources (CSE:PSE) CEO
Steve Williams said what everyone was thinking when he described zinc as the “least-
loved metal” out there in 2018 given the “odd” situation it is facing with falling supply,
falling stockpiles and depressed prices.
That “odd” situation was certainly taking a financial toll on miners by Q4, with Ascendant
Resources (TSX:ASND) posting a quarterly report showing that despite increases in
production and efficiency, it still posted a net loss of US$3.85 million in the September
quarter.
Lower prices didn’t stop South32 from banging around during Q4 though, delivering
plenty of love to zinc projects through the Americas.
Elsewhere, Nyrstar received a lifeline in late November, with a major shareholder
throwing it a US$650-million working capital facility to ensure it could continue its day-
to-day operations. The news allowed a look in at the depth of the trouble the major
global smelter was in over the year, as it required an interim payment before the
US$650 million kicked in to cover nine working days of operations.
Wrapping up the theme of the zinc story, as of writing LME zinc stockpiles stood at
127,850 tonnes — up from a low in late November of 115,000 tonnes.
Editorial Disclosure: Pasinex Resources is a client of the Investing News
Network. This article is not paid-for content.

Zinc Outlook 2019: A Year That Has to Be
Better
What's the zinc outlook for 2019? Experts and CEOs share
their thoughts on what's ahead for the base metal next year.
Zinc has had a bruiser of a year, with prices
for the unloved metal racing fellow base
metals to the bottom of the pile since the
trade war kicked off in earnest over June
and July.
While supply continues to dry up and
stockpiles continue to fall, prices haven’t
responded in any meaningful way, leading zinc
to fall over 24 percent year-to-date (as of
December 14).
Zinc experts — both analysts and company leaders — think there’s a light at the end of
the tunnel though, with a short-term recovery in the cards.
Zinc outlook 2019: Price performance review
Over 2018 zinc has languished well below its base metal compatriots, falling as low as
32 percent under its starting point of US$3,375 a tonne to US$2,285 in mid-September.
Compare that to copper on the same day (September 17), down 18 percent year-to-
date, and nickel, down 3.5 percent (though nickel rose partway through the year, while
other base metals did not).
Looking at the LME chart below, as of mid-December zinc has recovered somewhat, up
to US$2,555 — though still 24 percent below its January 1 price.

Various analysts through the year have stood by the claim that zinc's fundamentals are
solid, and negative sentiment is to blame for the metal's price in 2018 — which was
perhaps more of a correction.
Helen O’Cleary, senior analyst at CRU Group, told the Investing News Network (INN)
that the zinc price had been “buoyed by investors front running the deficit story, and had
been outperforming the rest of the LME metals for some time.”
The trade war still got slapped with blame for bearish sentiment though.
“Galvanized sheet trade has been directly affected by Section 232 tariffs on steel
products, and although US galvanized sheet prices increased to cover the 25-percent
duty, buyers have become more cautious,” she said.
Andrew Thomas, research director at Wood Mackenzie, said much the same, saying
prices for zinc had been ahead of fundamentals.
“By the February peak the concentrate market had been tight for 15 months, but the
metal market was still adequately supplied," he commented.
Thomas said that the US$3,600 value for zinc prices reached in mid-February 2018 was
the peak, and “profit taking [and] short selling lent momentum to the retreat” from there.

He said that the biggest story of 2018 (and heading into 2019) was smelter capacity in
China. A combination of poor economics and an ongoing environmental crackdown has
resulted in Chinese smelter production falling in 2018.
"Whilst economics should improve next year, the big question will be: will smelters be
able to complete environmental upgrades [to] increase production levels in excess of
those seen in 2015 and 2016, and prevent the tightness in the metal market from
becoming too extreme,” he said.
Stefan Ioannou of Cormark Securities said that zinc shaped up through 2018 to be in
line for a supply crunch, with large projects drying up and inventories falling.
Ioannou noted that as with other base metals, “the trade war is really what was sailing
the boat.”
Feeding into previous comments about a supply crunch, Ioannou pointed to an early
2018 fall in treatment charges as a sign of turbulence.
“What that means is that the smelters — basically the end users of a mine supply —
realized that there’s a shortage [in supply] and they’re willing to charge less to process
it.”
Read INN’s story from September for more thoughts from Ioannou on the coming
supply crunch.
Zinc outlook 2019: Looking to price drivers
Zinc prices have stayed down through the second half of 2018, failing to recover from
the shock of the trade war. However, stockpiles are still being drawn down as a supply
shortfall hits inventories. As of mid-December, LME zinc stockpiles stood at 122,000
tonnes — down from 250,000 tonnes in late July.
O’Cleary said that CRU expects a short-term recovery of the zinc price into early 2019
“as refined metal stocks will remain at critical levels until increased mine output starts to
feed through to an increase in smelter output.”
“We believe that the metal supply crunch is coming to an end and that the refined
market will return to balance in 2019,” she added.
Brian Leni of Junior Stock Review said that while the trade war has depressed prices, “it
isn’t the whole story. When any commodity is hitting new five-year highs, new or hidden
supply caches begin to feed the market."
He added, “however, LME zinc inventories remain very low and, in my opinion, still give
upside potential to the zinc price. While I do believe there is potential for a nice spike in

