Hour 1 – This Hour Is For All Of You Making Investments In The Metals Sector
It was another volatile week with all thanks to trade rumors and job numbers at the end of the week. Precious metals remaining range bound while US market closed very close to new all time highs.
This weekend’s show is focused mostly on metals investing while also recapping the major news events that will shape markets for the rest of the year. Please keep in touch by emailing me at Fleck@kereport.com. I love hearing from all of you!
- Segment 1 – Marc Chandler, Managing Partner at Bannockburn Global ForEx kicks off the with a recap of the jobs data and a look ahead to the major events coming next week. All with a focus on how we think the markets will trend heading into next year.
- Segment 2 – Adrian Day, President of Adrian Day Asset Management addresses the thought that a full on recession will be good for the PMs. History is telling a bit of a different story.
- Segment 3 – Chris Taylor, President and CEO of Great Bear Resources updated us on the newly increased, fully-funded, drill program, of 200,000 meters.
- Segment 4 – Jordan Roy-Byrne, Founder of The Daily Gold wraps up the show with his thoughts on the the PMs for 2020. This is the most bullish I have heard Jordan in a long time!
Exclusive Company Interviews This Week
- Riverside Resources – More information on the Pichette Gold Project acquisition in Ontario
- O3 Mining – Updates on the current 50,000 meter drill program
- Skeena Resources – Drilling and Financing Updates For Both The Eskay and Snipp Properties
- IsoEnergy – One of the only Uranium juniors with a bought deal financing and a growing discovery
- Novo Resources – Fine Grain Gold Results, Sorting Updates, and Kirkland Lake Comments
Thx again Cory.
Good to hear Jordans optimism.
Thanks, Cory. Looks like Jordan R-B is almost half as bullish as I am.
Same here, but he’s seeing the light!
8 weeks ago he had a very negative outlook for the sector that might have been loosely supported by history but, in my opinion, not by the current situation:
On October 9, 2019 at 8:44 pm,
Matthew says:
The monthly, quarterly and even daily gold charts do not support Jordan’s outlook.
7 weeks ago (at THE low for most miners):
On October 17, 2019 at 1:25 am,
Excelsior says:
Captain Obvious Says Gold Miners Have 15%+ More Downside Ahead
by @Goldfinger on 15 Oct 2019
“As the gold miners drift lower during a seasonally weak part of the year (mid-October) for the sector, a textbook complex head & shoulders top pattern has formed.”
https://ceo.ca/@goldfinger/captain-obvious-says-gold-miners-have-15-more-downside-ahead
On October 17, 2019 at 10:00 am,
Matthew says:
Everyone and his guru is aboard that H&S pattern so I’ll be surprised if it gets close to its target. In fact, a significant decline from here would not at all be consistent with the action we’ve had since May.
Sure enough, that H&S pattern delivered zero downside:
https://stockcharts.com/h-sc/ui?s=%24XAU&p=D&yr=0&mn=7&dy=0&id=p66492266382&a=705129764
Agreed, the H&S Pattern in the larger miners didn’t break down as many technicians expected, and it became a failed pattern, as the miners held up better than many projected they would, and actually have gained some in Nov/Dec.
Granted, many of the Jr Gold miners did continue selling off in Oct, Nov, and this month, but the Mid-Tiers & Major Gold producers have done well, and the Silver miners have been strong for the most part. Very encouraging action here in Q4 2019.
Goldman Says Case to Diversify With Gold ‘as Strong as Ever’
By Yvonne Yue Li – December 6, 2019
Goldman Sachs Group Inc. said investors should diversify their long-term bond holdings with gold, citing “fear-driven demand” for the precious metal.
“Gold cannot fully replace government bonds in a portfolio, but the case to reallocate a portion of normal bond exposure to gold is as strong as ever,” Goldman analysts including Sabine Schels said in a note Friday. “We still see upside in gold as late cycle concerns and heightened political uncertainty will likely support investment demand” for bullion as a defensive asset.
The precious metal climbed to a six-year high in September as the Federal Reserve cut borrowing costs and the total pile of debt yielding less than zero climbed to a record $17 trillion, boosting the appeal of non-interest bearing gold.
“Funds increase gold bullish bets by the most since September.”
“Hedge funds and other large speculators boosted their bullish bets on the precious metal by 8.9% in the week ended Dec. 3, government data showed Friday. That’s the biggest gain since late September.”
“Gold has fallen more than 6% from the peak to close at $1,460.17 in the spot market Friday.”
