The Weekly Dig - October 19, 2018
Mick Carew, PhD, mcarew@haywood.com
and The Haywood Mining Team
Gold Rises Again as Equity Markets Jitter
Highlights:
Precious Metals: The price of gold rose for the third week in a row, testing the $1,230 per ounce level multiple times before settling at $1,226 per ounce on Friday at market close. This performance has surprised investors given the continued strength of the U.S. dollar; instead, equity markets continue to jitter, possibly as a result of a continued hawkish U.S. Federal Reserve signaling further rate hikes and/or concerns that trade dispute between the U.S. and China may be negatively impacting the world economy. The Dow Jones Industrial Average reflected this uncertainty in equity markets, rising ~450 point early in the week before paring most of these gains on Thursday and Friday. Meanwhile gold equities reflected this week’s flat performance, with both the S&P Global Gold Index and VanEck Vectors Junior Gold Miners Index finishing the week where they started. Some of the better performing equities for the week included Barrick Gold Corp. (ABX-T, Buy rating, 17.00 target; up 6.5%), Endeavour Mining Corp. (EDV-T, Buy rating, $32.00 target; up 3.9%) and Oceanagold Corp. (OGC-T, Hold rating, $4.20 target; up 3.4%) amongst the gold producers, while Osisko Mining (OSK-T, Buy rating, $4.50 target; up 25%), Barkerville Gold Mines (BGM-V, Buy rating, $1.25 target; up 7.8) and Liberty Gold (LGD-V, Buy rating, $1.00 target; up 6.1%) were amongst the better performing junior gold explorers. Silver (up 0.5%) and palladium (up 1.4%) were both higher this week, while platinum continued to struggle (down 1%), finishing at $831 per ounce.
Base Metals: The majority of the base metals were down week over week (WoW). LME nickel and copper were the most negatively impacted metals, down -1.6% and -1.4% WoW, respectively. LME zinc remained unchanged week over week at $1.21/lb of zinc. The LMEX Index finished the week down -1.28% WoW at 2,967.4. The S&P Composite Diversified Metals & Mining Industry Index finished the week at 5,270, which was down -1.04% WoW. YoY, metals have had a mixed performance: copper and zinc are down -10.2% and -15.6%, respectively while LME nickel is up +6.0% YoY. LME inventories were all down WoW, with copper, zinc, and nickel inventories down -7.6%, -10.2%, and -1.9% WoW, respectively. Excluding bonded warehouse inventories, we calculate the current days of consumption at 6.9 for copper and 6.1 for zinc. The US Dollar Index was up +50 bps this week finishing at 95.69, having a slight negative impact on base metals prices. The majority of the stocks in our coverage universe were down this week with the exception of Nevsun Resources Ltd. (NSU-T, TENDER, C$6.00/sh target) which was up +1.0% WoW. The most negatively impacted weekly performers in our coverage universe were Lundin Mining Corporation (LUN-T, BUY, C$9.00/sh target) and Trevali Mining (TSX-T, BUY, C$1.75/sh target), which were down -9.8% and down -8.5%, respectively WoW.
