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Editor’s Picks: What War Means for the Gold Price, Latest Lithium M&A

The gold price has climbed steadily over the last two weeks, recovering from its drop at the end of September.

The yellow metal spiked during the morning of October 20, peaking at US$1,996.91 at 8:28 am PDT, just shy of the US$2,000 mark. It pulled back over the following hours to the US$1,980s, still up more than US$130 from where it started the month.

The war in the Middle East is a big factor behind gold’s big rise, and the conflict currently shows no signs of letting up. Whether it has a lasting impact on the precious metal remains to be seen — typically this type of geopolitical turmoil causes only a short-term price spike as market participants search for safe-haven assets.

However, this time around could be different. I recently heard from Brien Lundin of Gold Newsletter, who said the Israel-Hamas war could be the exception to the rule if it prompts a change in US Federal Reserve policy. Here’s how he explained it:

‘In this instance, though, it may prove to be an exception, because geopolitical conflicts and uncertainty and volatility could lead to a change in Fed policy. And as we know, Fed policy drives all the markets these days, so it could have a more lasting fundamental affect if it forces the Fed to either pause or pivot. I mentioned that we don’t know exactly what or when the Fed will be forced to pivot — what will cause that — but we know there’s lots of options out there and this may be the one that no one was really expecting. That’s usually the way it happens’ — Brien Lundin, Gold Newsletter

He also speaks about the New Orleans Investment Conference, which runs from November 1 to 4 — I’ll be attending and would love to say hello if you’ll be there!

Major M&A news hits the lithium space

Looking over to lithium, this week brought a couple of interesting pieces of news on the M&A front. First, major producer Albemarle (NYSE:ALB) withdrew its non-binding offer to acquire Australia’s Liontown Resources (ASX:LTR,OTC Pink:LINRF).

‘Our engagement with the Liontown team has been meaningful and productive. We appreciate the level of cooperation we have received, and we thank the entire team for their efforts. That said, moving forward with the acquisition, at this time, is not in Albemarle’s best interests’ — Kent Masters, Albemarle

In a press release, Albemarle explains that ‘growing complexities associated with the proposed transaction’ were a factor in its decision. This careful wording is likely an allusion to Hancock Prospecting’s growing stake in Liontown — led by Gina Rinehart, Australia’s richest woman, Hancock has built up a 19.9 percent stake in the company, enough to potentially block a transaction with Albemarle if it had gone to a vote.

Liontown’s key asset is its Western Australia-based Kathleen Valley lithium project, at which it started construction in 2022. The asset has the capacity for an initial 3 million metric tons (MT) per year for a production rate of about 500,000 MT of spodumene concentrate. An expansion to 700,000 MT is planned for year six.

Lithium Power International (ASX:API), another Australian company, was also in the spotlight this week as Chilean state-owned miner Codelco announced plans to buy the firm for AU$385 million. The deal marks Codelco’s first foray into lithium — the copper-focused company was tasked in April with taking over Chile’s lithium industry.

Codelco’s plan is to combine Lithium Power’s Chile-based Blanco project with its own nearby operations to create a ‘world-class lithium project.’ The boards of both companies are backing the transaction, but Lithium Power shareholders will need to weigh in during a vote in late January. We’ll keep you informed on what happens.

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

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