the price, especially upon news of a resolution in the US and China trade war, I don’t
think it will be sustainable over the long term.”
Leni said that today's lower zinc price is “a good gauge for the long term, with the
proviso that there is certainly room for a nice spike due to the very low visible LME
inventories.”
As mentioned, Thomas said the big story for zinc was smelter activity in China, which is
now giving way to mine supply.
“The underperformance of Chinese smelters has depleted Chinese stocks of refined
metal, which are close to record lows and supported the recovery in the zinc price from
less than $2,300 in September to current levels,” he said.
“With mine supply now starting to come onstream, the supply crunch now revolves
around smelter production — historically the shortfall in rest-of-world smelter capacity
has been more than compensated for by new smelter capacity in China. However, the
pace of capacity expansion has slowed. As a consequence there is a risk of a structural
smelter bottleneck developing in zinc.”
Meanwhile, Ioannou said that troubled zinc smelter Nyrstar’s (EBR:NYR) woes in 2018
are a sign of the very dry supply line for the metal.
“[Nyrstar has] always been a successful smelting business, and a few years back they
decided to make the move to become a fully integrated mine-through-smelting
company. And I think they discovered fairly quickly that the mining game is a lot tighter
and a lot less forgiving than the smelting business.”
Zinc outlook 2019: CEOs' thoughts on the market
Besides analysts, INN also asked CEOs operating in the zinc space how they felt about
2018 now it is behind them, and what they think 2019 will hold.
Steve Williams, CEO of Pasinex Resources (CSE:PSE), said that prices remaining so
low is “odd” as there are only eight or nine days of zinc held in visible stockpiles.
“We’re still very low on stock, yet the zinc price has come down. I think part of that is
that the market is anticipating more production coming on. There’s a mine reopened in
Australia, and I think the market’s already sort of anticipated that a bit into the price. But
normally you would think that the zinc price should be a bit higher. It’s sort of an unusual
position right at the moment,” he said.
Among other CEOs, investor sentiment was the main challenge seen for the base metal
in 2018.

CEO of Group Eleven Resources (TSXV:ZNG) Bart Jaworski said that he expected a
“more bullish tone in the zinc market in 2019 given hiccups in new production and
growing optimism on zinc demand used in fertilizers and batteries.”
He also expected trade war rhetoric to subside — a sentiment shared by Brandon
Macdonald of Fireweed Zinc (TSXV:FWZ), who expected a rebound back up to 2018
prices in a “double peak."
Macdonald said he based this sentiment on continued tightness in the market, while Dr.
Mark Cruise, CEO of Trevali Mining (TSX:TV), said that his optimism for zinc is based
on continued drawdowns of global refined zinc inventories.
“We are starting to approach inventory levels last seen in the 2006/2008 window when
the zinc price propelled to over US$2 per pound [US$4,409 per tonne].”
Zinc outlook 2019: Price predictions
Ioannou said that at Cormark, a price prediction of US$1.35 a pound (US$2,976.2 a
tonne) is the average for the next year going forward, a price he said is “somewhat
conservative.”
“We're down into sort of a 120,000-tonne range on the LME right now. And quickly
approaching 100,000 tonnes, and when you add up the visible supply that's out there
right now, we're down to half a week of global consumption, which I think for argument's
sake is pretty critical already.”
“[The] last time we saw zinc inventories on the LME below 100,000 tonnes, the zinc
price spiked to US$2 a pound [US$4,409.24 a tonne] ... I think just based on that supply
concern, I think if we see any waning in the Trump trade war narrative and people start
to take a closer look at what the visible inventories are telling them ... we could see
prices spike significantly next year,” he said.
Given her feelings on the supply crunch coming to an end, CRU's O’Cleary was
understandably more conservative, pegging the zinc price for 2019 at US$2,450, “with
an uptick in 2019 Q1 giving way to falling prices for the rest of the year as the refined
market returns to balance.”
Wood Mackenzie's Thomas was closer to Ioannou’s sentiments. “We forecast double-
digit growth in Chinese smelter production in 2019,” he said.
“It's important to understand that even if this is achieved, the metal market is still
forecast to experience further declines in stocks and remain in deficit. As a
consequence the price is projected to revisit, and potentially exceed, the highs seen in
February [2018].”

