The Weekly Dig - September 28, 2018

Mick Carew, PhD, mcarew@haywood.com

and The Haywood Mining Team

Gold Remains Below US$1,200 per Ounce

Highlights:

Precious Metals: While news coverage this week focus predominately on a televised hearing on sexual allegations against Supreme Court nominee Brett Kavanaugh, gold suffered its sixth monthly decline in a row as the U.S. Dollar Index continued to strengthen. This week saw the Federal Reserve announce another interest rate hike, its third in 2018, and give strong indications that another raise may follow in December. The U.S. Dollar Index climbed on point in response, while gold fell to as low at US$1,181 per ounce before recovering on Friday to finish at US$1,191 per ounce at the time of publication, a 0.7% fall compared to the start of the week. Gold has been trading in a somewhat narrow range around the $1,200 level since mid-August; however, gold bugs are concerns that this trend is not sustainable given the prospect of further rate rises. Despite the bearish outlook for gold, overall, gold mining equities followed gold’s lead and were down only slightly with the S&P/TSX Global Gold Index and the VanEck Vectors Junior Gold Mining Index finishing slightly lower, finishing at 154.5 and 27.4 at market close on Friday. Some of the better performing equities this week included Barrick Gold Corp. (ABX-T, HOLD rating, $19.50 target, up 6%), which follows the announcement that Barrick will pay US$6 billion to combine with Randgold Resources (RRS-LN). Oceanagold Corp. (OGC-T, HOLD rating, $4.20 target) also registered positive returns this week, finishing 3.2% higher. Meanwhile, Midas Gold Corp. (MAX-T, BUY rating, $1.30 target) and Lumina Gold Corp. (LUM-T, BUY rating, $1.50 target) were two of the better performing small cap companies this week, finishing up 9.8% and 7.8% respectively. Finally, the other major precious metals were mixed, with silver and palladium finishing 2.3% and 2.0% higher respectively, while platinum prices continue to struggle, down 1.5% this week.

Base Metals: Base metals were mixed week over week. While LME zinc was up +6.4% WoW, nickel and copper are down -5.0% and -1.8%, respectively WoW. The LMEX Index finished the week down -1.01% WoW at 2,994.8. The S&P Composite Diversified Metals & Mining Industry Index finished the week at 5,578.67, which was down -3.04% WoW. YoY, metals have had a mixed performance: copper and zinc are down -3.2% and -16.6%, respectively while LME nickel is up +20.7% YoY. LME inventories were all down WoW, with copper, zinc, and nickel inventories down -6.6%, -3.2%, and -1.1% WoW,respectively. The US Dollar Index was up -97 bps this week finishing at 95.14, having a negative impact on base metals prices. Overall, the stocks in our coverage universe were mixed this week. The most positively and negatively impacted weekly performers in our coverage universe were Nevada Copper (CS:TSX, BUY, C$0.90/sh target) and Lundin Mining Corporation (LUN-T, BUY, C$9.00/sh target), which were up +5.9% and down -2.7%, respectively.

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