Precious Metals

Since our last published report before Christmas, the price of gold has surged over 2% but remained steady this week to finish at US$1,286 per ounce as of Thursday’s close. The yellow metal pierced the $1,290 per ounce level twice over the past seven days amid investor concerns over the U.S. government shutdown, the continued trade dispute between the U.S. and China, and growing expectations that the Federal Reserve will pause its rate tightening program in 2019. However, investor doubts on the longer-term sustainability of this rise may explain the mixed performance in gold equities over the period. While the Van Eck Vectors Junior mining Index ETF enjoyed a 3 point (10%) gain over the same period, the S&P/TSX Global Gold Index failed to follow suit, falling to 178 after reaching a high of 187 on January 3rd. In a change of fortunes for junior explorers, the S&P/TSX Venture Composite Index made a welcome return to the list of positive performers after a disastrous year that saw the index fall almost 40% since the beginning of 2018. The junior exploration sector endured a tough 2018, particularly those requiring additional funds at depressed share prices. The Venture index has gained 10% since December 20th. There were a number of junior explorers that performed well over the past week; Falco Resources (FPC-V, BUY Rating, $0.75 Target) finished 11.6% higher, while Marathon Gold (MOZ-T, BUY Rating, $1.80 Target) gained 2.5%. Finally, while gold and silver were both down slightly since last Thursday, palladium (up 4.3%) and platinum (up 2.8%) both gained ground, finishing at US$1,326 and US$820 per ounce respectively

Base Metals

The base metals were all up week over week (WoW) as of Thursday’s close. LME nickel was the most positively impacted metal, up +3.7% to $5.08/lb followed by copper, which was up 3.4% WoW at $2.68/lb. LME zinc was up +0.9% to $1.12/lb WoW. The LMEX Index was up 2.9% WoW at 2,810.1 at Thursdays close. The S&P Composite Diversified Metals & Mining Industry Index closed Thursday at 5,227.9, which was up 10.74% WoW. Metals are all down YoY with copper, zinc and nickel down -16.9%, -26.3% and -13.1% respectively. LME inventories were mostly down WoW with zinc and nickel inventories down -1.5% and -1.4% WoW respectively. Copper was up 90bps. Excluding bonded warehouse inventories, we calculate the current days of consumption at 5.2 for copper and 4.3 for zinc. The U.S. Dollar Index was down 80bps this week, closing on Thursday at 95.539 and having little impact on base metals prices. The base metals equities in our coverage were mostly up WoW. The most positively impacted weekly performer in our coverage universe was Copper Mountain Mining Corp (CMMC-T, BUY Rating, $1.75 Target), up 17.3% WoW. The most negatively impacted weekly performer in our coverage universe was Capstone Mining (CS-T, BUY Rating, $0.85 Target), which was down -3.1% WoW on Thursday.

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