💼Silver On An Absolute Tear
CEO.CA Presents the Chairman's Briefing - May 16th, 2024
"Gold and Silver have always had value, never gone to zero. Can you say the same for stocks and bonds?"
— Mark Skousen
Metals/Crypto Price
In Today's Briefing
Gold
When the Labor Department reported April's PPI earlier this week, the digits revealed a 0.5% rise in wholesale inflation (2.2% annualized) which exceeded expectations and marked the highest reading in a year. The core PPI, which excludes food and energy, climbed 0.5% on the month and 2.4% year-over-year, also surpassing expectations. The market is now bracing for today's CPI (today being Weds, May 15). Gold continues its dance sideways but managed to mark a higher high on the short-term chart, which could prove technically significant...
Concerning the Fed's recent (monetary policy) ruminations, Chairman Powell acknowledged the stubborn nature of the pervasive price pressure at a banking parley in Amsterdam. His confidence wavers - Powell says he expects U.S. inflation to continue falling in 2024, though not as confident as before .
"I expect that inflation will move back down on a monthly basis to levels that were more like the lower readings we were having last year … I would say my confidence in that is not as high as it was, having seen these readings in the first three months of the year. So, we're just going to have to see where the inflation data fall out."
So we have a shaky Fed—what else is new? Many in the analyst community believe the metal is destined for new highs but that the Fed needs to pull the trigger on interest rates - Fed uncertainty weighs on gold, but prices are going higher this year—NDR’s Tim Hayes .
While the gold market still remains in a solid uptrend, the precious metal is once again being driven by uncertainty surrounding the Federal Reserve's monetary policy. At the start of the year, markets were pricing in six potential rate cuts this year; those expectations have dropped to two as inflation remains stubbornly elevated.
This just in (the CPI digits for April just dropped)...
Quoting Kitco: The just-released U.S. consumer price index report for April saw CPI up 0.3% versus the consensus forecast of up 0.4% and compares to the March report showing a rise of 0.4%. The annual CPI April reading was up 3.4% and was forecast at up 3.6% and compares to up 3.8% in the March report. Traders and investors were thinking the CPI report might come in hot today, following the producer price index report for April that was out Tuesday morning and ran hot on inflation - Gold price rallies following cooler U.S. CPI print .
Silver
Silver, 'gold's poor cuz,' is trading near the upper end of its yearly range—currently up a solid 3% on the heels of these (slightly) cooler-than-expected CPI digits.
Ag Equities on the Move
Silver equities appear to be moving as a group, with some of the higher-quality names—producers beating expectations—performing extremely well in this buoyant market. One example is Endeavour Silver's (EDR.TO ) chart after the company dropped better-than-expected Q1 earnings last week—Endeavour Silver Announces Q1 2024 Financial Results .
Considering the recent trajectory of Ag, Endeavor's share price strength is not surprising. Investors might reasonably expect that Q2 earnings will be better than Q1 if Ag can maintain/extend its gains.
Another example of relative strength is Ag producer Coeur Mining (CDE.NYSE), currently testing multi-year highs...
Further down the food chain, some of the juniors are also trading with vigor, testing multi-year highs. This next chart belongs to AbraSilver Resource Corp (ABRA.V), which is developing its Diablillos Ag-Au Project in the Salta province of Argentina.
Further up north, Dolly Varden Silver (DV.V), which is aggressively pushing its Kitsault Valley Project in the prolific Golden Triangle of northwestern BC further along the exploration curve, is within striking range of taking out its 2023 high north of $1.20...
Handsome rewards are being reaped in this space. Congrats Longs.
Copper
Short Squeeze Launches Cu to Record Highs
Copper had a wild session on Tuesday with some characterizing the July contract as ground zero of crazy...
There's nothing quite as satisfying as a good ol' short squeeze in a commodity you happen to be long—Copper Futures Surge as Short Squeeze Grips NY Market .
The July contract tagged $5.0695 a pound, which took out the highs seen in March of 2022.
The squeeze was partly due to traders playing the arbitrage between futures on Comex and the Shanghai Futures Exchange, Jia Zhang, head of trading at Shanghai Dongwu Jiuying Investment Management Co., said by phone.
The Comex price-per-lb works out to $11,176 a ton (more than $1k above the benchmark contract on the LME). The Comex market was also pushed into backwardation with the July contract trading 30 cents above September.
For holders of short positions in New York, the moves may mean significant losses as they face pressure to liquidate positions before the contract expires. The intensive squeeze has already left traders scrambling to see how copper can be diverted from other regions to Comex warehouses in the US.
According to a Reuters piece released earlier today, commodity traders Trafigura and IXM are looking to buy physical copper to deliver against large short positions with designs to close them out, five sources with direct knowledge of the matter said - Trafigura, IXM caught in COMEX copper short squeeze as prices hit record .
"Trafigura is one of the largest physical suppliers of copper to North America and given the premium in this market we are shipping larger quantities of the metal to COMEX," a Swiss-based trader said.
