Counting Down the Best and Worst of 2013: Part Two

Counting Down the Best and Worst of 2013: Part TwoPart Two: The Best

Continuing from yesterday’s look at five of the worst trends that happened in 2013, we now turn the conversation in a more positive direction, and look at five of the best commodity and junior mining success stories to emerge during the year. We hope that identifying these trends will help to guide your investment decisions going into the new year and beyond.

1. Patterson Lake, a Boon for Uranium Exploration

After the disaster of Fukushima, uranium prices tumbled, and that had many observers questioning the future of not only uranium, the fuel for nuclear reactors, but the entire nuclear industry. But uranium bulls have always argued the supply-demand fundamentals are strong, with uranium demand exceeding mined supply, and that it’s only a matter of time before the price sees a lift. While that didn’t happen in 2013, what did happen was a flurry of exploration in Saskatchewan’s Athabasca Basin — the source of some of the world’s highest-grade uranium.

Beginning in November of last year when Alpha Minerals (TSXV:AMW) and Fission Energy announced the discovery of a high-grade, shallow-depth uranium boulder field on the Patterson Lake South (PLS) property, activity heated up in March with a land grab that saw several juniors staking claims after a series of excellent drill results at PLS from Alpha and Fission.

Some of the key uranium juniors making strides in the region are:

  • Fission Uranium (TSXV:FCU), the operator of Patterson Lake south as well as holder of additional properties in the Athabasca Basin and in an emerging uranium district in Peru;
  • Zadar Ventures (TSXV:ZAD), a uranium exploration company working in the Athabasca Basin and Whiskey Gap;
  • Azincourt Uranium (TSXV:AAZ), which recently partnered with Fission Uranium to explore the Patterson Lake North property;
  • Aldrin Resource (TSXV:ALN), which has an option agreement to acquire a 70-percent interest in the Triple M uranium property, which is south and west of Patterson Lake;
  • NexGen Energy (TSXV:NXE), whose flagship property is the Radio uranium project, also located in the Athabasca Basin.

Also of note, the Western Athabasca Syndicate was formed in July of this year and currently holds the largest land package in the region. Its goal is to explore and develop over 700,000 acres of property with the aim of discovering uranium. The syndicate comprises Athabasca Nuclear (TSXV:ASC), Skyharbour Resources (TSXV:SYH), Lucky Strike Resources (TSXV:LKY) and Noka Resources (TSXV:NX).

2. Graphite in Canada Going Strong

Despite flake graphite prices being down significantly from what they were between mid-2011 and early 2012, interest in the graphite space from an exploration point of view was strong in 2013. Much of the action was centered in Northern Ontario, especially the Albany deposit being developed by Zenyatta Ventures (TSXV:ZEN), a graphite play that sparked a lot of discussion on these pages back in the summer.

Described by Zenyatta as “the only new magmatic hydrothermal graphite deposit currently being developed,” Albany was picked as the Discovery of the Year by the Northwest Ontario Prospectors Association; Zenyatta was also named the top-performing company on the TSX Venture Exchange in 2012.

Much of the excitement over Zenyatta stemmed from its claim of being able to produce very high-purity graphite, based on the results of beneficiation tests that produced graphite of over 99 percent carbon content. While some critics doubted such claims, Zenyatta stuck to its guns, and in December published its initial resource estimate for Albany, with a PEA expected out in the first quarter of 2014.

But Zenyatta wasn’t the only Canadian graphite explorer to make waves in 2013; partly on the strength of Zenyatta’s success, a number of other companies have staked claims in Northern Ontario and initiated exploration programs. They include Weststar Resources (TSXV:WER), Ashburton Ventures (TSXV:ABR), Caribou King Resources (TSXV:CKR), Alchemist Mining (TSXV:AMS), MPH Ventures (TSXV:MPS), GTA Resources & Mining (TSXV:GTA) and Benton Resources (TSXV:BEX). While these projects are admittedly early-stage, they do attest to the continued investor interest in graphite, which should generate some more exciting exploration results as the new year dawns.

3. Iron Ore Doing Well Despite China’s Lackluster Performance

As the Chinese economy started spluttering this year, falling below double-digit GDP growth investors had come to expect, many predicted a poor year for the iron ore price. Especially considering that China’s steel furnaces blast almost as much steel as the rest of the world combined, any constriction of economic activity would logically bite into steel production and lessen the need for steelmaking inputs iron ore and coking coal.

