The Weekly Dig - May 4, 2018

Mick Carew, PhD,

and The Haywood Mining Team

Base/Precious Metal Price Performance Remains Muted Despite Iran Controversy


Precious Metals: In a week that saw European and U.S. relations soured further following the latter’s withdrawal from the Iran nuclear deal implemented in 2015, precious metal prices remained relatively muted this week, a common theme throughout Trump’s sometimes controversial Presidency. In fact, the price of gold is only marginally higher (currently at US$1,320 per ounce) with where it was just prior to the election of President Trump in November 2016 (US$1,303 per ounce) before plunging to as low as US$1,130 and recouping those losses in the subsequent months. This is despite the controversial stance of the Trump administration on numerous issues since then, including this week’s decision on Iran that many observers believe could lead to a Middle-Eastern war. With the price of gold continuing to remain subdued despite the current geopolitical situation, gold equities have struggled to perform. This week was no exception with the S&P/TSX Global Gold Index remaining unchanged since last week. The VanEck Vectors Junior Gold Miners ETF performed slightly better, up slightly this week, but overall gold mining/exploration equities continue to struggle, remaining relatively rangebound between 32 and 34 (minus a couple of brief spikes) since may last year. This week, Osisko Gold Royalties (OR-T, BUY rating, $18.00 target; up 4%) was up for the week, while Midas Gold (MAX-T, BUY rating, $1.90 target; up 22%) and Barkerville Gold Mines (BGM-V, BUY rating, $1.80 target; up 5%) were amongst the better performers for the small caps this week. 

Base Metals: Base metals were up slightly this week with LME copper up 1.7% WoW, followed by LME zinc up 0.6%, and LME nickel up 0.2% WoW. The LMEX Index finished the week up 14 bps WoW at 3,344. The S&P Composite Diversified Metals & Mining Industry Index finished the week at 6,604, which was up 648 bps WoW. YoY, metals have had a respectable performance: copper, zinc, and nickel are up 25.1%, 18.5% and 50.6%, respectively. LME inventories were all down WoW, with copper down 11.2%, zinc down 1% and nickel down 1% WoW. Excluding bonded warehouse inventories, we calculate the current days of consumption at 12.5 for copper and 8.7 for zinc. The US Dollar Index was flat this week finishing at 92.51. Trevali Mining (TV:TSX, BUY, C$2.30/sh target) reported Q1/18 financial results this week which were mostly in line with expectations, operations are expected to improve for the remainder of 2018, and are on track to meet guidance for the year. Lundin Mining Corporation (LUN-T, HOLD, C$9.50/sh target), and Euro Sun Mining Inc. (ESM-T, not rated) earlier this week announced that they had submitted a proposal to Nevsun Resources Ltd. (NSU-T, BUY, C$4.00/sh target) to acquire all of Nevsun's outstanding common shares for approximately C$1.55 billion (or C$5.00/sh). The proposal has been rejected by Nevsun, in the meantime, each company is engaging with shareholders in an effort to make their case. 

The Week Ahead: Endeavour Mining (EDV-T; BUY rating, $32.00) will report Q1/18 operations data and financial results pre-market on Tuesday May 15th, and Roxgold (ROXG-T, BUY rating; $1.90) will report Q1/18 financial results after-market hours on Tuesday, May 15th. 

Click here for the full report