As mentioned, Junior Stock Review's Leni believes a spike in price is on the cards due
to low inventories — though that could be soured by any resolution to the trade war.
Leni said the big story for 2018, and going into 2019, is zinc-air batteries, which he said
he increasingly heard and read about this year.
“Unlike the narrative-heavy vanadium redox battery storylines, zinc-air batteries are
legit, and I believe could be an emerging major demand source for zinc in the future.”
Zinc outlook 2019: What's ahead for companies
Each of the zinc CEOs polled by INN shared what their respective companies were
working on through 2018 and into the future.
ZincX Resources (TSXV:ZNX) President and CEO Peeyush Varshney said that his
company recently completed a preliminary economic study on its Cardiac Creek
deposit within its Akie property in BC — a development that shifted ZincX’s share price
by 200 percent.
For Trevali, Dr. Cruise said that 2018 was the first full year of ownership of its two
African zinc mines, Perkoa (in Burkina Faso) and Rosh Pinah (in Namibia).
“There was an integration process, which is now largely complete, that did introduce
some challenges and resulted in some production and shipping/logistics setbacks at our
Rosh Pinah operation that negatively affected our output; however, this was offset by
superior operating results from Perkoa.”
Cruise said that going forward, Trevali will be working on optimizing its operations
through organic growth initiatives at some of its operating mines.
Meanwhile, Fireweed Zinc released an updated resource and preliminary economic
assessment for its Macmillan Pass project in Yukon, which “moved our Macmillan Pass
project into elite company among large zinc-lead projects, and the preliminary economic
assessment showed the potential for robust economics,” said Macdonald.
For his part, Williams at Pasinex said investors should keep an eye on his company's
drilling in Nevada.
“We’ve got what we think is a SEDEX-style zinc deposit in Nevada, and so we’ll be
drilling that again in the spring of next year. So definitely watch that because that one
we think can be exciting,” he said.
“And then we’re also drilling in Turkey. We think there’s a lot more zinc around where
we are. We’re actually drilling at the property due north of Pinargozu, the mine, right at
the moment. And so hopefully later this year we should have some results coming out.”

Editorial Disclosure: Pasinex Resources, Trevali Mining and Fireweed Zinc are
clients of the Investing News Network. This article is not paid-for content.
The Investing News Network does not guarantee the accuracy or thoroughness of
the information reported in the interviews it conducts. The opinions expressed in
these interviews do not reflect the opinions of the Investing News Network and do
not constitute investment advice. All readers are encouraged to perform their
own due diligence.

Nickel Trends 2018: Becoming a Battery
Metal
What nickel trends drove prices in 2018? We run through top
supply, demand and price catalysts in this overview of the
space.
In 2018, the nickel story was one of increased
interest in its use as a battery component,
along with anxiety over supply mixed with
trade war jitters.
From the start of 2018 through to now, nickel has
had as bumpy a ride as other base metals, but
with a peak well above its starting value in the
middle of the year.
From January 1 until the end of June, nickel’s value increased by 14 percent, rising from
US$12,680 a tonne to US$14,570.
A yearly high of US$15,745 was hit during that period, but from July 1 onward it was a
downward journey as nickel lost 25 percent of its value between the midpoint of 2018
and late December.

2018’s low came in mid-December when nickel was trading at US$10,715 — not quite
the lows seen in 2016 and early 2017, but getting there.
Despite the hill in the middle of the year as shown on the chart above, year-to-date,
nickel has lost 14 percent of its value in 2018, going from US$12,680 on January 1 to
US$10,880 on December 18.
Nickel trends Q1: Prices on the up
The year began with the news that Chinese company Jinchuan Group (HKEX:2362)
would be expanding production of nickel sulfate by 40 percent in a move to position
itself to take advantage of the coming electric vehicle (EV) boom.
Canadian miner RNC Minerals (TSX:RNX) was on the same wavelength, announcing
plans to build what it is calling the largest nickel-cobalt project in 2019 — news that
brought the company a 47-percent increase in its share price on the TSX.
Cobalt 27 Capital (TSXV:KBLT) soon after signed a royalty deal for nickel and cobalt
production from the project. RNC President and CEO Mark Selby said in March that
even without the EV demand driver, nickel fundamentals were strong.

