The Weekly Dig

Mick Carew, PhD,

and The Haywood Mining Team

Junior Equities Still Weighed Down Despite Stronger Gold Price

Precious Metals: The relative performance of gold equities was a mixed bag this week. Initial signs were positive as the price of gold rose 1.1% to US$1,238 per ounce following continued speculation of a more dovish approach to future interest rate rises by the U.S. Federal Reserve and conflicting news regarding the status of a supposed U.S.-China trade war truce. General U.S. markets were hit hard as the yield curve on U.S. bonds inverted for the first time in a decade as longer-term bond yields dipped lower than short-term (3-year) bond yields; the Dow Jones Industrial Index was down 3% for the week while the S&P500 registered similar losses. The S&P Global Gold Index followed the price of gold this week, rising 3%, while the response from the VanEck Vectors Junior Gold Miners ETF was relatively muted, finishing slightly higher compared to the start of the week. Some of the better performing large and mid-cap gold producers this week include Alamos Gold (AGI-T, BUY rating, $10.00 target; up 6.9%), Barrick Gold (ABX-T, BUY rating $18.00 target; up 3.1%) and Tahoe Resources (Tender; up 2.8%). By contrast, junior exploration equities continued their downward trajectory, with the S&P/TSX Venture Composite Index falling almost 5% this week; the TSX Venture has now lost almost half its value since early January. Despite the gloom surrounding the junior explorers, there were some positive performers this week including Lumina Gold (LUM-V, BUY rating, $1.50 target; up 10%), Marathon Gold (MOZ-T, BUY rating, $1.80 target, up 9.7%) and Nighthawk Gold (NHK-T, BUY rating, $0.90 target, up 8.6%). Meanwhile, palladium prices continue to close in on gold, rising 2.3% to US$1,211 per ounce, while silver was also higher (up 1.1%) and platinum continued to struggle, falling 3.6% since last Thursday.

Base Metals: The base metals were mixed week over week (WoW) as of Thursday’s close. LME zinc was the most positively impacted metal up +5.4% to $1.23/lb, while LME copper and nickel were down -2.7% and -1.9% WoW at $2.76/lb and $4.89/lb, respectively. The LMEX Index was down -0.67% WoW at 2,874.6 at Thursday’s close. The S&P Composite Diversified Metals & Mining Industry Index closed Thursday at 5,061.56, which was up 4.87% WoW. Metals are mostly down YoY with copper and zinc down -6.7% and -12.7% respectively. Nickel is up 0.3% YoY. LME inventories were all down WoW with copper, zinc and nickel inventories down -8.3%, -6.7% and -1.3% WoW, respectively. Excluding bonded warehouse inventories, we calculate the current days of consumption at 5.8 for copper and 3.9 for zinc. The US Dollar Index was flat this week, closing on Thursday at 96.73, having little impact on base metals prices. The base metals equities in our coverage were mixed WoW. The most negatively impacted weekly performer in our coverage universe was Copper Mountain (CMMC: TSX, BUY, $2.00 target), down -15.1% WoW. The most positively impacted weekly performer in our coverage universe was Trevali Mining (TV: TSX, BUY, C$1.00 target), which was up +5.9% WoW on Thursday.

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