The Weekly Dig - October 5, 2018

Mick Carew, PhD,

and The Haywood Mining Team

Gold Strengthens as VIX Spikes 25% this Week


Precious Metals: After dropping to US$1,185 per ounce on Monday, gold recovered and hit a high of US$1,208 on Tuesday. The precious metal kept its traction to finish the week off at US$1,204 per ounce Friday afternoon at the time of publication, a 1.1% gain compared to the start of the week. Following gold's upward trend, the S&P/TSX Global Gold Index hit a high of 160.28 Wednesday morning before finishing the week off at 157.21 (up 1.7% WoW), and the VanEck Vectors Junior Gold Miner ETF finished the week up 0.95% at 27.62 following a spike at 28.29 Thursday morning. Meanwhile, the Dow Jones Industrial Average opened flat Friday morning before falling 180 points to finish the day off at 26447. The US Dollar index also softened following Friday morning’s release of weaker-than-expected jobs data where the U.S. Labor Department’s Employment Situation Report for September released an increase of 134,000 jobs compared to an expected 180,000 for the key non-farm payrolls number. Some of the better performing equities this week included B2Gold Corp. (BTO-T, BUY rating, $5.00 target) and Barrick Gold Corp (ABX-T, BUY rating, $17.00 target) finishing up 7.5% and 3.8% this week, respectively. Meanwhile, Asanko Gold Inc. (AKG-T, HOLD rating, $2.00 target) and Osisko Mining Inc. (OSK-T, BUY rating, $4.50 target) were two of the better performing small cap companies this week, finishing up 13.7% and 14.0% respectively.

Base Metals: Base metals were mixed week over week. While LME copper was down -1.5% WoW, LME zinc and nickel were both flat, up +0.3% WoW. The LMEX Index finished the week relatively flat up 12 bps WoW at 2,998.4. The S&P Composite Diversified Metals & Mining Industry Index finished the week at 5,441.05, which was down -1.20% WoW. YoY, metals have had a mixed performance: copper and zinc are down -7.4% and -20.5%, respectively while LME nickel is up +20.0% YoY. LME inventories were all down WoW, with copper, zinc, and nickel inventories down -7.7%, -0.9%, and -0.3% WoW, respectively. The US Dollar Index was up +59 bps this week finishing at 95.69, having a negative impact on base metals prices. The majority of the stocks in our coverage universe were down this week with the exception of Nevsun Resources Ltd. (NSU:TSX, TENDER, C$6.00/sh target) which was up +1.0% WoW. The most negatively impacted weekly performers in our coverage universe were Lundin Mining Corporation (LUN-T, BUY, C$9.00/sh target) and Hudbay Minerals (HBM:TSX, BUY, C$9.00/sh target), which were down -7.3% and down -13.1%, respectively.

Week Ahead: We are expecting production results from Barrick Gold (ABX:TSX, BUY, $17.00/sh target) on Wednesday, October 10th after market close, Copper Mountain (CMMC:TSX, BUY, $2.00/sh target) on Tuesday, October 9th before market open and Capstone Mining (CS:TSX, HOLD, C$1.20/sh target) on Wednesday, October 10th before market open.

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