The Weekly Dig - Dec 1, 2017
by Mick Carew, PhD, firstname.lastname@example.org, 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.
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