“While Goldman said the correction on bullion prices has further room to run, the bank is still sticking to its forecast prices will climb to $1,600 over the next year.”
Gold rally foiled again as payrolls torpedo weekly gain
Bloomberg News | December 6, 2019
https://www.mining.com/web/gold-rally-foiled-again-as-payrolls-torpedo-weekly-gain/
Did you read the full article as a contrarian he did not suggest gold was going down another 15 %.
Thanks for pointing that out. His view was much more consistent with the rest of his work than I thought. I don’t know why I missed it in October but I’ll try not to let it happen again.
Goldfinger:
“While such a large decline is certainly possible, I believe the more likely scenario is a failed breakdown below the neckline followed by a sharp upside reversal OR a decline to test the rising 200-day moving average (about 7.5% below current levels) before an upside reversal takes hold.”
Also Goldfinger:
I believe it’s important to remember that bull markets regularly experience 50% declines along the way before the dominant trend reasserts itself.” — I think he meant 50% retracements. The difference is huge.
Matthew – good contrarian call in October on the miners actually not having much more weakness, due the strength we’d already seen in 2019 from May to August.
> In Goldfinger’s defense he posted a few more articles after that “Captain Obvious” article noting things were more constructive in the PMs.
_____________________________________________________________________
Gold Mining Companies Suck And That’s Why They Offer A Great Investment Opportunity Today
by @Goldfinger on 23 Oct 2019
Gold Sector Poised For A Big Move As Fed Week Looms Large
by @Goldfinger on 26 Oct 2019
“Gold miners are facing a key test of resistance as we enter a week that has at least two potentially major market moving events (FOMC on Wednesday afternoon, and non-farm payrolls Friday morning). The gold miners, as represented by the GDX exchange-traded fund, are attempting to break free from a range defined by roughly $26.20 on the downside and $28.30 on the upside.”
https://ceo.ca/@goldfinger/gold-sector-poised-for-a-big-move-as-fed-week-looms-large
Gold On The Verge Of Testing Support As Sentiment Deteriorates
by @Goldfinger on 11 Nov 2019
“A ~$300 rally from the May low to the early September high has now given way to a slightly more than $100 correction. From a longer term vantage point this is normal and healthy price action, with a powerful bullish impulse move followed by a 30%-40% correction.”
“As gold tests previous resistance amid deteriorating sentiment, now comes the challenging part for investors. Do you hold your nose and step in and buy at what should be support? OR do you wait for things to get much worse and risk missing the low before gold resumes its bullish longer term trend? ”
https://ceo.ca/@goldfinger/gold-on-the-verge-of-testing-support-as-sentiment-deteriorates
Mid-Tier Gold Developers & Producers Offer Classic Buy Setup
by @Goldfinger on 16 Nov 2019
“After a powerful ~50% rally in the span of three months, a ~20% correction has brought the mid-tier gold producers/developers that comprise the GOEX exchange-traded fund back to previous resistance which should now serve as support. Toss in a rising 200-day simple moving average and what could be interpreted to be a bull flag pattern over the last three months and we have a solid bullish buy setup with a clearly defined risk. ”
https://ceo.ca/@goldfinger/mid-tier-gold-developers-producers-offer-classic-buy-setup
From what I’ve seen from Goldfinger, I think he’s good. I highlighted an opinion I got right but did not intend to imply anything negative about Goldfinger.
Understood, and I agree you were correct about the thwarted H&S pattern and call, and also agree that @Goldfinger is a pretty solid technician.
He’s usually very adamant about TA not predicting anything, but simply being probabilistic risk/reward set ups, so it was curious that he called it “Captain Obvious Says…” as it seemed to imply a very good likelihood of a breakdown.
He was quick to adjust to the changing dyamics, and I enjoy reviewing his thesis and charts as he puts them out. Cheers!
Btw, I think it should be pointed out that the action I referred to here: “…a significant decline from here would not at all be consistent with the action we’ve had since May”
pertains to more than percentage gains and strength. Large gains by themselves set the stage for large declines.
Here’s @Goldfinger’s article hot off the presses today:
____________________________________________________________
Putting The Recent Gold Consolidation Into Perspective
by @Goldfinger on 7 Dec 2019
“The correction since the September peak at $1565 has served to cool off overbought technicals and overbullish sentiment, and I think gold is set up nicely to rally into Q1 2020:”
https://ceo.ca/@goldfinger/putting-the-recent-gold-consolidation-into-perspective
Silver made a new low yesterday precisely at the 30 week MA and is now down 4.5% since October 15, the day SILJ and most miners bottomed. Despite silver’s meaningful decline, SILJ is up 18.2% since October 15 (+24% vs silver). This is a significant positive divergence that has very bullish implications but SILJ is now overbought versus silver/SLV so the metal should do some catching-up in the short term.
