?? - Will Gold’s Tailwinds Be Enough To Overcome September Curse?
CEO.CA Presents the Chairman's Briefing - September 5th, 2024
“Borrowers will default. Markets will collapse. Gold (the ultimate form of safe money) will skyrocket.”
— Michael Belkin
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In Todays Briefing
The convergence of weak manufacturing data in the US and typical September jitters—historically an unfriendly month for markets—weighed heavily on most asset classes as trading picked up after the long weekend.
Despite Powell's recent pivot (the Fed is expected to ease rates later this month to ward off a recession), the S&P 500 was off more than 2%, the Nasdaq 100 saw its worst start to a September since 2002, and Wall Street's "fear gauge"—the VIX—pushed substantially higher.
Though our primary focus here at CB Central is metals and mining, it's impossible to ignore the market action in AI heavyweight Nvidia, which made history, marking the steepest single-day decline in market value for a U.S. company - Nvidia suffers record $279 billion loss in market value as Wall St drops.
Nvidia lost $279 billion in market capitalization, a major indication that investors are becoming more cautious about emerging AI technology that has fueled much of this year's stock market gains.
Gold
The precious metal held its ground during the general market tumult reasonably well, but the equities, as measured by the GDX and GDXJ (chart below), took it on the chin with the latter off nearly 5% on the first trading day of the month.
This price weakness may represent an opportunity for those seeking exposure to the precious metals arena, but the pressing question is: Will Gold’s Tailwinds Be Enough to Overcome September Curse?
Bullion has dropped every September since 2017. Over that period, the average decline has been 3.2% in September – easily the worst month of the year, and far below the monthly average gain of 1%.
It’s a phenomenon that’s perplexed economists who believe markets should behave more efficiently, and it isn’t limited to gold: September is also commonly the worst month for US stocks, with average declines of more than 1.5% in the S&P 500 over the past decade.
Goldman Sachs' take on the precious metal? Gold to hit $2,700 in early 2025 amid softening cyclical environment – Goldman Sachs.
An excerpt from their recent commodities update: “Our analysis suggests an upside of 15% in gold prices under a hypothetical rise in financial sanctions equal to the rise seen since 2021 and a similar upside if US CDS spreads widen by 1,” they wrote. “That said, due to the particularly price-sensitive Chinese market digesting the recent price rally, we have adjusted our $2,700 target to early 2025 vs year-end 2024 previously. However, we believe that that same price sensitivity also insures against hypothetical large price declines, which would likely reinvigorate Chinese buying.”
With everyone on edge, all eyes will be on the monthly jobs report out on Friday, which could alter the trajectory of the easing cycle.
Jason Pride and Michael Reynolds at Glenmede:?“This week’s jobs report, while not the sole determinant, will likely be a key factor in the Fed’s decision between a 25 or 50 basis-point cut. Even modest signals in this week’s jobs report could be a key decision point as to whether the Fed takes a more cautious or aggressive approach.”
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Lithium Sector Woes
To say that it's been a rough ride for battery metal bulls over the past year would be a colossal understatement as a rout in the price of lithium, triggered by a supply glut and weaker-than-expected EV demand, has turned price chart trajectories upside down, from buoyant to bleak.
The following chart shows the downward spiral of lithium carbonate priced in yuan (blue line, chart below).
Headlines like these, from two of our largest Li producers, have become the norm:
The lithium industry has been pitched into turmoil as a glut of supply overwhelmed slower-than-expected demand growth from electric-vehicle makers, driving spot carbonate prices to a three-year low. The drawn-out slump has squeezed producers’ margins, forcing companies to rethink expansion plans, reduce spending, or shutter facilities to weather the downturn.
A major Chinese lithium producer swung to its first half-year loss since 2020, hit by the battery material’s massive price slump. Tianqi Lithium Corp. posted a net loss of 5.21 billion yuan ($734 million) for the first six months, from a profit of 6.45 billion yuan a year earlier, according to a statement late Friday.
