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October 8, 2019

7 @ 7:00

Visit the BMR comments section throughout the morning for updates and helpful information!

1. Gold has traded between $1,488 and $1,510 so far today, firming up on fresh U.S.-China tensions...as of 7:00 am PacificGold has climbed $13 an ounce to $1,506…a case for holding precious metals as a hedge remains strong, according to TD Securities“Another ‘earnings recession’ similar to 20152016 is seen as a rising risk, along with the risk of a downward multiple reset particularly for growth stocks.  In this context, the case for holding precious metals as a tail risk hedge for equities is still growing, with ETF purchases soaring some 20% year-on-year and showing no sign of slowing down as of yet.  The interest rate environment is also contributing to the pro-Gold camp.  A high proportion of real rates in negative territory further strengthens the case for Gold bugs as purchasing Gold as an alternative to bonds is particularly attractive given the paradigm shift narrative”…Silver has jumped 31 cents to $17.72…Copper is off a penny at $2.55, Nickel has slipped 14 cents to $7.97 while Zinc is steady at $1.05…Crude Oil has lost 61 cents to $52.14 while the U.S. Dollar Index has added one-tenth of a point to 99.06…the South China Morning Post reported this morning that China is toning down its expectations ahead of trade negotiations with the United States…the report said Chinese Vice Premier Liu He, who will lead the country’s trade delegation, will not carry the title of “special envoy”, signaling he has not received any specific instructions from President Xi Jinping…

2. The data continue to pile up showing that September was an historic month for the Gold market…in its latest report published today, the World Gold Council (WGC) said that holdings in global Gold-backed exchange traded products surpassed its 2012 levels and hit an all-time high in September…the report said that ETF holdings increased by 75.2 tonnes last month to a total of 2,808“Against a backdrop of easy money monetary policy by global central banks, continued geopolitical uncertainty including the looming Brexit deadline and tensions in the Middle East – as well as rising turmoil in Congress – global Gold demand remained strong through the month,” the WGC said in the report…the surge in investment demand came as prices pushed to their highest levels in 6 years…although Gold has fallen from last month’s highs, the market is still holding within a strong support band between $1,500 and $1,450…North American investment demand saw significant growth last month, rising by 62 tonnes, representing 83% of net inflows last month…across the Atlantic, European funds increased by 7.7 tonnes…in the east, Asian funds were up 3.9 tonnes…the WCG also noted a significant rise in low-cost Gold-backed ETFs in the U.S., which have climbed in 15 out of the past 16 months, and have increased their collective holdings by 51% so far this year…

3. U.S. producer prices unexpectedly fell in September, weighed down by decreases in the costs of goods and services, which gives the Federal Reserve even more room to cut interest rates again this month to limit the drag on the economy from trade tensions and slowing growth overseas…the Labor Department said this morning that its producer price index for final demand dropped 0.3% last month, the largest decline since January, after edging up 0.1% in August…in the 12 months through September the PPI increased 1.4%, the smallest gain since November 2016, after rising 1.8% in August…economists polled by Reuters had forecast the PPI nudging up 0.1% in September and advancing 1.8% on a year-on-year basis…with statistics such as this, and Crude prices very much in check, the Fed continues to overestimate inflation potential…

4. U.S.-China tensions ratcheted up again this morning ahead of high-level trade talks scheduled to begin Thursday…China signaled it would hit back after the Trump administration placed 8 of the country’s technology giants on a blacklist over alleged human rights violations against Muslim minorities…asked today whether China would retaliate over the blacklist, foreign ministry spokesman Geng Shuang told reporters “stay tuned”…he also denied that the government abused human rights in the far west region of Xinjiang…“We urge the U.S. side to immediately correct its mistake, withdraw the relevant decision and stop interfering in China’s internal affairs,” Geng said in Beijing…“China will continue to take firm and forceful measures to resolutely safeguard national sovereignty, security and development interests”…meanwhile, Bloomberg News reported this morning that the White House is indeed discussing ways to limit U.S. investments in China despite claims to the contrary…Bloomberg first reported last month that Trump administration officials are weighing delisting Chinese companies from American stock exchanges and preventing U.S. government pension funds from investing in the Chinese market…