SILJ:SLV daily:
https://stockcharts.com/h-sc/ui?s=SILJ%3ASLV&p=D&yr=1&mn=0&dy=0&id=p71951454985&a=705143124
Silver’s new low at 16.58 happened to be at the precise level of the 200 week MA as well as the 30 week MA. The latter is about to bullishly cross above the former for the first time since June 2009.
https://stockcharts.com/h-sc/ui?s=%24SILVER&p=W&yr=4&mn=1&dy=0&id=p92303960148
Silver Price Update – December 5, 2019 + #Silver Miners Update
iGold Advisor – Christopher Aaron is bullish on $IPT
Investors in Impact Silver (IPT) (ISVLF) should really check out the 2nd 1/2 of that video above with Christopher Aaron, as his fundamental and technical analysis on Impact is spot on.
Thanks for the video. As you might recall, I’m a fan of IMPACT’s “renegade” approach. The property and the company’s results speak for themselves. Why waste millions on on resource estimates if you don’t need banks to finance your activities? Now, if/when the company becomes a producer first and an explorer second, then it could be beneficial to produce resource estimates. But for now and for the foreseeable future, it remains an explorer first and producer second, in my book.
Yes there is an element of greater risk without the resource estimates, but the team at Impact has been delivering on their exploration and production for years, and I have confidence they’ll continue to hit pay dirt and extract it economically in the years to come.
There’s bigger risk in a barely-profitable nano cap spending millions unnecessarily. Lots of people have criticized IPT over the years for their approach but I wouldn’t have it any other way. The rest can go dilute themselves! 😉
I have to disagree with Aaron’s projection for IPT if silver goes to $50 again. I believe it will be WAY beyond its 2011 high in that event. A lot has changed since then.
I agree with you there as 850% gains only take us to the previous 2011 high, and where it goes from there could be much higher.
The sector is in a much better place now cyclically which is part of the reason IPT hit 1.28 in 2016 at 20-21 silver but was only 1.28 in Nov. 2012 at 33-34 silver.
The silver miners provided terrible leverage to silver in H2 2010 and H1 2011. That won’t be the case this time.
That’s a very encouraging thought and looking forward to the upside leverage in the coming leg of the PM bull.
It’s worth stressing again how terrible the leverage was back then. Many silver miners provided zero to even negative leverage as silver soared. ETF SIL fell versus silver as it more than doubled while silver almost tripled. PAAS did even worse. This huge negative divergence foreshadowed a big cyclical bear market. Big money sold all strength because it had so much selling to do.
I don’t know when $50 will return, but it will not mark the final top when it does so the leverage we’re after should be intact.
That guy sure enunciates. Helen Keller would have no problem reading his lips.
😮
Sprott Money News Weekly Wrap-up – (12.6.19) #VIDEO
“Eric Sprott discusses the latest developments in the gold and silver markets. He also addresses some of the recent merger and acquisition news in the mining sector.”
(BAR) (BALMF) Balmoral Expands Ripley Zone Gold Discovery / Area 51 Gold System, Detour Gold Trend, Quebec
by @nasdaq on 4 Dec 2019
“Balmoral’s Detour Gold Trend Project adjoins the holdings of Detour Gold Corp. – the subject of a current $4.5+ billion takeover offer* – on its western end, surrounds and controls a portion of the rapidly expanding Area 51 gold system, as further evidenced by today’s results, and features Balmoral’s wholly-owned Martiniere gold and Grasset nickel deposits.”
https://ceo.ca/@nasdaq/balmoral-expands-ripley-zone-gold-discovery-area
(AMX) Amex Drills 41.30 g/t Gold over 4.10 m including 202.81 g/t Au over 0.80 m in New Emerging Upper Gratien Zone, Perron Project
by @nasdaq on 5 Dec 2019
https://ceo.ca/@nasdaq/amex-drills-4130-gt-gold-over-410-m-including-20281
(SGN) Scorpio Gold Reports Results of Drilling at the Keystone-Jumbo Area, Goldwedge Property, Nevada
Balmoral was poorly managed for years. Its in a good area. But will get no credit for the management doing nothing for years other than collecting a salary. Sad sad sad< I've lost thousands on this dog!
In just 2019, Balmoral (BAR) has put out a number great exploration results and found new zones at their Grasset nickel deposit which has all been very promising.
