The Weekly Dig - Feb 2, 2018

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

Zinc Shrugs off Broad Based Commodity Selling to Post 8th Consecutive Weekly Gain


Highlights: Precious Metals: Following last week’s optimistic tones, precious metal prices saw significant declines this week after Friday morning’s heavy selling on the COMEX. Gold (down US$15.73, -1.2%), silver (down US$0.82, -4.9%), platinum (down US$20.43, -2.1%), and palladium (down US$42.63, -4.1%) all recorded losses week over week to finish at US$1,333, US$16.59, US$991, and US$1,049, respectively. Meanwhile, early Friday morning, a positive US jobs report gave way to a favorable interest rate outlook and bond yields in the US reached 4-year highs. Along side precious metal price declines on Friday, the Dow Jones Industrial Average dropped ~666 points to finish the week down 4.0% at 25,521. 

Weekly Performance: Positive performers this week include Aurion Resources Ltd. (AU-V, not covered) up 18%, RTG Mining Inc. (RTG-V, not covered) up 18%, and Novo Resources Corp. (NVO-V, not covered) up 16%. Meanwhile, Asanko Gold Inc (AKG-T, Hold, $2.00 Target) and Goldquest Mining Corp. (GQC-V, Buy, $0.60 Target) both finished down 15% for the week. 

Base Metals: Base metals were primarily down week over week, LME nickel was the most negatively impacted metal, -1.6%, followed by copper, -0.6% and finally zinc was up 0.9% WoW. Year over year, copper, zinc and nickel are +19.3%, +25.0% and +29.6%, respectively. LME inventories for copper, zinc and nickel were down WoW at -1.6%, -5.2% and -2.3%, respectively. Excluding bonded warehouse inventories, we estimate the current days of consumption at 10.3 for copper and 6.6 for zinc. This week, Goldman Sachs analysts published updated commodity pricing, they expect copper to reach US$8,000/ton (US$4.00/lb) by year-end, and stated that the environment for commodities investing is the best since 2004-2008. This week also marks the 8th straight week of positive gains for LME zinc, marking the longest streak since 2015. 

Weekly Performance: Base metals equities were primarily down this week with the exception of NGEx Resources (NGQ-T, not covered) up 21%, Ascendant Resources Inc. (ASND-T, not covered) up 18%, and Imperial Metals (III-T, not covered) up10% WoW. Nevsun (NSU-T, Buy, $4.00 Target) and HudBay Minerals (HBM-T, Buy, $13.50 Target) were the worst performers WoW, down 14.0% (on dividend cut) and 9%, respectively.

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