The Weekly Dig - September 7, 2018

by Mick Carew, PhD, and The Haywood Mining Team

Gold Remains Steady


Precious Metals: This week saw another steady performance by gold, which has hovered around the US$1,200 per ounce level for over 2 weeks now. The yellow metal dipped slightly on Friday after the release of the U.S. jobs report for August, which exceeded consensus, while U.S. unemployment rose slightly to 3.9%. Gold and silver both finished the week down to US$1,197 per ounce and US$14.17 per ounce respectively, while palladium and platinum also fell, 0.2% and 0.7% respectively, to finish at US$980 and $783 per ounce. While the price of gold continued to remain steady this week, gold equities were down overall; the S&P/TSX Global Gold Index fell five points to 152, while the VanEck Vectors Junior Gold Mining Index fell one point to 26.9. After bucking the trend last week, the S&P/TSX Ventures Composite Index fell in line with other indices to finish 14 points lower to 711. Gold producers are largely down across the board this week, while there were a few junior explorers with positive returns including Osisko Mining (OSK-T, BUY rating, $4.50 target; up 16%), Barkerville Gold Mines Ltd. (BGM-V, BUY rating, $1.60 target; up 20%), and Filo Mining (FIL-V, BUY rating, $4.60 target; up 6%).

Base Metals: Base metals were all down this week, as the trade war continues to negatively impact the metals. LME nickel was the most negatively impacted metal, down -3.4% WoW, followed by LME zinc and LME copper, down -1.6% and -0.9% WoW, respectively. The LMEX Index finished the week down -1.2% WoW at 2,883. The S&P Composite Diversified Metals & Mining Industry Index finished the week at 5,128, which was down -4.57% WoW. YoY, metals have had a mixed performance: copper and zinc are down -13.9% and -22.5%, respectively while LME nickel is up +1.5% YoY. LME inventories were all down WoW, with copper, zinc and nickel inventories down -7.1%, -3.6% and -1.1%, respectively. The US Dollar Index stayed relatively flat finishing at 95.4, having a minimal impact on base metals prices. The majority of the equities in our coverage universe were down this week with the exception of Nevsun Resources Ltd. (NSU:TSX, BUY, C$4.00/sh target) up +17.6%. This week Nevsun announced that Zijin Mining (not rated) made a take-over bid to acquire Nevsun for C$6.00/sh in cash valued at C$1.86B (US$1.41B).

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