The Weekly Dig

Mick Carew, PhD,

and The Haywood Mining Team

Gold Rebounds as Mid-Term Elections Draw Near

Precious Metals: It has been a volatile week for gold as the mid-term elections in the U.S. draw near. After hitting a 3-month high last week, the price of gold tumbled early this week, hitting a low of US$1,212 per ounce on Tuesday as global stocks recovered following disappointing results from several company quarterly reports last week. This was reflected in the performance of the Dow Jones Industrial Average and S&P 500, both of which regained ground after a tumultuous 2 weeks. Meanwhile, there is considerable uncertainty over how the U.S. mid-term elections will play out next week, as both parties hit the campaign trail in a bid to secure tightly contested electorates. The swinging gold price, as expected, correlated with a gyrating U.S. Dollar Index, along with major gold equity indices. The VanEck Vectors Junior Gold Miners Index opened on Friday at 28.59 before falling sharply early this week and recovering to finish slightly lower on Thursday, while the S&P Global Gold Index followed a similar trend throughout the week but managed to finish slightly higher (up 5 points) as of yesterday’s close. Gold producers that registered positive weeks include Barrick Gold Corp (ABX-T, BUY, $18.00/sh target; up 6.5%) and Detour Gold Corp. (DGC-T, BUY, $15.50/sh target; up 3.6%). Meanwhile, some of the better performing junior equities include Pure Gold Mining Inc. (PGM-V, BUY, $1.00/sh target) and Superior Gold Inc. (SGI-V, BUY, $2.00/sh target), both of which finished 9.6% higher as of Thursday’s close. Sabina Gold and Silver Corp. (SBB-T, HOLD, $2.35/sh target; up 4.3%) and Nighthawk Gold Corp. (NHK-T, BUY, $0.90/sh target; up 2.5%) also finished higher this week. Finally, while gold finished at US$1,233 per ounce, platinum (up 0.8%) and platinum (up 3.7% also finished strongly, while palladium fell 0.7% this week.

Base Metals: The base metals were all down week over week (WoW). LME zinc, nickel and copper were down -3.5%, -2.9% and -2.4% WoW at $1.18/lb, $5.32/lb and $2.77/lb, respectively. The LMEX Index was down -2.2% WoW at 2,895.7 at Thursdays close. The S&P Composite Diversified Metals & Mining Industry Index closed Thursday at 5,023, which was up +15.3% WoW. Metals are all down YoY with copper, zinc and nickel down -11.5%, -21.9% and -8.1%, respectively. LME inventories were all down WoW, with copper, zinc, and nickel inventories down -8.6%, -8.6%, and -0.4% WoW, respectively. Excluding bonded warehouse inventories, we calculate the current days of consumption at 6.6 for copper and 5.3 for zinc. The US Dollar Index was down -42 bps this week, closing on Thursday at 96.3, having a slight positive impact on base metals prices. The stocks in our coverage universe were mixed this week. The most negatively impacted weekly performers in our coverage universe were Copper Mountain <Q3 Report > (CMMC:TSX, BUY, $2.00/sh target) on the back of a miss on Q3/18 financials and Trevali Mining (TSX-T, BUY, C$1.50/sh target), which were down -7.6% and down -5.7% WoW on Thursday, respectively. The most positively impacted weekly performers in our coverage universe were Hudbay Minerals <Q3 Report> (HBM:TSX, BUY, C$9.00/sh target) on the back of positive financial results and Lundin Mining Corporation (LUN-T, BUY, C$9.00/sh target), which were up +28.3% and +19.2% WoW on Thursday, respectively.

Week Ahead: We expect SEMAFO (TSX:SMF, BUY, C$6.00 target) and Osisko Gold (TSX:OR, BUY, C$16.50 target) to report Tuesday after the close, followed by Trevali (TSX:TV, BUY, C$1.50 target) reporting Wednesday after market close.

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