The Weekly Dig - July 20, 2018

Mick Carew, PhD, mcarew@haywood.com

and The Haywood Mining Team

Reprieve for Falling Gold Price After Trump Criticizes Fed

Highlights:

Precious Metals: The price of gold continued its free-fall after falling below the US$1,250 per ounce level last week as the U.S. Dollar Index continued to climb. The yellow metal hit a low of US$1,211 on Thursday, with concerns that the psychological US$1,200 level could be tested soon. However, on Friday President Trump criticized the continued raising of interest rates by the Federal Reserve, which has coincided with the U.S. Dollar Index rising 6% since mid-April, negating some of the effects of tariffs imposed on a number of trading partners. The gold price responded by regaining some of the losses incurred earlier in the week, finishing the week at US$1,231 per ounce, while silver (down 2%) and palladium (down 5%) followed suit, with only platinum finishing the week where it started at US$828 per ounce. Both the S&P/TSX Global Gold Index and VanEck Vectors Junior Gold Miners ETF (GDXJ) fell, continuing the negative sentiment towards gold mining and exploration equities. The share price of a number of gold producers rose this week, despite the poor performance of gold equities in the markets, with Detour Gold Corp. (DGC -T, HOLD rating, $15.50 target) rising 6.6% after a public spat between the Company and major shareholder Paulson & Co, while B2Gold Corp. (BTO-T, BUY rating, $5.00 target; up 4.3%) and Endeavour Mining Corp. (EDV-T, BUY rating, $32.00 target; up 3.6%) both finishing higher this week. Junior gold explorers, meanwhile, continue to struggle with Harte Gold Corp. (HRT-T, BUY rating, $0.80 target; up 2.9%), Lumina Gold Corp. (LUM-V, BUY rating, $1.20 target; up 2.5%) and Troilus Gold (TLG-V, BUY rating, $3.25 target; up 2.5%) some of the few positive performers in the junior exploration space.

Base Metals: The majority of the base metals were down this week with LME nickel being the most negatively impacted metal, down -3.2% WoW, followed by LME copper, down -1.5%, while LME Zinc was up 0.8% WoW. The LMEX Index finished the week down -1.1% WoW at 2,973. The S&P Composite Diversified Metals & Mining Industry Index finished the week at 5,893, which was down 45.8 bps WoW. YTD, metals have been mixed with copper and zinc down -15.0% and -21.6%, respectively, while nickel has been up +5.8%. LME inventories were all down WoW, with LME zinc inventories down -4.4% WoW, followed by nickel and copper inventories, down -1.7% and -1.3%, respectively. The US Dollar Index was down -26.8 bps this week finishing at 94.42, having a minimal impact on base metals prices. Base metals equities were all negatively impacted by the metals prices with the exception of Nevsun Resources Ltd. (NSU-T, BUY, C$4.00/sh target) which was up 9.5% WoW on Lundin Mining Corporation’s (LUN-T, HOLD, C$9.50/sh target) announcement that it intends to make a C$4.75/sh all cash offer to acquire Nevsun. The most negatively impacted weekly performers in the base metals universe were Sherritt International Corp. (S-T, Not Rated) and Taseko Mines Ltd. (TKO:T, Not Rated), which were down -11.6% and -5.9%, respectively.

Week Ahead: In the precious metals sector, we have four companies reporting financial results. We expect Barrick Gold (ABX-T, BUY, C$26.00/sh target) and Detour Gold (DGC-T, HOLD, C$15.50/sh target) to report Wednesday after market with OceanaGold (OGC-T; HOLD rating, $4.20/sh target) reporting pre-market on Thursday and Eldorado Gold (ELD-T, BUY, $2.50/sh target) on Thursday after the close. In the base metals sector, we have Lundin Mining Corporation’s (LUN-T, HOLD, C$9.50/sh target) reporting Wednesday after the close and Nevsun Resources Ltd. (NSU-T, BUY, C$4.00/sh target) on Thursday after market close.

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