Add on a well-supplied market caused by ramped-up production in the Australian Pilbara by iron ore majors Rio Tinto (NYSE:RIO,LSE:RIO,ASX:RIO) and BHP Billiton (NYSE:BHP,ASX:BHP,LSE:BLT), and the stage for iron ore looked decidedly ugly.

The metal, however, has surprised investors. While the price took a fall in May to $114 a tonne after reaching a yearly high of $158 in February, the metal rebounded, and by August was sitting a $137.06; in 2013 iron ore averaged $136 per tonne, which according to the Financial Times (subscription required), is the second-highest on record. Iron ore’s performance was aided by the fact that despite surging iron ore exports, mostly from Australia but also Brazil and South Africa, China has been faced with a reduction in domestic supply, based partly on lower grades and stricter environmental standards imposed by the government. In October imports reached a record high of 74.6 million tonnes, so with the Chinese buying more iron ore, the price has naturally held firm.

And the good times appear to keep rolling for iron ore, according to the latest news and forecasts. MINING.com reported in early December that iron ore reached a three-month high on the back of strong Chinese economic data, including a rebound in steelmaking and strong growth in construction. While the concerns over a supply glut overwhelming the market are still there, most analysts believe that 2014 will also see continued demand for iron ore from Asian steelmakers, and that should bode well for the price.

4. Palladium: The New Precious Metals Sweetheart

While gold, silver and platinum were some of 2013′s worst-hit sectors, precious metal palladium has spent much of the year being praised right, left and center.

The good news for palladium started coming midway through the year, when its fellow metals were still reeling from the dramatic April price drop. At that time, Bloomberg reported that the metal was beating expectations laid out by analysts in the London Bullion Market Association’s (LBMA) Forecast 2013. On average, the experts had forecast that the metal would hit a high of $851 per ounce, a low of $607 and an average price of $744.

While those numbers ultimately didn’t pan out — a glance at Kitco’s chart for the metal shows that its low for 2013 was $659, while its high came in at $781 — that is a much better performance than the metal’s peers put on, and the expectation is that a variety of factors will make 2014 similarly rewarding. Those include:

  • lack of Russian, South African supply: Supply from Russia hinges mostly on what the country releases from its stockpiles. Although the amount of palladium they hold is a “state secret,” the widely held expectation is that however much of the metal is released in 2013, it will not to be enough to head off the deficit the palladium market is headed toward. In terms of South Africa, strikes and labor tension are an ongoing concern in the country.”
  • Chinese pollution control: in a MarketWatch article published earlier this year, Myra Saefong explains that a new Chinese pollution control plan will “ban new coal-fired power plants in three key industrialized regions” and will require, among other things, “the replacement of coal-heating furnaces by gas-fired furnaces.” While the new rules will likely reduce the number of cars on the road, they will also spur the replacement of polluting cars, and those replacements will require palladium.

5. Diamonds Weather the Storm

Providing some stability this year were diamonds, which after a weak 2012 were able to get their act together. That change was largely made possible by increased demand from Asian countries, particularly China and India.

In China, that demand has for the most part been the result of the increasing number of billionaires in the country — as Diamond Investing News reported in February, their presence is causing a “trickle-down effect in wealth across the country,” meaning that as a whole the Asian nation is primed to consume high-end luxury products like diamonds.

Over in India, diamonds began receiving increased attention midway through the year mainly because despite low gold prices, two factors have made it difficult to buy the precious metal. First, the rupee has fallen along with gold, essentially nullifying the metal’s lower price, and second, taxes and import restrictions have made it harder for buyers to get their hands on the yellow metal. Faced with these circumstances, Indian jewelers began turning to “diamond jewellery and innovative products,” according to The Economic Times.

Also working in the gems’ favor is the fact that colored diamonds are garnering more and more attention. Rapaport said in October that such diamonds have shown “significant” gains since the beginning of 2013, setting sales records at auctions and tenders and generally running rings around their white counterparts. While 2014 may not bring further record setting in that arena, analysts do expect colored diamonds to have an exciting year as price stability continues for white diamonds.

 

Securities Disclosure: I, Andrew Topf, hold no direct investment interest in any company mentioned in this article.

Related reading:

Counting Down the Best and Worst of 2013: Part One

Graphite Exploration in Northern Ontario

Uranium Outlook: 2014 Will be the Year of Uranium

Juniors Hunting for Uranium in Patterson Lake Region

Diamond Outlook: Price Stability to Continue in 2014

Palladium Still Reigns Supreme Over Precious Metals

Platinum and Palladium Outlook: Gains to Come in 2014