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March 29, 2017

What #gold price are large cap gold stocks reflecting?

As can be seen from the Table below, Randgold Resources is trading at a 30% premium, which implies a gold price per ounce of US$ 1'635. On average the large capitalized group is trading at a premium of 5% or an implied gold price of US$ 1'321 per ounce.




- Gold Equities Continue to Lag the Underlying?…What Gold Price the Large Cap Gold Equities Reflecting?: Scotiabank Senior Precious Metals Analyst Tanya Jakusconek this morning noting that with the gold price continuing to march upwards post Fed (and post Trump's healthcare failure), she thought she would highlight the valuation level in the group and her stock recommendations. As per the chart below, the group is currently trading at an overall premium to gold price of just 5%!


Premium/Discount to Gold Price – %

Source: Scotiabank GBM Precious Metals Research


Recall that the "Implied Gold Price" resulting the calculated premium/discount (in the chart above and table below) is the gold price that would be need for the respective stocks to be trading at 1.0x NAV3% using Tanya's modeled estimates.


Source: Scotiabank GBM Precious Metals Research


March 27, 2017

#Palladium- The Star of the Metals Markets $PALL

The star of the week was Palladium. The grey-white metal touched the highest price since March 2015 (attachment 1).  The weekly chart shows the medium term base palladium has formed (attachment 2). The Point&Figure chart reveals the breakout of the chart formation (attachment 3).


The 10-year palladium chart shows that the metals is just US$ 100 below the peak of 2014 and therefore has outperformed, gold , silver and platinum (attachment 4). The palladium price is now trading around the highs of 2015, which could be a resistance point.


A Reuters article (March 16) stated that a fund created by Norilsk Nickel had purchsed palladium from Russia's central bank reserves to help meet demand from its customers. The central bank holds reserves of palladium, which Norilsk will use to fill orders and not for stockpiling.


The Russian central bank has been selling palladium

for years into the market (from stockpile) but lately it seemed that selling had diminshed. It all looks Russia has found a way to better control the palladium market and therefore the palladium price.


Also the big fairy tale by politicians and car dealers

that diesel engines are less polluting has come to

an end. German Chancellor Angela Merkel said once

if you buy a diesel car then you buy a car which is more environmental friendly. She said this during an

electoral campaign. Diesel engines in relation to gasoline engines are more efficient, they need less fuel and therefore emit les CO2. However, they emit a lot of nitrogen oxides, which the World Health Organization (WHO) classifies as harmful. In addition nitrogen oxides decompose in a chemical process into fine particulates which could harm the lungs.


Platinum is used to reduce emissions in diesel-powered engines whereas palladium is used in gasoline-powered engines. A strong Chinese market tends to favor palladium, which are used by catalytic converters in gasoline-powered cars, which make up the biggest market share in China and the U.S. Attachment 5 shows the applications for palladium and attachment 6 the palladium producers by country.


In an article of TD Securities  (Toronto-Dominon Bank) last December, TD looks for the palladium market supply deficit to double from 600,000 ounces in 2016 to 1.2 Mio. ounces in 2017.


The palladium market is very small with only just over 6 Mio. ounces produced per year (attachment 7).


The best vehicle to trade palladium is the ETF Physical Palladium Shares (PALL) US$ 77.49 (attachment 8). The palladium price is very volatile, which doesn't suit all investors.


March 24, 2017

After years of underinvestment, #Miners finally increasing #Exploration spending in Hunt for new deposits Bloomberg

Miners Regain Mojo to Spark $18 Billion in Exploration Hunt - Bloomberg
  • Exploration Spending forecast to rise more than 75% through 2025 to $18 Billion: MinEx
  • Discovery of world-class deposits has slowed in past decade

Miners Regain Mojo to Spark $18 Billion in Exploration Hunt

David Stringer

  • Spending forecast to rise more than 75% through 2025: MinEx
  • Discovery of world-class deposits has slowed in past decade
A rebound in exploration by global miners could see spending hit $18 billion by 2025 with China the front runner in the search for a new generation of giant discoveries.
Exploration budgets are rising after they plunged to an 11-year low of about $10 billion last year as mining companies slashed costs in the wake of a collapse in prices, according to Richard Schodde, managing director of Melbourne-based MinEx Consulting Pty, an industry adviser.
"We are coming out of the bottom of the cycle. I actually see the opportunity for the exploration sector to regain its mojo and quickly deliver a pipeline of good discoveries," Schodde said in an e-mailed response to questions. "It's catch-up time for the industry."

China, the top spender on exploration, is likely to continue to dominate in the hunt for new deposits, while Canada and Ecuador are currently among hot targets for more investment by miners, according to Schodde. The U.S. could be poised for a rise in exploration with President Donald Trump regarded as likely to be more favorable toward resource development, S&P Global Market Intelligence said in a report published in January.
Discoveries of so-called tier one projects, deposits with a net present value of more than $1 billion, have stalled. Only 12 were uncovered in the past decade compared to an average of two to three a year since 1950, according to MinEx. The average cost of finding a significant mineral deposit has tripled in the last 10 years to about $238 million, the consultancy said in a March 6 presentation.
China, the target of more than a quarter of global exploration spending in 2016, is yet to reap major rewards. An estimated $42 billion spent on the nation's hunt for new mines since 2007 has seen only two large discoveries announced and found a total slate of projects worth about $13 billion, according to MinEx. Global exploration budgets peaked in 2012 at $33 billion, the data show.

March 14, 2017

#Uranium & uranium co's - volume exploding $URA

attached the chart (2) of URA, Global

X Uranium ETF. URA provides investors

access to a broad range of uranium mining

companies (Cameco is weighted 20%). Just

look at the volume of URA since the beginning

of the year. It exploded. This means strong



Attachment 3 shows the uranium price over

the last 5 years. After declining to US$ 18 per

pound early December 2016, the price recovered

to US$ 25.50 as per March 6, 2017. The reason

is the planned annual uranium production cut of 10%

by Kazatomprom. This amount translates into

roughly 3% of 2015 global production. Kazakhstan

is globally the largest supplier or uranium (39%)

followed by Canada (22%) (attachment 4).


At the current market price almost no new uranium

project is economic. Generally speaking, a uranium

price of US$ 70 is needed in order to bring a new

uranium mine in production.



Attached is the Quarterly Commodity

Outlook by Cantor Fitzgerald. Page

1 to 9 is a comment on uranium. Page

5 explains Japanese uranium inventories.

Page 27 to 53 has comments on uranium



March 13, 2017

March 1, 2017

#Gold #ETF - The big buyers are in Germany $XETRA

Unlike a year ago when the big ETF buyers were in the U.S., this time it's the Germans. They are buying XETRA-Gold, the exchange-traded fund backed by bullion. Investors poured almost US$ 906MM into this ETF this month, the biggest inflow since inception in 2007. As of February 13, holdings were estimated at 157.9 metric tons (attachment 1).

The motivations of the buying are political. The uncertainty about BREXIT, U.S. politics, and elections in Holland (March) and France (1st round April, second round May).

The latest buying spree by them was done between US$ 1,220 per ounce and US$ 1,250 per ounce. Attachment 2 shows the sharp and long decline of gold from 2012 with a low in January 2016 round US$ 1,040 per ounce. After that a rally occurred till July 2016 to around US 1,370 and subsequently gold fell back to around US$ 1,125 per ounce. The current rally is still considered to be against the major trend, which is down. A breakout over US$ 1,350 per ounce would signal the end of the bear market. Gold is not out of the woods yet.