Supply tightness and increased demand were behind a surge in value during the
quarter, with market analysts at the time predicting the increase would be maintained in
the near term.
The increased value did not last long though; shortly afterwards there was a fall in price
as volatile markets and a stronger greenback took their toll in early February.
Despite the ups and downs of the quarter, nickel ended Q1 at US$13,240 — up 4.4
percent.
Nickel trends Q2: Big projects and headaches
In Q2, with nickel prices maintaining a steady upward trend, Glencore (LSE:GLEN)
announced it would be spending US$1 billion to hunt for more nickel ore near its
Sudbury operations in Canada.
Around the world in Q2 the nickel story was one of pressure, from the Philippines to
Cuba to New Caledonia.
In the Philippines, Rodrigo Duterte, the Asia-Pacific nickel powerhouse's firey president,
started banging on about how much he hates mining, threatening to ban open-pit mining
in the country due to environmental infractions. It was a theme he would repeat at
regular intervals through 2018.
Meanwhile, in the Caribbean, Cuba set itself a nickel-cobalt production target of 50,000
tonnes in 2018 after — according to business sources close to the industry — failing to
hit its 2017 targets.
On the other side of the world in New Caledonia, Vale (NYSE:VALE) continued pulling
its hair out over its troublesome VNC nickel complex there; at the time, the company
was searching for a joint venture partner to work with. VNC posted good numbers in Q1,
but has been a headache for Vale since it opened (late) in 2010.
In 2017, it was reported that Vale would mothball the complex if it didn’t find a partner
by the end of Q2 2018 — something that did not come to pass.
To salt the wounds, Moody’s Investor Service announced in May that the mining
industry wasn’t doing enough to keep up with EV demand, and prices kept rising as
demand outstripped supply.
All this, while increased discussion around the importance of nickel in EV
batteries began taking shape.
Despite angst over VNC, Vale still pulled the trigger on its Voisey’s Bay nickel-cobalt
expansion in Canada.

By the end of Q2, nickel was up at US$14,905, having passed its 2018 peak of
US$15,745 in early June.
Nickel trends Q3: Boom in the land down under
Over Q3, nickel prices began their journey downwards.
First up, miners in the Philippines warned that Duterte’s antics and decreasing prices
would impact output for the remainder of the year; later in the quarter Manila announced
a mild loosening of mining rules to allow exploration.
Additionally, many projects in Australia moved forward. Alpha Fine Chemicals settled on
a location for its nickel sulfate plant in Western Australia. Poseidon Nickel (ASX:POS)
released a feasibility study for its Black Swan mine and processing plant, Ardea
Resources (ASX:ARL) announced an expansion plan for Goongarrie, while Western
Areas (ASX:WSA) and Iluka Resources (ASX:ILU) revealed plans to increase
exploration in South Australia.
Meanwhile, Mincor Resources (ASX:MCR) flaunted an increased mineral resource at its
Cassini project in Western Australia, and GME Resources (ASX:GME) was another
company going for the battery spin, releasing a prefeasibility study for its NiWest
project.
And don’t forget Australian companies barging into neighboring markets, with Axiom
Mining (ASX:AVQ) acquiring a mining lease for the San Jorge deposit, and Metminco
(ASX:MNC) revealing plans to snap up the Jejovo project — both nickel projects in the
Solomon Islands.
Not to be outdone, mining behemoth BHP (ASX:BHP,NYSE:BHP,LSE:BLT) revealed
that it has zero plans to be left out of any ongoing or future nickel boom, announcing
intentions to build a slew of mines and refining projects to underpin a major push into
the EV space through its Nickel West division.
While all that happened, nickel prices fell from US$14,570 on July 1 to US$12,470 on
September 28 — a fall of 14.4 percent.
Nickel trends Q4: Continued price slump
Q4 begun with more nickel development news out of Australia, with Western Australia
turning out to be quite the hot spot for the metal.
Over in Queensland, Townsville looks set to become home to yet another nickel refinery
after Pure Minerals (ASX:PM1) announced plans to take over a private company that
already had big plans. Combined with Pure Minerals’ ore agreements from miners in
New Caledonia, 25,000 tonnes of new nickel could come onto the market thanks to the
plans.

Western Areas announced it is pulling the trigger on its Odysseus mine in Western
Australia, banking on the project coming online as demand for the metal increases (and
with that, prices).
BHP also took steps towards realizing its previously mentioned nickel domination plot.
Brazil saw developments too, with Horizonte Minerals’ (TSX:HZM) Araguaia project set
to double with a second-phase expansion announced by the company in a review, while
Centaurus (ASX:CTM) inked itself a deal that completely de-risks the exploration and
evaluation stage of its Itapitanga project.
Vale popped up in the news again, this time with protests over pollution halting
operations at its Onça Puma mine.
In what could be seen as good news for miners in New Caledonia, voters in the French
Territory voted to remain with France in a nail-biting referendum, meaning no need to
renegotiate mining leases.
Nickel prices kept sliding through the quarter, with analysts predicting that markets
should get used to market volatility (and depressed sentiments) at least until the 2020
elections in the US — if not beyond.
Towards the end of Q4, and therefore 2018, nickel was trading at US$10,930 — a fall of
11.3 percent for the quarter, and 14 percent for the entire year-to-date.