Thacker Pass Financing Delay
General Motors is delaying the second tranche of a planned $650 million investment in Lithium Americas' Thacker Pass Lithium Project until the end of the year (the first tranche was completed in February of 2023) - GM delays additional $330m investment in Thacker Pass, Lithium Americas says.
Cited for the delay: Lithium Americas needs to secure a $2.26 billion loan agreement with the U.S. Department of Energy to develop the ambitious project, hailed as the 'largest known M&I resource in North America,' a clay-hosted deposit that's expected to produce 80,000 metric tons per year once at full capacity.
There's a rush to close these loan agreements with the U.S. Department of Energy while Biden is still in the White House. If Donald Trump is elected, his pledge to "end the electric vehicle mandate" will deprive projects like Thacker Pass of critical development funds.
Patriot Delivers, Attempting to Grind Out a Bottom
From mere pennies to nearly $18.00 per share, Patriot Battery Metals (PMET.TO) was one of the junior arena's highest flyers of the previous Li bull cycle. The company's valuation has been dealt a severe blow along with the rest of the sector in recent months. Attempting to call a bottom in the stock has been a mug's game despite dropping two major headlines highlighting key developments.
Highlights:
Highlights:
The shares continue to grind lower.
Biden to the Rescue?
The Biden administration is considering intervention—using federal funds to prop up critical minerals projects on US soil... projects "being hammered by an influx of cheaper Chinese materials," an Energy Department official told POLITICO - Biden administration considering price support to backstop critical minerals projects.
An official from the Energy Department told the publication that the new policy would involve setting a price floor and agree to pay the difference when market prices fall below that threshold for critical minerals produced in the US.
“If we move forward on anything like this, the intent would be to give the nudge that is needed to set off the flywheel, versus create a permanent subsidy or cushion for a particular sector or company going forward,” the Energy Department official told POLITICO.
General Mining Sector News
Paladin Short of Necessary (Fission Shareholder) Support
Late last June,?Paladin Energy declared its intention to take out Fission Uranium (FCU.TO) in a deal valued at C$1.14 billion.
The prize in the resource-hungry predator's eyes: Fission's?Patterson Lake South (PLS) projects, specifically the Triple R deposit located in the prolific Athabasca Basin of Saskatchewan.
Flash forward a couple of months and the takeover is far from a done deal - Paladin’s Takeover of Fission Yet to Win Shareholders’ Support.
The deal was contingent on securing at least two-thirds shareholder support by Aug. 26. Paladin fell short of that mark as nearly half of Fission's eligible shareholders failed to submit their proxies. A special general meeting has been postponed to Sept. 9.
“The majority of the votes received to date are in favor but are not sufficient to approve the transaction,” Paladin said in its earnings statement Thursday, citing information from Fission. “The postponement of the meeting is intended to provide additional time for all security-holders to have the opportunity to make their voices heard.”
The delay also threatens an agreement which would mark the first time since 2022 that a large foreign mining company listed its shares on the Toronto Stock Exchange. Canada’s bourse has ensured a year-long dry spell in new corporate listings.
Hudbay Snags Key Permit - De-risks Copper World
Hudbay Minerals (HBM.TO) is now in receipt of the second-last permit required to begin the buildout of its Copper World project in Arizona - Hudbay Receives Aquifer Protection Permit for Copper World.
The 85,000-tonne-per-year Copper World project, with the potential to gain status as the third-largest copper cathode producer in the US, could see the Canadian miner boost its output to roughly 250,000 tonnes beginning in 2029.
Copper World has a proven and probable reserve base of some 385.1 million tonnes grading 0.54% copper, plus moly/gold/silver credits.
CEO Peter Kukielski: “Receiving the aquifer protection permit is a significant de-risking event for Copper World as it brings us one step closer to being fully permitted.”
