The Weekly Dig - Nov 11, 2017

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

The Weekly Dig - Uranium Sector in Focus as the World’s Largest Uranium Mine Plans to Suspend Operations


• Precious Metals: It was a mixed week for gold as the yellow metal reached 3 week highs on Thursday before taking a sudden plunge late Friday morning as it dropped almost US$10 in 10 minutes. The precious metal finished the week up 0.5% at US$1,276. Silver also dropped on Friday morning before finishing the week at US$16.91. Meanwhile, platinum finished up 0.85% at US$929 and palladium finished down 0.44% at US$997. 

• Base Metals: The base metals were mixed week over week, LME zinc had the only gain on the week, up 0.5% WoW, while copper and nickel were down 1.6% and 4.9% WoW, respectively. According to Bloomberg, the decline in nickel was the result of speculation that China’s top producer of stainless steel cut its prices. The closing price of nickel on Friday represented the lowest since October 31st, losing all of its November gains. Nickel remains the top performer in the quarter and is up 21.0% YTD, in line with the YTD performance of copper (+22.3% YTD) and zinc (+27.7% YTD). Trafigura places $175M bet on Electric Vehicles (EV) with an investment in nickel and cobalt chemicals plant planned Terrafame, as the commodities trader anticipates surging usage in EV batteries. According to Terrafame, the plant will establish the Company as one of the largest producer of nickel sulphate, a key component in lithium-ion batteries. Trafigura’s chief economist, Saad Rahim, expects demand for nickel sulphate will increase by 50% to 3Mt by 2030. He’s been headed with a new inhouse working group to look at investments in the renewables space, including solar, wind and battery projects. 

• Uranium: Uranium equities rallied this week after Cameco (CCO-T; NR) announced plans to temporarily suspend operations at its flagship McArthur River mine/Key Lake mill, the world’s largest uranium mining operation, by the end of January 2018 for a period of 10 months. The news drove the daily uranium price (BAP) above the US$22.00/lb U3O8 level after it had recently tested US$20.00. Our uranium team believes the suspension may last longer than the stated 10 months and that this move could rapidly accelerate the improving supply/demand balance in the uranium market, which has been perennially over-supplied since the Fukushima disaster in 2011. New reactor builds in China and a gradual return to nuclear power by Japan underpin uranium’s demand fundamentals, while production cuts from Kazatomprom and Cameco should rectify the oversupply situation and support higher spot prices. Ultimately, this is a highly positive development for uranium equities where a number of deep value opportunities remain. 

• The Week Ahead: More Q3/17 financial and operating results are expected including Mountain Province Diamonds Inc. (MPVD – T) after-market close on Monday, followed by Trevali Mining Corporation (TV-T), RNC Minerals (RNX-T), and Roxgold Inc. (ROXG -T) after-market close on Tuesday.

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