On the gold front, BAR put out an initial resource estimate for their Martiniere Gold System, and had a number of successful drill campaigns at Bug, Horsefly, and other targets on their Detour Gold trend. Some investors were overly giddy with unrealistic expectations on where this resource estimate should be so the stock sold down after that and out came the haters. That is when I started following them more closely because I love it when investors throw out the baby with the bathwater and over-react.
Then in 2019 the exploration team at Balmoral has had a number of positive exploration results on Detour East / Lynx and Area 52, and Ripley, while continuing to simultaneously explore Grasset further and hit paydirt each campaign.
That is a far cray from just collecting a salary, and with these Jrs, the goal is to buy the dips when shares are depressed and ride them up when the market rerates the good work.
Balmoral has been up nicely all year long in 2019 (Dec 31st 2018 it was at $.14 and today it is trading at $.355 – up 254%, so I’m up thousands on this turn around story. happy happy happy 😉
Here is a 1 year Chart for (BAR) Balmoral Resources and the share prices speaks for itself:
ProactiveInvestor Inteview: (MAI) (MAIFF) Minera Alamos announces 14-million-dollar deal with Osisko Gold Royalties to help fund construction
“Minera Alamos President Doug Ramshaw joined Steve Darling from Proactive Vancouver on Skype with details about a deal they have signed with Osisko Gold Royalties to help fund construction on their Santana project in Mexico.”
“Ramshaw telling Proactive how the deal will work and the timeline for construction.”
@Goldfinger – “I think the best lesson from watching/owning $MAI in 2019 has been an example of what it looks like for a junior mining company to execute according to plan and hitting milestones on timelines as laid out by the company. I believe this is why the market has rewarded the Minera Alamos share price so nicely. Something a lot of other management teams in this sector could learn from. @TheGalvanizer is also teaching us what a great promoter he is ;)”
@The Galvanizer is Doug Ramshaw, BSc, ARSM – President & Director
Uranium Miners Rise as Trump Panel Urges U.S. Buy Domestic
By Ari Natter – December 4, 2019
“The purchase of uranium by the U.S. Defense Department is among the recommendations being made by the U.S. Nuclear Fuel Working Group, comprised of cabinet level and other high-ranking officials, according to two people familiar with the matter who requested anonymity to discuss non-public deliberations.”
Excelsior and Matthew:
You guys feed off each other and the Readers benefit. Thank You.
Much appreciated David. Cheers!
Hey Ex. Here’s some excerpts from that report
Malartic Underground: A Unicorn Emerges in the Backyard Investment Thesis. With the completion of two major new mines in Nunavut in 2019, AEM is positioned to deliver rapidly growing free cash flow in 2020 as the new mines ramp up. The market often rewards growing free cash flow and we expect this to be the case for AEM, given its strong growth pipeline – to which we now add the Malartic underground – and history of paying dividends. AEM has been a long time favourite of ours and remains so for 2020. Event Senior producers are all searching for “unicorns”; i.e., projects over 5Moz with low costs. Global discovery rates being what they are, the object of their desire is indeed a fabled animal. Yet, a large unicorn has appeared with little recognition or fanfare in the Val d’Or camp — the Malartic underground, shared by Agnico and Yamana. We believe it to be a much larger (>12Moz), more valuable resource than investors appreciate. Highlights u Tier 1 Potential Begins to Emerge in September I Prior to the September 9 press release that updated the Odyssey and E Malartic resources, the two deposits had global resources of 4.5Moz @ 2.0 gpT (inclusive of internal dilution). The press release added 3.7Moz below 1,000m, mostly from E Malartic, taking total resources to 8.2Moz at 2.0 gpT (100%); i.e., very large, but low grade, for underground mining (Figure 1). u East Gouldie – A Game Changer I Discovery of E Gouldie (EG), located south of Odyssey, was also announced in the press release (see long section in Figure 2). No resource was provided but, based on drill results, we estimated 3.5Moz @ 2.9 gpT, allowing for internal dilution (Figure 3). EG is large and significantly higher grade — a game changer. It is notably continuous and uniform in grade with two sweet spots and has likely grown up and down dip since September. By year-end, we think ~5Moz is a reasonable target for EG and it still remains open east and west along strike. We estimate that would take Malartic’s total underground resource potential to about 12–13Moz at 2.2 gpT (100%) — clearly of vast proportions and larger than the open pit’s 10.8Moz global resource at start-up in 2011. u Milestones #1 & #2 in Q1/20 I EG’s drill density is still too wide for much of the