Nickel Outlook 2019: No Boom, but
Batteries Loom
What's in store for nickel in 2019? Experts share their nickel
outlook, from supply and demand dynamics to price
predictions.
Nickel was as hard hit as other base metals in
2018 as investor sentiment bled the markets,
leading to lower prices even as demand
increased.
Analysts predict that nickel prices will stay low
through to 2019, barring any significant
improvements in the seemingly deteriorating US-
China trade rhetoric.
Additionally, the much-touted battery metal boom might well not happen in any
meaningful way for nickel in the near term, as markets learn more about just how far the
electric vehicle (EV) industry has to go, and how quickly consumers need to adopt new
technology for the boom to materialize.
New developments throughout Australia and headaches for miners in the Philippines
dominated supply-side news, while demand meant that over the year stockpiles were
drawn down.
As seen on the chart below, nickel started the year pretty well, gaining 14 percent in
value through the first half of the year, rising to a high of US$15,745 per tonne in early
June.

In June and July, the trade war got down to business though, triggering a sustained fall
in the metal's value through to the end of the year. Nickel was not alone.
But it wasn’t just a US and friends vs. China tango — nickel was also the subject of
anxiety about US sanctions against Russia in April, which forced prices higher.
While no sanctions were placed on major Russian nickel producer Nornickel
(MCX:GMKN), the risk of America broadening its attack on Russian businesses made
investors wary, accounting for the spike seen on the chart in April.
The US had previously put sanctions on Russian aluminum producer Rusal
(HKEX:0486), causing that company's shares to collapse more than 69 percent over a
week earlier that same month.
Nickel miner Horizonte Minerals (TSX:HZM) told the Investing News Network that while
nickel prices have risen on 2017’s momentum and fallen on 2018’s drama, the metal is
still a solid investment.
“The overriding nickel fundamentals with demand increasing and limited supply coming
online should continue pushing the nickel price upward over the medium [to] long term,”
the company said, reflecting the commonly held sentiment that for nickel it is a waiting
game for the time being.

Nickel outlook 2019: Supply
Questions about the future of nickel supply have centered around a long-touted EV
demand boom as consumers embrace EVs, but according to analysts the primary
consumers of nickel remain industrial.
“Stainless steel will continue to be the primary first use for nickel for a long time to
come,” said research director at Wood Mackenzie, Andrew Mitchell.
Nobody is denying increased demand from EVs is looming though — major and junior
mining companies are scrambling to bring production online to meet an anticipated
peak, with dozens of companies in Australia developing projects (read more here). And
news from the world’s second-largest nickel producer, the Philippines, always gets
media attention for the risks raised by its anti-mining president.
In their last commodities forecast report for 2018, analysts at FocusEconomics note that
increased output from Indonesia and the Philippines has been pushing prices down,
and plans to build a new Class 1 nickel-cobalt refinery in Indonesia are ensuring any
bullish attitudes to the metal are tempered.
The company with those plans, China’s Tsingshan (the world’s largest stainless steel
maker), announced that the refinery will be producing battery-grade nickel and cobalt.
Besides the trade war, Mitchell said that “sentiment and perception of the prospects for
nickel were also adversely affected by the announcement by Tsingshan.”
Tsingshan’s refinery is set to produce 50,000 tonnes of nickel annually.
“While treated with some skepticism, the aforementioned announcement by Tsingshan
and the view that this might precipitate another NPI (nickel pig iron) wave of production
growth continues to be a significant talking point,” said Mitchell.
“Had any other company made the announcement it would have essentially been
ignored, but since Tsingshan has a remarkable track record of delivering what its states
it will do, the ambitious plan cannot be dismissed out of hand.”
On the LME, nickel stockpiles fell through 2018 — starting above 350,000 tonnes and
falling to 209,000 tonnes by late December — a loss of around 40 percent year-to-date,
indicating a supply shortfall.
Nickel outlook 2018: Demand
Horizonte Minerals blames “political events” for making the nickel market a tougher one
in 2018.

“Unfortunately, political events, including trade impediments between some of the
world’s largest economies, have resulted in a general slowdown globally, with nickel
weakening along with almost all other metals in the second half," the company said.
“This despite a sustained drawdown of stocks and a very positive supply/demand
outlook, reflected in the market’s consensus forecast, which expects much higher prices
in the years ahead.”
As mentioned, the looming EV boom and increased demand for nickel is a talking point
for basically everyone operating in the nickel space — but the conversation has moved
on to when it will actually actually materialize.
Brian Leni of Junior Stock Review said that no matter what, electrification is in the
cards.
“This revolution in human history will be led by EVs and will have a tremendous impact
on the battery metals market," he explained.
“In saying this, given the current and future chemistries used in EV batteries ... nickel
plays a major role. While I don’t see this staying this way forever, I would say that the
next 10 to 12 years of battery demand is very bullish for nickel,” said Leni.
He continued, "the question that then needs to be asked is, what will the EV adoption
rate be, moving forward? It is a hard question to answer, but one thing to keep in mind
is countries around the world are incentivizing the adoption of EVs with rebates and
instituting taxes on carbon emissions. I believe these incentives and penalties will only
increase with time, making me more optimistic of a higher growth rate in the global EV
market.”
Mitchell said that the market’s understanding of nickel and its use in EVs is maturing,
lending an explanation to why its value is falling right now, rather than going up.
“There is now more understanding and a realization that this is not a near-term story but
more a mid- [to] long-term growth area. In addition, there is also some caution as to
whether the potential requirements for nickel and indeed cobalt can be met longer term.
The development of 'new' battery technologies is likely to ease this somewhat (e.g.
solid-state batteries), but how and when is still a point of conjecture," he explained.
Meanwhile, Stefan Ioannou of Cormark Securities said while hype around EVs (and
supply troubles in the Philippines) caused nickel to go on a run in 2017, the reality of
timing brought an end to that party.
“I think the reality in the case of the battery narrative is that yes, I think nickel at some
point will have a place to play there, but it's a few years out yet in terms of actual
consumption of the metal in that space. So I think it may have been a bit premature, and
I think the market has recognized that as well.”

