The Weekly Dig - Dec 1, 2017

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

The Weekly Dig - Gold Spikes as Flynn Pleads Guilty


Precious Metals: After almost hitting the $1,300 per ounce level on Monday, the price of gold experienced three successive days of losses, falling briefly to as low as US$1,270 per ounce on Thursday before recovering on Friday to end the week at US$1,280 per ounce. Gold has been trading at its narrowest range in ~12 years, between US$1,299 and US$1,266 per ounce since mid-October; and while U.S. growth data continued to weigh on gold and gold equities throughout the week, news that Michael Flynn, former security adviser to Donald Trump had pleaded guilty to lying to the FBI about Russia saw swing upward on Friday. On the equities front, Golden Queen Mining Co. Ltd. (GQM-T; 18%), Lupaka Gold Corp. (LPK-V; 17%) and Nighthawk Gold (NHK-T; (13%) were the big risers in the junior exploration space, while for the gold producers, Kirkland Lake (KL-T) and St Barbara (SBM-ASX) gained 3.9% and 4.5% respectively.

Base Metals: The majority of the base metals were down week over week, LME nickel was the most negatively impacted metal, down 6.3% WoW, followed by copper down 2.5% while zinc was flat. Copper, zinc and nickel are up 23%, 28% and 13% year to date, respectively. LME inventories for copper, zinc and nickel were down 14%, 4% and 1%, respectively. Excluding bonded warehouse inventories, we calculate the current days of consumption at 8.4 for copper and 7.2 for zinc. The drop in LME copper stockpiles represents the largest weekly drop in 12 years and inventories are at the lowest level since June 2016. Despite the large drawdown in LME inventories, copper had its biggest weekly price loss since August 2016. The decline in the copper price followed copper miner Antofagasta comments that it expects Chinese demand growth to decline from 4-5% this year to 3-4% in 2018. Driven by the decline in LME metals prices, the base metals equities were down this week with the exception of Sherritt International. Lundin had the largest decline, down 24.2% WoW, following the release of an operational outlook. Forecasts for 2018 and 2019 were revised down under the new re-phased open pit life-of-mine plan at Candelaria and to address pit wall instability, resulting from the impact on production from a recent slide. Company projections in 2018 for copper production are down 15%, zinc production is down 8%, while nickel remains flat relative to previous guidance.

Click here for the full report                                                                                                                                                                                                                                                                                                          


Important Information and Legal Disclaimers

All prices are in C$ unless noted

This report is neither a solicitation for the purchase of securities nor an offer of securities. Our ratings are intended only for clients of Haywood Securities Inc., and those of its wholly owned subsidiary, Haywood Securities (USA) Inc., and such clients are cautioned to consult the respective firm prior to purchasing or selling any security recommended or views contained in this report.

Estimates and projections contained herein, whether or not our own, are based on assumptions that we believe to be reasonable. The information presented, while obtained from sources we believe reliable, is checked but not guaranteed against errors or omissions. Changes in the rates of exchange between currencies may cause the value of your investment to fluctuate. Past performance should not be seen as an indication of future performance. The investments to which this report relates can fluctuate in value and accordingly you are not certain to make a profit on any investment: you could make a loss.

Haywood Securities, or certain of its affiliated companies, may from time to time receive a portion of commissions or other fees derived from the trading or financings conducted by other affiliated companies in the covered security. Haywood analysts are salaried employees who may receive a performance bonus that may be derived, in part, from corporate finance income.

Haywood Securities, Inc., and Haywood Securities (USA) Inc. do have officers in common however, none of those common officers affect or control the ratings given a specific issuer or which issuer will be the subject of Research coverage.  In addition, the firm does maintain and enforce written policies and procedures reasonably designed to prevent influence on the activities of affiliated analysts. 

Dissemination of Research

Research reports are disseminated either through electronic medium or in printed copy.  Clients may access reports on our website, or receive publications directly via email.  Haywood strives to ensure all clients receive research in a timely manner and at the same time. It is against our policy for analysts to discuss or circulate their recommendations internally prior to public distribution. This policy applies equally to recommendation changes, target changes and/or forecast revisions.

For Canadian residents: Haywood Securities Inc. is a Canadian registered broker-dealer and a member of the Investment Industry Regulatory Organization of Canada, the Toronto Stock Exchange, the Toronto Venture Exchange and the Canadian Investor Protection Fund and accepts responsibility for the dissemination of this report. Any Canadian client that wishes further information on any securities discussed in this report should contact a qualified salesperson of Haywood Securities Inc.

For U.S. residents: This investment research is distributed in the United States, as third party research by Haywood Securities (USA) Inc. Haywood Securities (USA) Inc. is a wholly owned subsidiary of Haywood Securities Inc., registered with the U.S. Securities and Exchange Commission, and is a member of FINRA and the Securities Investor Protection Corporation (SIPC). Haywood Securities (USA) Inc. as a U.S. registered broker-dealer accepts responsibility for this Research Report and its dissemination in the United States. Any U.S. client that wishes further information on any securities discussed in this report or wish to effect a transaction in these securities should contact a qualified salesperson of Haywood Securities (USA) Inc. Haywood Securities Inc. Research Analysts are considered Foreign Research Analysts to the USA and are not registered/qualified as Research Analysts with FINRA. As these analysts are considered Foreign Research Analysts they may not be specifically subject to FINRA (formerly NASD) Rule 2711 and FINRA (formerly NYSE) Rule 472 restrictions on communications with a Subject Company, Public Appearances and trading securities held by a Research Analyst Account.

This report may be distributed in the following states: nil. Otherwise, this report may only be distributed into those states with an institutional buyer state securities registration exemption.

Analyst Certification

We, Mick Carew, Geordie Mark, Colin Healey, Pierre Vaillancourt, and Kerry Smith, hereby certify that the views expressed in this report (which includes the rating assigned to the issuer’s shares as well as the analytical substance and tone of the report) accurately reflect my/our personal views about the subject securities and the issuer. No part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations.

Important Disclosures

Of the companies included in the report the following Important Disclosures apply:

* n/a

Other material conflict of interest of the research analyst of which the research analyst or member knows or has reason to know at the time of publication or at the time of public appearance:

* n/a