apparent potential to make it into the year-end resource estimate, but a portion should make it into the inferred category. That portion could be included in the Q1/20 Malartic Underground Preliminary Economic Assessment (PEA) and will give investors a sense of the Malartic underground’s potential. Expect a low IRR, but think of this as only a beginning. u Timing – Sooner than You Think I Malartic’s open-pit production will exhaust current reserves in 2025–2026. Optimistically, underground mining could begin from a ramp into the upper mineralization of Odyssey by 2022–2023, we think, but EG requires an expensive shaft and would not likely begin much before 2026. Much depends on when a decision is made to build a ramp. We hope for H1/20, as the necessary permits are already in hand, but there needs to be visibility that the end goal — a suitable risk:reward — is achievable
u Valuation – A Big Pie I Figure 5 summarizes our assumptions and valuation. At $1,450/oz, our NPV@5% and IRR are $1.1B and 13.7%. We benchmarked to Goldex and Young Davidson — two large-scale underground mines (Figure 4). Existing Malartic infrastructure should be scalable and a big capital saver. We assumed 10Moz mineable at 2.3 gpT. One cannot mine as fast as with an open pit. Our production estimate drops from 660Koz in 2019 (100%) to 375Koz/year, but for 25 years. Not surprisingly, the NPV and especially the IRR are sensitive to our assumptions. Three observations: 1) The $1.1B NPV prize is large; 2) Because the grade is low, our IRR @ $1,450/oz (14%) is below our hurdle rate (17–20%). Yamana (YRI-T, C$6.00 TP, Buy) and Agnico-Eagle will likely use ~$1,200/oz to judge the project, at which our IRR is 9%, well below their hurdle rates; and 3) We believe the Malartic underground can, and will, improve and eventually proceed, but all beneficiaries, royalty com.panies and governments included, will need to work together. Figure 6 provides a sense of how impactful tweaks to grade, throughput and timing could be
Yes Malartic underground may be much larger than the market realizes and may end up bing that rare unicorn of a prize. We’ll see how much AEM throws at development in 2020.
Royalty Burden Is too Heavy: There are several royalties over the property package hosting the three Malartic underground deposits, Osisko being the largest and, to a lesser extent, Abitibi Royalties. We have assumed an average 5% NSR royalty applies. The royalties are a serious burden. Malartic’s open-pit reserves have been calculated at $1,200/oz. Something in this price range will likely be the base-case price by which the partners will judge the Malartic underground project. At $1,200/oz, the split of after-tax NPV in our analysis is quite lopsided: 35%, 35% and 30% for AEM, YRI and the royalty holders, respectively. At $1,100/oz, only $100/oz lower, the split deteriorates to 24%, 24% an 52%; at $1,000/oz, the royalty holders would earn all the benefit and the partners would lose money. The split becomes more rational above $1,500/oz, at which point it is 42%, 42% and 16%. The hardlearned lesson for development projects has been to protect for downside risk and embrace the upside, only if and when it happens. We doubt that management and shareholders of AEM and YRI would allow the underground project to proceed with a relative value split that is lopsided in favour of the royalty holders. At the same time, we doubt much value has been attributed to the Malartic underground by investors to any of the companies’ share prices. This is a win-win-win setting. Certainly, there has been precedent for royalty companies renegotiating their royalties to encourage projects to proceed. In June 2014, Franco Nevada (FNV-T, C$120.00 TP, Buy) lowered its royalty to encourage development of the Guadalupe underground mine in Mexico. Sandstorm (SSL-T, C$9.50 TP, Buy) substantially lowered a heavy royalty on the Aurizona mine in Brazil to encourage a buyer, after the mine failed, in large part because of the royalty.
“above $1,500/oz, at which point it is 42%, 42% and 16%”
Well Gold is in the mid $1400’s so a move above $1500 in the next leg higher in the PM bull in 2020 seems very doable, and at that point the underground opportunity seems like a win-win-win for AEM, YRI, and OR/RZZ.
May 2020 be the year that everyone makes some cheddar….
So does anyone know or follow someone they consider good for copper calls or base metals in general???….copper has started to show signs of life but I’m not sure if it’s just a bounce in bear trend. I’m really looking to catch that next bull wave in base metals cuz I think it will be a super bull run
I’m not aware of anyone that has nailed the moves in Copper or the Base Metals over the last few years, but I get a lot of good company and sector info from just going to the #Copper room over at ceo.ca.
Thanks Cory, Big Al, and the KE Report contributors for another great week of interviews, daily editorials, and the weekend show. As always, it is appreciated.