Member of the Canadian Investor Protection Fund 

The Weekly Dig - April 6, 2018 

Mick Carew, PhD, mcarew@haywood.com and The Haywood Mining Team 

Commodity Prices Sway as U.S./China Trade Concerns Increase

Highlights: 

Precious Metals: Gold and silver prices fell early in the week after concerns over the potential for a trade war between China and the U.S. eased, sending general markets higher. However, this sense of optimism was short-lived as President Trump announced plans for a further $100 billion in tariffs on Chinese imports after China reciprocated following the initial tariffs announced by Trump. The Dow Jones Industrial Average was down just over 570 points and the S&P/TSX Composite Index lost almost 150 points on Friday, while gold rose slightly in response. Over the course of the week, the price of gold and silver remained relatively flat, with both finishing at US$1,333 and US$16.38 per ounce respectively. As expected it was a mixed week for gold equities, with both the S&P/TSX Global Gold Index and VanEck Vectors Junior Gold Miners ETF finishing relatively unchanged for the week. There were a few positive performances from individual gold equities this week; Eldorado Gold (ELD-T, BUY, $12.50 target) rose over 15% on the back of a positive ruling by the Arbitration Panel in Greece while Detour Gold (DGC-T, BUY, $20.00 target), Alamos Gold (AGI-T, BUY, $10.00 target) and Tahoe Resources (THO-T, SELL, $5.50 target) rose 5%, 5% and 3% this week, respectively. On the junior mining/exploration front, Pure Gold Mining (PGM-V, BUY, $1.00 target) was up 5% this week, while Barkerville Gold Mines (BGM-V, BUY, $1.60 target) and Nighthawk Gold (NHK-T, BUY, $1.30 target) also had positive weeks, finishing up 5% and 1% respectively. Platinum (down 1.6%) and palladium (down 5.5%) prices fell sharply this week, with platinum prices overtaking palladium for the first time since October last year. 

Base Metals: Base metals were mixed week over week. LME copper was the most positively impacted metal, up 0.8% WoW, while nickel and zinc were down -0.2% and -1.5% WoW, respectively. The LMEX Index finished the week up 55.5 bps at 3,223. YoY, metals have had respectable performance: copper, zinc, and nickel are up 15.5%, 19.7% and 31.9%, respectively. LME inventories were all down WoW led by copper down 4.5%, followed by zinc and nickel which were down 3.5% and 1.0% WoW, respectively. Excluding bonded warehouse inventories, we calculate the current days of consumption at 13.6 for copper and 9.0 for zinc. The US Dollar Index was up 13.9 bps last week finishing at 90.099, which had a slight negative impact on base metals prices. Outlook for Q1/18 results: It was a strong quarter for base metals prices relative to previous quarters, with the average Q1/18 zinc price at $1.55/lb v. our estimate of $1.50/lb and $1.47/lb in Q4/17; the average Q1/18 copper price at $3.16/lb v. our estimate of $3.10/lb and $3.09/lb in Q4/17, and the average Q1/18 nickel price at $6.02/lb v. our estimate of $5.50/lb and $5.26/lb in Q4/17. As a result, we expect improved QoQ earnings among base metals producers. 

The Week Ahead: T1) Cesco - world copper conference in Chile all week – http://www.cesco.cl/en/, 2) Trevali (TV-T, BUY, $2.30 target) Q1/18 Production results – Tuesday, 3) Capstone Mining (CS-T, HOLD, $1.75 target) Q1/18 Production Results – Wednesday before market.


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