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Analysts Revising Cu Price Forecasts
Revising price targets is par for the course as the global megatrends of decarbonization and electrification gain momentum. Example: Chile's state-run copper commission—Cochilco —is due to revise its outlook for the commodity, which will land considerably higher than previous prophecies (in January, Cochilco had projected a price of $3.85 per pound for 2024). Cochilco sees a considerable increase in Chile's copper price forecast .
Going forward, Cochilco is “moderately optimistic” on how copper prices will evolve, vice president Joaquin Morales told journalists.
A Cu Primer
For a primer on some of the compelling fundamentals underpinning this market, the following WSJ piece is worth the 5-minute read - Why the World Has Gone Cuckoo for Copper .
BHP Group’s record nearly $43 billion takeover bid for Anglo American, which was rejected Monday, puts a fresh spotlight on the intense demand for copper. While London-listed Anglo produces a range of commodities, from diamonds to nickel, Australia’s BHP has made clear that it most prizes the company’s copper assets. Anglo rebuffed BHP’s first offer last month, and other companies are believed to be weighing rival bids.
Mining Sector News
Anglo's Strategy to Thwart BHP
Now clearly in the crosshairs of resource-hungry predators, Anglo American announced plans to exit the platinum/diamond/coal business, a strategy that would allow it concentrate its focus on the green metal - Anglo American eyes break-up as it fends off BHP offer .
By spinning off these less profitable assets—sources say Anglo is exploring an IPO for its diamond business (De Beers)—the company expects to lower costs by $1.7 billion.
Anglo's CEO Duncan Wanblad: "We expect that a radically simpler business will deliver sustainable incremental value creation through a step change in operational performance and cost reduction."
One of Anglo's top 20 investors welcomed the new strategy, stating, "At the moment, Anglo has lots of very interesting assets ... but it is not a focused business, focused on a clear strategic goal. This plan offers clarity of purpose."
Rio May Enter the Fray
It would appear that mining colossus Rio Tinto (US$119 billion market cap) is about to enter the fray where Anglo American's prized copper assets are concerned - Rio chief 'not afraid' of M&A as Anglo American break-up looms .
Rio has not ruled out getting involved in a possible break-up of Anglo American, which now appears certain after the London-based diversified miner vowed to sell or shut all assets other than those producing copper, crop nutrients or iron ore. The strategy is intended to foil BHP’s $64.4 billion takeover bid for Anglo.
While the company prefers to grow its operations organically, Rio's CEO, Jakob Stausholm, stated recently that he's not afraid of M&A.
Rio's current exposure to copper includes the massive Oyu Tolgoi copper mine in Mongolia, which it is working on expanding, and a 30% stake in the Escondida mine in Chile, the world's largest copper producer (BHP owns 57.5% of the operation).
According to Daniel Sullivan, portfolio manager of Janus Henderson Investors’ global natural resources fund, Rio does not have “the capacity to fight BHP in an auction for Anglo. Rio has much better targets in companies like Pilbara, Arcadium, Patriot, Teck, and Sandfire, and needs to build a dynamic growth acquisition partnership model to attract many agreed acquisitions to rapidly diversify.”
Another potential suitor for Anglo American is Glencore, the company's JV partner in the Collahuasi copper mine in Chile.
The Red Pine Tainted Assay Debacle - "more reputational damage than harm"
After trading was halted briefly on Weds May 15, Red Pine Exploration (RPX.V) dropped the following headline concerning its Wawa gold project in northern Ontario - Red Pine Provides Update On Assay Results for Wawa Gold Project .
The company states that ex-CEO Quentin Yarie tampered with 532 of the 98,000 assays before sending them off for deployment in a 2019 Wawa project MRE update.
According to Mining.com 's Red Pine coverage, the ex-CEO caused more reputational damage than harm to the project when he allegedly altered hundreds of drill core assays used in the project's MRE - Red Pine plans new resource, downplays alleged assay fraud at Ontario gold project .
“Look, in the end, it could have been a lot worse in terms of timing and the impact,” incoming CEO Michael Michaud said on a conference call on Wednesday. “We still believe in the potential of the asset. This is the reason why I joined Red Pine, this is reason why I’m here today and am looking forward to becoming the CEO.”
Red Pine's share price has recovered somewhat but is still well below its previous twenty-cent trading range.
Hits of the Week
Shareholders in BHP Group Ltd. and takeover target Anglo American Plc expect the world’s largest miner to come back with a third and improved proposal before a regulatory deadline next week, even after the smaller company laid out a bold restructuring plan of its own on Tuesday - BHP Shareholders See Room for One More Sweetened Anglo Bid
Panama's president-elect has ruled out talks with Canadian miner First Quantum Minerals until it drops multiple arbitration proceedings it has launched seeking billions of dollars in compensation from the government over a mine shutdown order - Panama president-elect rules out First Quantum talks until arbitration dropped
US President Joe Biden is hiking tariffs on Chinese imports, including batteries and critical minerals, in a bid to bolster domestic manufacturing in critical industries. The move includes semiconductors and solar cells. The US will also raise levies on port cranes and medical products - Biden adds tariffs on Chinese critical minerals, EVs
At 12 years old, Nivritti Vikram already knows what many adults don’t – that when it comes to the products we use and the food we consume – if its not farmed its mined - CIM: Responsible mining and resource management from a 12-year old’s perspectiv e
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