The Weekly Dig

Mick Carew, PhD,

And the Haywood Mining Team

Gold Explorers Continue to Struggle

Precious Metals: Following last Friday’s plunge in the price of gold, negativity against the yellow metal continued through the week, with gold prices testing the US$1,200 level on Tuesday and Wednesday before paring some of those losses on Thursday to finish at US$1,213 per ounce (down 1% for the week) at market close. Once again, the bearish sentiment towards gold correlates well with a rising U.S. Dollar Index; U.S. consumer prices for October increased MoM, pointing to steadily rising inflation that will likely see the Federal Reserve raise interest rates again next month. As expected, gold equities also had a rollercoaster week, with both the S&P Global Gold Index and VanEck Vectors Junior Gold Miners ETF falling sharply before gaining recovering later in the week. One highlight for the week was Tahoe Resources (THO-T, TENDER, $4.00 Target) which rose 47% on the back of a proposed takeover by Pan American Silver (PAAS-T, Not Rated) in a stock and cash deal, while Roxgold Inc. (ROXG-T, BUY, $1.50 Target) was up slightly in an otherwise disappointing week for gold equities. Meanwhile, the S&P/TSX Venture Index failed to recover after early week losses, falling 4% since last Friday, reflecting another disappointing week for junior gold explorers. Goldquest Mining (GQC-V, HOLD, $0.20 Target) was one of a select few junior gold equities to register a positive week, up 5% since Friday. Silver followed gold’s 1% fall this week, finishing at US$14.29 per ounce, while platinum (down 2.6%) lost ground and palladium rose 2.8% to finish at US$1,160 per ounce on Thursday.

Base Metals: The base metals were mixed week over week (WoW). While LME nickel was down -4.5% to $5.07/lb, LME zinc and copper were up +2.4% and +0.4% WoW at $1.20/lb and $2.81/lb, respectively. The LMEX Index was down -84 bps WoW at 2,899.4 at Thursdays close. The S&P Composite Diversified Metals & Mining Industry Index closed Thursday at 5,186.94, which was up 4.2% WoW. Metals are all down YoY with copper, zinc and nickel down -8.0%, -17.0% and -3.9%, respectively. LME inventories were also all down WoW with copper, zinc and nickel inventories were down -3.4%, -6.1% and -0.5% WoW, respectively. Excluding bonded warehouse inventories, we calculate the current days of consumption at 6.9 for copper and 4.5 for zinc. The U.S. Dollar Index was up +38bps this week, closing on Thursday at 97.1, having a slight negative impact on base metals prices. The most negatively impacted weekly performer in our coverage universe was Copper Mountain (CMMC-T, BUY, $2.00 Target), down -5.1% WoW. The most positively impacted weekly performer in our coverage universe was Capstone Mining (CS-T, BUY, $0.70 Target), which was up +20.0% WoW on Thursday.

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