The Weekly Dig - Mar 9, 2018

by Mick Carew, PhD,, Emma Boggio, MSC, CPA and CA, and The Haywood Mining Team

Mixed Week for Metals as PDAC Comes to a Close

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Precious Metals: There was an increase in the attendance at this year’s annual Prospectors & Developers Association of Canada’s (PDAC) Convention in Toronto. Following 2017’s 24,000 attendees, this year’s conference hosted a 1.5k increase as it breached the 25,500 mark (the highest recorded attendance in the past 5 years). However, it’s been a mixed week for precious metals as gold reached a high of US$1,340 per ounce on Tuesday, before finishing the week where it started at US$1,323. Meanwhile, silver (up 0.5%) and palladium (up 0.4%) finished the week slightly higher at US$16.60 and US$998 per ounce, while platinum (down 0.1%) finished the week slightly lower at US$965 per ounce. 

Base Metals: Base metals were also mixed week over week, with LME nickel being the most positively impacted metal, up 3.1% WoW, followed by copper up 1.1% WoW and LME zinc was down 2.4% WoW. The LMEX Index finished the week flat at 3,311. YoY, copper, zinc, and nickel are up 22.3%, 22.7% and 36.9%, respectively. LME inventories of copper and nickel were down 4.2% and 1.5% WoW, respectively. However, LME zinc inventories increased by 53.7% to 202kt. The increase in inventories was the result of traders delivering the largest physical delivery of zinc in almost 3 decades to avoid losses from hedging inventory. Due to the rising zinc price and a market in backwardation, traders that own zinc in warehouses are facing the prospect of having to pay money to roll over their futures positions on the LME. Rather than rolling over expiring positions and realizing losses from hedging their inventory, traders delivered physical zinc held privately. The delivery is speculated to have come from privately stored metal in New Orleans. The market anticipated the stockpile surge was coming but expected it in two tranches, so it was initially viewed as negative, but does not change the macro fundamentals. LME Stocks are still half of where they ended 2016 (428kdmt). Excluding bonded warehouse inventories, we calculate the current days of consumption at 11.8 for copper and 8.9 for zinc. The US Dollar Index was flat last week finishing at 90.14. The base metals equities were mix WoW with Atalaya Mining and Copper Mountain Mining having the strongest weeks up 5.6% and 5.3%, respectively. Teck Resources and Trevali Mining Corp were down the most WoW, down 7.3% and 4.1%, respectively. 

The Week Ahead: Endeavour Mining (EDV-T; BUY rating, $32.00 target) reports Q4/17 and full-year financials on March 13th along with Trevali (TV-T; BUY rating, $2.30 target) who will report after close followed by a conference call Wednesday, March 14th at 10am. Meanwhile, Asanko Gold (AKG-T; HOLD rating, $2.00 target) and B2Gold report (BTO-T; BUY rating, $5.00 target) Q4/17 and full-year financials on March 15th. Mountain Province Diamonds (MPVD-T; BUY rating, $6.30 target) will provide an update on February diamond sales data next week.



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