Securing an air quality permit is the company's next objective; "The last key state-level permit, the Air Quality Permit, continues to progress as planned and will mark the completion of one of the three key prerequisites in the company's prudent sanctioning plan for the project."
Hudbay is seeking a committed JV partner to fund a feasibility study and further advance project development.
According to The Northern Miner: A September updated prefeasibility study for the first stage of Copper World improved economics and extended the mine life compared with a June 2022 preliminary economic assessment. The new study pegs the project’s after-tax net present value at $1.1 billion with an 8% discount rate and an internal rate of return of 19%, based on a copper price of $3.75 per pound.
Copper World is an alternative to Hudbay’s stalled Rosemont project next door. It has faced legal and environmental challenges, notably a 2019 federal court ruling that blocked its development due to concerns over its potential impact on federal lands and local water resources. Copper World, by contrast, is being developed mainly on private land, which allows it to proceed under state and local permits, bypassing the federal hurdles that impeded Rosemont.
Ghana Tees Up A 'Monster'
With expectations of more than 350,000 ounces, Ghana is slated to commission its first large-scale greenfield mine in more than a decade this November - Ghana to launch 'monster mines' to boost gold production.
The Cardinal Namdini mine, owned by Cardinal Resources, a unit of Shandong Gold, has a probable reserve base of 129.6 million tonnes at a grade of 1.14 g/t Au for roughly 4.76 million ozs.
This ambitious mine plan comes after a decade of declining exploration activity in the West African nation, which has impacted big-miner-output and the flow of new projects (Ghana's last major commissioning was back in 2013 when mining behemoth Newmont launched the 420k per year producing Akyem, in the southeastern part of the country).
According to Martin Ayisi, CEO of the Minerals Commission, “exploration took a nosedive” since Akyem, but “we will now have commissioning galore.”
“First is Cardinal Namdini, which is a monster mine and it will produce an average of 358,000 ounces per year. Mid-year 2025, Newmont will commission another monster mine – Ahafo North.”
Ayisi said another two new mines – a gold mine by Azumah Resources in northwestern Ghana along the border with Burkina Faso, and the country’s first lithium project, owned by Atlantic Lithium – will start production in 2026.
Ghana produced 4.03 million ozs of gold in 2023, driven largely by increased output from small-scale and artisanal miners.
Hits of the Week
The Yukon government has appointed a trio of experts to look into the cause and factors behind the heap leach failure at Victoria Gold's Eagle mine earlier this summer. The three-person independent review board is tasked with figuring out what led to the June 24 slide, which spilled hundreds of millions of litres of cyanide solution into the environment and forced the immediate halt of operations at the mine site - Yukon appoints board to investigate cause of 'catastrophic failure' at Eagle mine
The Biden administration is close to announcing it will block Nippon Steel's acquisition of U.S. Steel two sources familiar with the situation said on Wednesday, amid growing bipartisan political opposition to the $14.9 billion deal - Biden close to blocking Nippon Steel deal to buy U.S. Steel, sources say
Staff at billionaire Chris Ellison’s mining company have already been banned from working from home. Stepping outside for a coffee could well be the next endangered perk. “I want to hold them captive all day long,” Ellison, chief executive officer of Mineral Resources Ltd. said on Thursday. “I don’t want them leaving the building. So I don’t want them walking down the road for a cup of coffee. We kind of figured out a few years ago how much that costs” - Mining Billionaire Who Banned Work From Home Targets Coffee Runs
First Quantum Minerals Ltd. is seeking compensation from Panama for a stockpile of semi-processed copper ore stranded at the company’s flagship mine as part of wider arbitration over the shuttered operations. The material, worth between $225 million and $340 million at current copper prices, has sat idle for months at the giant mine while the Panamanian government determines whether the metal was mined before or after Cobre Panama was ordered to close last year. The Canadian mining company has warned that the matter must be resolved urgently since the stockpile can degrade in value and poses an environmental risk when left idle - First Quantum Seeks Damages for Copper Trapped at Panama Mine
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