Dave Erfle – Reviewing The Macroeconomic Backdrop In Light Of 4 Decade Record High 8.5% CPI Inflation Reading
Dave Erfle, Founder of The Junior Miner Junky, joins us to review the macroeconomic backdrop in the general markets and precious metals sector after seeing a 4 decade record high 8.5% CPI inflation reading this morning. We made the point that even with the Fed hiking rates and planning on getting more aggressive, they are starting from a point so far behind the curve, that even despite a few upcoming 50 basis point hikes, there will be negative real interest rates for the foreseeable future.
When asked if the Fed can truly get on top of inflation and normalize rates, Dave made the point that the Fed is not going to be able to do what the prior Fed chair Paul Volker did in the 1970s, because the Fed balance sheet and the US government has a far higher debt load and a far higher debt to GDP level than it did in the 1970s. In some respects this could be the end of the Keynesian economic experiment, and it is possible that gold is starting to sniff that out and head higher to the $1975 resistance level on the inflation reading today as there is a historical basis for gold to move higher in interest rate tightening cycles. He goes on to point out that not only do we have high inflation, and crushing debt levels, but that we have ongoing supply chain issues, a war in Ukraine, a stock market that looks like it is putting in a major topping pattern
We wrap up by noting that for the first time in a while gold and silver stocks are starting to diverge and outperform the general equities markets, and that while there has not been much interest or volumes in the junior PM mining stocks, once the generalist realize that gold is getting ready to make $2000 the floor and not the ceiling, then more speculative interest will come back into the sector as margins and economics expand on projects.
Click here to visit the Junior Miner junky website to learn more about Dave’s newsletter.
Frank Holmes – Will interest rate hikes crash Bitcoin, Ethereum, and Gold this year?
Kitco News – April 11, 2022
“Frank Holmes, executive chairman of HIVE Blockchain, discusses the outlook for Bitcoin, Ethereum, and Gold with David Lin, anchor of Kitco News. ”
The near-500% Rally In Lithium Price Is Showing Cracks In China
Bloomberg News – April 12, 2022
“Chinese lithium carbonate, which has gained almost 500% in the past year, slipped slightly on Monday after steadying in the past week, according to Asian Metal Inc.”
https://www.mining.com/web/the-near-500-rally-in-lithium-is-showing-cracks-in-china/
Warning Bells Sound In London Metal Exchange Zinc Market
Reuters – April 11, 2022
“Is zinc going to be the next nickel?”
“Even as the London Metal Exchange (LME) tries to reassemble the pieces of its broken nickel contract, there are signs that zinc could be the next metal market to find itself in turmoil.”
“A raid on LME zinc stocks has seen available tonnage fall to two-year lows. Traders are tapping the market of last resort for metal to ship to Europe, where smelting capacity has been idled by high energy prices.”
https://www.mining.com/web/warning-bells-sound-in-london-metal-exchange-zinc-market/
Zinc is now over $2 a pound, and at 2 decade highs, and while this base metal doesn’t get as much fanfare and publicity as Copper or Nickel, it is incredibly important to most of the “Silver” producers as most silver producers and development projects are polymetallic deposits containing Silver, Zinc, Lead, and sometimes Copper.
There are very few Silver exclusive deposits, and if anyone peels back the layers on the contributing metals in most companies revenues, Zinc is a major contributing metal to the “Silver Equivalent” ounces being produced or showing in up in resource estimates and economic studies.
In a back-channel way, these higher Zinc prices could be a real boon to the silver producers and silver developers with exposure to this metal. Even many of the “Zinc” companies, like say Trevali or Tinka (or even technically Silver Bull) still have Zinc/Lead/Silver, just in a more a Zinc forward proportion.
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With large companies we often see the Zinc/Lead number buried in Silver equivalent ounces and they are not very transparent with how much Zinc they mine… but it’s in there in the Silver eq ounces. There are some companies that at least highlight the zinc in their metals mix more openly.
– Silvercorp has produced 1.1 billon lbs of Zinc from 2006 – 2021. They are projecting between a 12%-21% increase in Zinc production year over year, and are projecting 27M-28Million lbs of zinc production in 2022.
– Americas Gold & Silver is projecting 36M-40Million lbs of Zinc in 2022, and 31-35million lbs of Zinc in 2023, which is a substantial amount of Zinc in their metals mix.
– Sierra Metals is more polymetallic with 35% Copper, 26% Zinc, 24% Silver, 10% Lead, and 5% gold, and one of the most transparent about their actual production metals mix.
– 15% of Hecla’s 2021 production was Zinc.
– Coeur is harder to figure out but they have substantial Zinc exposure at pretty high grades of 8%-10% Zinc
– Pan American Silver had 8% of 2021 production in Zinc, and 14% of their mineral reserves are Zinc
– Fresnillo is producing over 100,000+ tons of Zinc annually. They don’t explain how much of their “Silver equivalent” ounces are made up by zinc/lead specifically but they do provide the price assumptions in the fine print: “Metal prices used for 2021 estimation: All open pit mineral resources are reported within pit shells run at a US$1,600/oz Au, Silver (US$/oz 18.50), Lead (US$/lb 0.90) and Zinc (US$/lb 1.20).” So with the move in Zinc from $1.20 per lb. to over $2 per lb., that’s a big deal.
I’ll stop there because I’m tired of researching the zinc in the mix, but clearly $2 Zinc will be more of a help to most silver stocks and even the polymetallic base metals producers (like Glencore) than many are fully appreciating.
(DEF) (DNCVF) Defiance Silver Returns up to 3,260 g/t Silver in Maiden Drilling at Lucita
12 Apr 2022
– DDSA-21-50 returned a downhole interval of 1.15m of 1,603.90 g/t Ag, within a downhole interval of 3.33m grading 709.04 g/t Ag (from 115.82m to 119.15m).
– DDLU-21-05 returned multiple results greater than 100 g/t Ag, including 3.48m of 513.57 g/t Ag (from 152.52m to 156.00m), with a high-grade interval of 1.90m of 940.18 g/t Ag (from 154.10m to 156.00m). Individual intercepts in this interval grade up to 3,260 g/t Ag (from 154.10m to 154.35m).
https://ceo.ca/@newsfile/defiance-silver-returns-up-to-3260-gt-silver-in-maiden
Gold kicking off the day at $1981
Silver at $25.96 (above that $25.50 level some technicians wanted to see cleared)
Will NOVO Res. ever find competent leadership and/or a BOTTOM?
Yes I have a stink bid in @ < $.65
Sold 15% position in NFGC @ $7 US
No change in juniors in my account. Still zero sum game. I have added more base metals as a result, but doesn’t matter. I think the key remains where managed money goes for Juniors.
Rick Rule: Crisis in Confidence and Fear of Recession, ‘That’s What My Portfolio Reflects’
Stansberry Research – April 11, 2022
“Gold will resume an increasingly important role in global trade,” but I don’t believe any country will have a gold standard as their currency, says founder and CEO of Rule Investment Media, Rick Rule. “A gold standard is always a limit to a political system’s power,” as seen with the limitation Vladimir Putin has had affecting fiscal policy with the precious metal,” Rule tells our Daniela Cambone.
“Negative real interest rates are a government construct that, “penalize savers and investors on behalf of spenders,” and underscore a lack of understanding of basic fairness in economics, he continues. “Negative real interest rates, quantitative easing, debt, and deficits,” are much stronger underlying causes of inflation than other considered factors, Rule states. Right now, “Russian stocks are stupidly cheap,” and are some of the largest commodity producers in the world, he concludes.
https://youtu.be/UHmA6UQXRN4