The Weekly Dig
Mick Carew, PhD, mcarew@haywood.com
and The Haywood Mining Team
Gold Rises Steadily amid Weak U.S. Economic Data and Trade Tensions
Precious Metals: After falling to a low of US$1,200 per ounce ten days ago, the price of gold has risen steadily as recent U.S. economic data suggests capital spending may be slowing down due to the continued trade war between the U.S. and China. This week, Durable Good's Orders for October hit a 15-month low (down $11.7 billion to $248 billion), while recent manufacturing and housing reports also came in weaker. With this backdrop in disappointing economic data, the U.S. Dollar Index remains where it was one week ago, while the price of gold has risen 2% since mid November. Gold equity indexes for larger cap companies have followed this positive trend; both the S&P Global Gold Index and VanEck Vectors Junior Gold Miners ETF are up this week. Some of the better performing gold equities in our coverage universe included B2Gold (BTO-T, BUY rating, $5.00 target; up 9.5%), Oceanagold (OGC-T, HOLD rating, $4.20 target; up 7.7%) and Endeavour Mining (EDV-T, BUY rating, $32.00 target, up 6.1%). However, it continues to be a tough period for the junior exploration sector, as reflected by the S&P/TSX Venture Index which fell just above 600 points as of Thursday close. Whilst the malaise in the junior sector continues, there were some positive performers in the space this week, headlined by Superior Gold (SGI-V, BUY rating, $1.50 target) which registered a 18.4% gain this week, while Liberty Gold (LGD-T, BUY rating, $1.00 target) and Marathon Gold (MOZ, BUY rating, $1.80 target) were both up 8.3% and 2.9%, respectively. Finally, while we saw gold rise 1.2% this week, silver also gained ground (up 1.4%), while platinum and palladium saw little change since last Thursday.
Base Metals: Were all down week over week (WoW). LME nickel was the most negatively impacted metal down -3.4% to $4.95/lb, followed by LME zinc and copper were down -0.5% and -0.2% WoW at $1.21/lb and $2.82/lb, respectively. The LMEX Index was up 93 bps WoW at 2,926.4 at Thursdays close. The S&P Composite Diversified Metals & Mining Industry Index closed Thursday at 4,985.88, which was down -3.88% WoW. Metals are all down YoY with copper, zinc and nickel down -10.5%, -18.2% and -8.2%, respectively. LME inventories were all down WoW with copper, zinc and nickel inventories were down -13.3%, -2.3% and -0.6% WoW, respectively. Excluding bonded warehouse inventories, we calculate the current days of consumption at 6.2 for copper and 4.3 for zinc. The US Dollar Index was down -22 bps this week, closing on Thursday at 96.7, having a slight positive impact on base metals prices. The majority of base metals equities in our coverage were down WoW. The most negatively impacted weekly performer in our coverage universe was Capstone Mining (CS:TSX, BUY, C$0.70 target), down -4.8% WoW. The most positively impacted weekly performer in our coverage universe was Nevsun Resources Ltd. (NSU-T, TENDER, C$6.00 target), which was up +1.2% WoW on Thursday.