Harking back to supply-side considerations, Ioannou said that that demand will come up
against tightness in the pipeline due to physical limitations in mining.
“A lot of [nickel] is coming from lateritic ore, which is typically very capital-cost intensive
and can be very challenging from a technical and metallurgical point of view ... the
preferred way to get nickel out of the ground is in a form of a sulfide deposit, but there
haven't really been any major new significant sulfide discoveries in the last decades.
Probably the last biggest one of real memory would be Voisey's Bay.”
Nickel outlook 2019: Price predictions
Drawing down on the above thoughts on supply and demand, each analyst predicted
either a stable or higher nickel price in 2019 — with the trade war weighing down on
prices even if supply and demand push them up.
“Our outlook for next year is one of a similar price to the current year as a consequence
of the ongoing trade dispute and the potential impact of Brexit,” said Mitchell.
“Should the trade dispute be resolved sooner rather than later and/or China provides a
new stimulus package for internal growth, then that would be positive for the price
outlook," he added.
Leni said that he sees higher prices in 2019 for nickel.
“Considering the entire nickel market is currently 2 million tonnes, and given the current
supply and demand fundamentals and the time and cash needed to find, develop and
produce nickel sulfide projects, you have to ask yourself, where is it going to come
from?" he said.
“I’m bullish on nickel and provided there is resolution to the US and China trade war,
think 2019 is going to be a good year for the nickel price. How good? I believe there’s a
good chance that the nickel spot price will challenge US$8 per pound.”
US$8 per pound for nickel equals around US$17,640 a tonne — prices not seen since
2014.
Analysts polled by FocusEconomics also forecast higher prices — though not as high
as Leni’s number.
Panelists see nickel prices recovering considerably over the next 12 months amid a
tight market. Downside risks — namely, geopolitical tensions and the ever-present
threat of a hard landing for the Chinese economy — are expected to persist in the short
term.
“Over the coming years, intensifying EV-battery output spells good news for demand
and should support prices. Our analysts see nickel prices averaging US$13,904 per

metric ton in Q4 2019, before edging lower to average US$13,846 per metric ton by Q4
2020," the analysts said.
At Horizonte Minerals, a company with numerous nickel assets in Brazil, the sentiment
is the same.
“Given the outlook for EVs and continued strength in the stainless steel market, we
expect prices to begin to better represent the underlying market fundamentals of
growing demand and a need for increased prices to incentivize new sources of supply.”

Iron Outlook 2019: Premium Prices for
Premium Grade
What do experts see coming for the iron outlook in 2019?
Unsurprisingly, actions taken by China will be key to watch
in the coming year.
Iron ore was in for a bit of a ride in 2018 — not
because of the trade war, but because of Chinese
environmental regulations, which had miners
scrambling to tailor their products to the market.
In regards to prices, for iron ore it’s a continuing story
of decline; over the last few years the iron ore fines
price has gone down.
According to Scotiabank’s most recent Commodity
Price Index, the vital base metal fell from an average of US$72 a tonne in 2017 to
US$70 in 2018. It has a projected 2019 average of US$65 — well below the heady
values of 2012/2013, when iron ore was above US$130.
According to the latest World Bank report, iron ore prices were 7 percent below 2017
prices year-on-year in October. The firm also projects iron ore prices to fall in 2019
— and for the foreseeable future.
Paul Gray, vice president of research at Wood Mackenzie, said that in 2018 the big
story for iron was a widening of price spreads.
“Premium prices for premium grade,” he said, noting that the Chinese steel sector’s
restructuring had a major impact. “China’s steel restructuring and environmental
clampdown have impacted iron ore pricing and supply dynamics.”
Iron ore trends 2018: The year in review
Before we look further into what the experts are saying about iron ore, let's have a quick
recap of big stories in the iron ore space.
The year began with the Australian government’s Office of the Chief Economist
predicting extremely bearish iron ore prices for 2018 and 2019 due to production cuts in
China and increased supply from Australia and Brazil.