5. The Dow, on a 3-week losing skid, is off 273 points as of 7:00 am Pacific…the TSX has retreated 126 points, though the Gold Index has pushed 3 points higher to 247Marathon Gold (MOZ, TSX), one of our favorite Gold stocks, is up a penny at $1.46 as it closes in on a fresh multi-year high…the Venture is unchanged at 558Benchmark Metals (BNCH, TSX-V) is up another half penny to 42 cents in early trading after reporting yesterday that it cut 132.5 g/t Au and 8,560 g/t Ag over 0.9 m within a broader core interval of 2.87 m grading 46.9 g/t Au and 3,056 g/t Ag starting 130 m downhole in the first 2019 drill hole result from the Phoenix zone at its Lawyers Project in north-central British Columbia…the struggling Canadian Marijuana Index has slipped back below 300, down nearly 7 points in early trading to 299.70Breath of Life International Ltd., an Israeli medical cannabis company, has shelved its planned IPO on the TSX until market conditions improve…Breath of Life had planned to raise $150 million through a public share offering priced at $27 to $32 a share, according to a June presentation to bankers…the company said it had revenue of $3.5 million (U.S.) in 2018 and $1.1 million in the 1st quarter of 2019…“We are sitting on the fence waiting for the market conditions to get better,” CEO Tamir Gedo told Bloomberg yesterday…“When the market is ready to be bullish, we’ll go ahead immediately”Breath of Life may have to wait a while…cannabis shares have been in a bear market since the spring, as disappointing earnings, regulatory issues and now a vaping-related health crisis have weighed on the industry’s outlook…

6. North American Palladium (PDL, TSX) has agreed to a $1 billion takeover in an unusual deal that sees its biggest shareholder, Brookfield Business Partners LP, accept a discount in order to get the transaction done…North American Palladium announced yesterday that it had reached a friendly agreement with South Africa’s Impala Platinum, or Implats…public shareholders of PDL will get $19.74 a share, exactly the level the shares closed at on Friday…Brookfield Business Partners and the institutions that invested alongside it, however, will receive only $16 a share for the 81% interest they hold – a 19% discount…Brookfield appears eager to lock in its gains from a turnaround at the mining company and strong prices for the metal, which is used in vehicles to minimize toxic emissions…takeover talks with Impala intensified in July and shares in PDL ran up by 35% over the next few months…Brookfield first got involved as a debt holder in 2013, advancing $130 million (U.S.) to the company at a 15% interest rate…the money helped expand the Lac des Iles Palladium mine in Northern Ontario…

7. Silly move, Norway the largest pension fund in Norway has removed 4 Canadian energy names from its investment list…KLP says it sold $58 million (U.S.) worth of stocks and bonds as it reduces its “tolerance threshold” for companies with interests in the Oil sands from 30% to 5% cent, matching its limit for Coal investments…the fund says it will now exclude Calgary-based Cenovus Energy, Suncor Energy, Imperial Oil and Husky Energy from investment consideration, along with Russia-based Tatneft PAO…shares in Cenovus, Suncor, Imperial and Husky have plunged over the past year as growth outstripped pipeline capacity, leading to steep price discounts and legislated production curtailments in Alberta…Greenpeace Canada’s Keith Stewart, a true globalist and Oil hater, is cheering on the Norway pension fund and says institutional investors are continuing to abandon high-carbon investments because they “can see where the puck is heading”…in a news release, the Norwegian fund, which administers more than $81 billion (U.S.) in assets, says a full exit from the Oil sands is “great news” for customers because that activity is not aligned with a 2-degree Celsius global warming target…

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  1. thoughts on CLM hitting what appears to be a porphyry in thier first pass ?

    Comment by david — October 9, 2019 @ 6:44 am

  2. Not that great….

    Comment by Mack — October 9, 2019 @ 6:53 am

  3. Those results are from the ’72 Zone, david, a couple km from Burgundy…lots of indications of a potential large-scale porphyry system on this part of the Newmont Lake Project, but the market’s reaction shows how investors want CLM to focus on high-grade targets rather than porphyry (and there is no shortage of high-grade opportunities across this huge land package in the Eskay Camp)…porphyry is not going to take you very far in this Camp, especially in a high-grade focused market environment..having said that, where do u often find high-grade Gold?…near large porphyry deposits…great plumbing system at Newmont Lake…

    Comment by Jon - BMR — October 9, 2019 @ 7:24 am

  4. I’m not confident that CLM’s approach to target the porphyry system was / is the right approach. The results speak for themselves and it has been devastating to the share price. There is never enough transparency when CEO’s step down or are forced to step down, however the share price, trend and dilutive measures have taken their toll and are likely representative of why this unfolded as it has. Who paid the price? Retail investors who bought into the story. Yes there was a market trouncing opportunity when this first ran hard back in 2017, but a calamity of events and what looks like corporate mismanagement have left those who bought at or near the high holding one hell of a bag. The road to recovery here will be a long one, if it ever manifests. A 50% hair cut over the last pp is indicative enough that something is amiss. The boat here is leaky and market rumors have proven out time and again here on this story. A swing and a miss repeated over and over again does not inspire confidence; and there were are some devoted longs who are licking their wounds here. I think it is time to tell this story for what it is and stop the hype.

    Comment by BCCOASTAL — October 9, 2019 @ 9:58 am

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