Strengths

  • The best performing precious metal of the week was silver, up 3.90%, likely due to stronger inflation data released this week, which silver of course loves. Technically, $26.00 continues to act as major resistance on a price breakout. Exchange-traded product (ETP) purchases of gold hit a record high in March as investors withdrew record amounts from exchange-listed European equity funds as the fallout from Russia’s invasion of the ‘Ukraine made themselves felt in the markets. Global net inflows into gold ETPs quintupled month-over-month to $11.3 billion in March, according to BlackRock data, eclipsing the previous peak of $9.4 billion in March. July 2020. barely reached its all-time high at the start of March, although it has since declined, reports the Financial Times.
  • Nomad Royalty announced strong preliminary results for the first quarter of 2022 with attributable revenue of approximately $12.7 million on 6,604 attributable ounces sold. Ounces rose sequentially this quarter and now make up 26% of the full-year midterm guidance, according to the company.
  • Perseus Mining reported ongoing infill and step-out drilling on the CMA structure at the Yaouré gold mine in Côte d’Ivoire. General Manager Jeff Quartermaine noted that they are working on a resource upgrade to complete a pre-feasibility study. The Bank of Ghana has set aside 180 million cedis for the purchase of gold. Ghana is Africa’s top gold producer and has bought over 600 kilos since the start of its buying program in June.

Weaknesses

  • The worst performing precious metal of the week was palladium, down 2.83%. The London Platinum & Palladium Market (LPPM) has followed the London Bullion Market Association (LBMA) in suspending the accreditation of Russian refineries. Specifically, the LPPM suspended the government-owned Krastsvetmet refinery and the Piroshky non-ferrous metals plant from its good delivery and sponge accreditation lists. Compared to the gold and silver suspensions, this action by the LPPM could have far more serious price implications. These two refineries process Russia’s 3 million ounces of annual palladium production and 700,000 ounces of annual platinum production.
  • New Gold reported first-quarter gold-equivalent production 21.4% lower than the prior quarter. Production was down at both of their mines, with New Afton output down 32.3% while Rainy River slipped 15.0%. New Gold is rated underperforming by BofA Securities.
  • Galiano Gold is still struggling to regain investor confidence. This week, Raj Ray downgraded Galiano Gold from a market performer to an underperformer. At the end of February, Galiano Gold noticed in February that the gold grade going to its tailings contained 0.40 g/t, far exceeding the expected grade of 0.10%. Ray noted in his report that the new measured and indicated grade was approximately 20% lower than the previous report, which management explained as an update to the geological model. Go figure.

Opportunities

  • South Africa was last ranked 75th out of 84 jurisdictions according to the Fraser Institute’s annual survey of mining companies 2021. This highlights how unattractive the region has been for new mining investment due to the power shortages, frequent strikes and community unrest. This week, South Africa’s Department of Minerals and Energy unveiled its exploration strategy which aims to attract $900 million in annual investment in the exploration of its vast mineral wealth by removing bottlenecks , improving resource mapping and diversifying its business beyond gold. With South Africa’s gold resources dwindling, the department stressed it was focusing on minerals of the future. In 2019 alone, South Africa was ranked 40th out of 76 in the Fraser survey.
  • Shares of Asian and South African companies linked to platinum group metals rose after the London market suspended two Russian state-owned palladium refiners from its accreditation lists. This decision potentially disrupts supplies from the world’s largest precious metal producer; Russia produces 40% of all freshly mined palladium.
  • High commodity prices are boosting mining profits and companies are choosing to return cash to shareholders rather than invest in new projects, which could slow global production growth. Last year was spectacular for mining groups who benefited from a post-pandemic recovery in demand. Profits soared as a result, and much of it went into shareholders’ pockets.

Threats

  • Barrick Gold announced preliminary gold and copper production in line with expectations. Gold production fell from the previous quarter, but was telegraphed earlier. However, analysts’ forecasts of about 20% higher costs were surprising. Inflation is certainly having an impact on costs, as diesel fuel prices soared in March, likely hitting surface miners harder than underground operations.
  • Barrick Gold also said it had re-engaged with the Pakistani government on a revised plan to develop the giant Reko Diq copper gold deposit, located near the border with Iran and Afghanistan. The project is expected to be built in two stages with a capital requirement of $7 billion. Barrick recently announced a $1 billion share buyback. If Jeff Currie is right in the early innings of a commodities supercycle, investors will be wary of financing this new production project rather than demanding a dividend or a buyout.
  • According to UBS Group AG, some of Russia’s palladium exports could be redirected to China following the London Platinum and Palladium Market’s suspension of two state-owned refiners, which could dampen a panicked market. China, which consumes about three million ounces of palladium a year, uses slightly more than Russia produces, said Giovanni Staunovo, strategist at the bank’s global wealth management unit.




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