In May, foreign investors were given a look in at China’s iron ore market, with futures
opened to outsiders for the first time at the Dalian Commodity Exchange.
Speaking of China, Australia’s BHP (ASX:BHP,NYSE:BHP,LSE:BLT) predicted that
changes to environmental regulations in the world’s largest iron ore consumer would
benefit companies that marketed higher-grade iron (in other words, BHP).
There was also a roll call of major Australian miners announcing replacement projects in
2018: Fortescue Metals' (ASX:FMG) Eliwana mine (costing US$1.275 billion), BHP’s
South Flank project (costing US$2.9 billion) and Rio Tinto’s
(ASX:RIO,NYSE:RIO,LSE:RIO) Koodaideri, West Angeles and Robe Valley
developments (costing US$2.2 billion).
Over in Brazil, Vale (NYSE:VALE) announced it would be limiting production until iron
ore prices increased, despite plenty of room for increased capacity across its portfolio.
Vale and BHP’s Samarco project in Brazil continued to cause headaches for the joint
venture partners, with settlements to work through and differences in eagerness to
restart the mine.
In 2018, autonomous infrastructure and transport linkages became more prominent in
the space, with trucks in Brazil and trains in Australia being converted to human-free
operations besides oversight.
Iron ore outlook 2019: Expert analysis
Looking back at 2018, Wood Mackenzie's Gray said that compared to other base
metals, iron ore has not been majorly impacted by the trade war — lending credence to
the idea that really, the iron story is all about China and its appetite for development.
Speaking of development, he said that heading into 2019 the big story will remain
“Chinese steel mill margins and profitability — to what extent will the focus switch from
profitability to cost control?”
In their December consensus forecast, analysts at FocusEconomics said that falling iron
prices in November were due to “jitters over a slowing Chinese economy and global
trade tensions.
“In addition, the decline follows a selloff in steel futures and lackluster steel prices,
which hints that steel production will drop," they added.
FocusEconomics noted that “steel production is also expected to be constrained this
winter as the Chinese government stipulates production cuts to combat pollution.”

Meanwhile, Brian Leni of Junior Stock Review said that much of the narrative around
iron ore was “concentrated on the premiums given to the high-grade concentrates —
those which have over 62-percent iron content.”
Leni said that because the higher-grade market is smaller than the lower-grade one,
and given the “increasingly stringent environmental regulations in all countries, most
importantly China, [he believes] there is good reason to think that a hefty premium will
be paid moving forward, almost regardless of where the global economy is headed.”
He added, "a great example of the high-grade market’s resilience is its performance
over the course of 2018, where both its premium and its price have held fairly steady in
the face of rapidly increasing interest rates and a US and China trade war."
Iron ore outlook 2019: Price predictions
For prices, Leni said that for now, iron ore will be susceptible to the health of the global
economy, “and the direction with which the largest iron ore producers ... want to push
it.”
“I am bullish on high-grade iron ore, and I am putting my cash in companies that are
producers of the high-grade product or are developing high-grade iron ore projects
toward production. In terms of price, I am hard pressed to pick a number. What I will say
is that the high-grade product will continue to fetch a premium, which I believe will only
increase with time.”
At Wood Mackenzie, Gray said that a price range of US$65 to US$70 over 2019 is a
reasonable balance, while analystss at FocusEconomics said that iron ore prices are
expected to continue softening next year and in 2020, although they will be volatile.
“Rising supply and a weakening property market in China will likely weigh on prices,
pushing them down in the coming quarters," they said. "However, the outlook is murky
due to lingering uncertainties over the trading relationship between China and the U.S,
as well as over the broader global economy."
FocusEconomics panelists expect prices to average US$58 in Q4 2019. In 2020, prices
are seen declining further to average US$57 in the fourth quarter.

Lead Outlook 2019: Mines Back Online
as Prices Dither
Lead had a tough 2018, but what's the lead outlook for 2019?
Read on to find out what analysts had to say about the
market.
In 2018, lead took on much of the same calamity that
its fellow base metals endured in the face of dismal
investor sentiment caused by the US-China trade
war.
From a starting value of US$2,543 a tonne on January 1
to prices below US$2,000 towards the end of the year,
lead lost 22.3 percent of its value in 2018.
Analysts are predicting that 2019 will hold even lower prices for lead as supply deficits
are plugged by existing stockpiles of the metal.
Lead, which is often mined with zinc and silver, hit a high point early in 2018 when it
soared to US$2,682 at the beginning of February — a 5-percent rise year-to-date at the
time. Its low for the year was at the end of October, when it fell to US$1,866.50 — at the
time a 26.6-percent decrease year-to-date.

