The Weekly Dig - May 25, 2018

Mick Carew, PhD, mcarew@haywood.com

and The Haywood Mining Team

Gold Back to $1,300 but Equities Continue to Struggle

Highlights:

Precious Metals: Minutes from the Federal Reserve’s May meeting and President Trump’s withdrawal from a meeting with North Korean Leader Kim Jong Un saw the price of gold return above $1,300 per ounce. Multiple interest rate hikes before the end of the year were put into doubt after the Fed suggested inflation could be allowed to rise above 2% for a “temporary period”. While longer-term interest rates fell, gold levelled of to finish at $1,300 per ounce (up 0.8%). The performance of junior gold equities was not so convincing with the VanEck Vectors Junior Gold Miners ETF rising slightly to 32.89 after a volatile week. For the gold producers, the S&P/TSX Global Gold Index rose 6 points to 190 this week. Some of the better performing gold equities included: Eldorado Gold (ELD-T, BUY rating, $$2.50 target), Alamos Gold (AGI-T, BUY rating, $10.00 target) and Tahoe Resources (THO-T, SELL rating, $5.50 target) for the producers, each finishing 16%, 7.7% and 4% higher respectively, while for the junior explorers, Pure Gold Mining (PGM-V, BUY rating, $1.00 target), Superior Gold (SGI-V, BUY rating, $2.00 target) and Osisko Mining (OSK-T, BUY rating, $4.50 target) were up 4.7%, 4% and 3% respectively. Silver, platinum and palladium each rose 0.5%, 1.5% and 1.6% respectively.

Base Metals: Base metals were mixed week over week. While LME copper and nickel were relatively flat, up 0.6% and 0.2% WoW respectively, LME zinc was down 1.5% WoW. The LMEX Index finished the week flat WoW at 3,331. The S&P Composite Diversified Metals & Mining Industry Index finished the week at 6,378, which was down -5.2% WoW. YoY, metals have had a respectable performance: copper, zinc, and nickel are up 20.3%, 16.2% and 63.6%, respectively. LME inventories were all down WoW, with copper, zinc and nickel down -2.7%, 1.0% and 3.1% WoW, respectively. The US Dollar Index was up 59 bps this week finishing at 94.19, which had a slight negative impact on base metals prices. In China, Copper sentiment was negative as supply was stronger than expected, while demand remained soft. LME nickel started the week strong as stockpiles fell to multi-year lows on LME and Shanghai Futures Exchanges. However, nickel finished the week flat following four straight weeks of gains marking the longest winning streak since October. The most positively and negatively impacted weekly performers in our coverage universe were Capstone Mining (CS:TSX, HOLD, C$1.50/sh target) and Hudbay Minerals (HBM:TSX, BUY, $12.50/sh target), which were flat and down -8.3%, respectively.

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