The highs of early 2018 were a continuation of a steadily increasing lead value from
June 2017 — a year when the lead price never fell below US$2,000. The fall for lead
that took place from February 2018 onward was the primary trend of the year.
Neil Hawkes, lead market analyst at CRU Group, said that while analysts had predicted
that the base metal would decline in value, “the scale of the price decline surprised us
(along with everyone else!).”
Lead trends 2018: The year in review
Hawkes said that the main “bearish drivers” of the lead price in 2018 were “broader
ones of renewed strength in the US dollar (and US economy, rising US interest rates)
alongside growing concerns over the impact of US-Chinese trade tariff escalation on
raising inflation and dampening future economic growth and metals demand growth.”
He said that the biggest news of 2018 was a two-fold development wherein an expected
rise in lead mining failed to eventuate “as several key mines underperformed.”
Secondly, Hawkes added, "the scale of disruption to the Chinese lead supply chain due
to ongoing environmental and safety checks was greater than expected, even eclipsing
markedly slower Chinese lead demand (weaker automotive, e-bike and telecom
sectors) to lift Chinese lead prices to open the arbitrage opportunity to import more lead
from overseas.”
Disruption didn't lead to increased prices though. “The inescapable bearish truth in the
lead story this year has been that there has been no shortage of metal inside or outside
China, with any gaps in supply from fresh lead production continuing to be met from
drawing down previously built lead stocks.”
As of late December, LME lead stockpiles sat at 108,000 tonnes after starting 2018
above 140,000 tonnes.
Lead outlook 2019: Batteries make a splash
“The key trend to watch unfold in 2019 is the gathering speed and scale of lead mine
production as primary supplies finally respond to previously attractive market
conditions,” said Hawkes.
“Amid no better than steady lead demand growth and steady secondary lead production
(recycling lead-acid battery scrap), higher primary lead supplies will be the difference in
pushing the global lead market from the widening deficit over the last three years back
into balance or even a small surplus.”
And it's here that the battery metals narrative makes its way into lead. Hawkes said that
for the base metal, the rise of the lithium-ion battery and its use in electric vehicles is
solidifying as a real factor in lead prices.

“[The] main bearish concern for the lead market, other than rising mine production, is
the longer-term threat to lead-acid battery usage in both automotive and industrial
applications from lithium ion.”
He added that “CRU still sees room for both battery chemistries to grow alongside each
other, but the speed and scale of penetration of lithium-ion batteries into lead-acid
battery market share could yet surprise on the upside.”
As Hawkes noted, higher lead production faltered through 2018, meaning that there was
a shortfall between production and consumption, as noted in the International Lead and
Zinc Study Group’s November report. It states that “world refined lead metal demand
exceeded supply by 110,000 tonnes during the first nine months of 2018,” drawing
down on total world stockpiles by 49,000 tonnes.
Hawkes said that key companies and mines to watch in 2019 are Goldcorp’s
(TSX:G,NYSE:GG) Penasquito mine in Mexico, Vedanta’s (NSE:VEDL) Indian mines,
silver-focused (and therefore lead-producing) Fresnillo (LSE:FRES) and its Mexican
operations, as well as Glencore’s (LSE:GLEN) mines in Australia: Mount Isa and
McArthur River.
“There are also some big ownership changes, with JCI (NYSE:JCI), the world’s leading
automotive lead-acid battery maker, recently sold to Brookfield Business Partners; and
Eco-Bat, the world’s largest refined lead producer, likely to change hands in the near
term in a debt-for-equity deal connected to a lawsuit against the company’s owner.”
If that isn't enough drama, he added that Aqua Metals (NASDAQ:AQMS), which has an
up-and-running lead recycling facility in Nevada, and LeadFX (TSX:LFX), which has a
proposed lead refinery at an idled mine site in Western Australia, "[are] both struggling
to commercialize new hydrometallurgical technology to recover lead" (from scrap at
Reno and from mining at Paroo Station).
Lead outlook 2019: Prices
“Lead-specific factors aside, investors should keep an eye on the broader metal price
drivers that have pushed and pulled LME lead prices around in 2018,” said Hawkes.
“Namely a further escalation (bearish) or hopefully de-escalation (bullish) in US-Chinese
trade tariff wars and how much longer renewed US dollar strength can last. Price
movements in other LME metals, particularly LME flagship copper and sister mining
metal zinc (both expected to fall in 2019), will also influence lead price direction," he
said.
“Ultimately we think that the LME lead price will post fresh lows in 2019, with the full
year averaging US$1,925, the first sub-US$2,000 outcome since 2016.”
Over at FocusEconomics, analysts polled were a mixed bag on prices.

“Improved supply and demand dynamics in winter months and still-solid demand for
lead-heavy vehicle batteries should support lead prices in the coming quarters.
Moreover, the recent easing in tensions between the US and China could bode well for
prices going forward," the analysts said.
They see prices averaging US$2,251 per metric tonne in Q4 2019, and US$2,237 in Q4
2020.
For 2019 as a whole, the analysts posted a consensus forecast of US$2,221 through
the year, with the lowest forecast coming from Liberum Capital, which predicts a price of
US$1,834. The most bullish prediction is from Fitch Solutions, at US$2,500.

Base metals outlook 2019

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