Declining grades don’t help #Copper’s supply picture $GLEN $RIO $TRQ $FM $TKO $FCX $HBM

This from GMR

Good Morning/Afternoon, looking back at quarterly copper grades today:

 

Grade decline (Coppers)

 

Below is a summary of Q4 processed grades vs. reserve grades across the copper sector. In-line with Q3 overall average processed grades were 15% above reserves, but ranging from -38% to +100% at the mine level. At the corporate level the range is -38% (TRQ) to +74% (HBM), and while there's no implied criticism because you can only mine what's in front of you, clearly grades should normalise over time, easing or tightening operating margins. In summary:

 

Q4 Processed Cu Grades vs. Reserves:

 

 

Much like in Q3, on a mine level the highest in Q4 were Constancia (80%), Aktogay (+66%) and Las Bambas (+59%), though by importance we can't overlook the gradual decline that is slowly occurring at Escondida (+46%), and indeed Codelco where head grades have fallen from 1.6-1.8% in the 1970s to ~0.7% today. Declining at around 0.017% each year, that's ~40ktpa of copper loses each year. Or put another way, Codelco needs to add 6.7Mtpa of mining and milling capacity each and every year to offset grade decline.

 

Although there is an argument to suggest owning those on the left of the chart over those on the right (over the long-term anyway), it clearly isn't that simple given things like the impact dilution can have on quarterly performance (e.g. at MLX), or reconciliation (e.g. HBM). However to focus on the two outliers:

 

Hudbay: Quarterly head grades were 0.54% at Constancia vs. a 0.30% reserve grade, more or less in-line with the mine plan. However while the grade decline is going to be painful when it comes, there are two reasons to remain optimistic at the moment – Namely the introduction of Pampacancha ore, plus the ongoing positive grade reconciliation.

 

Constancia mine plan:

As illustrated above, mining at Pampacancha is expected to begin later this year, providing a nice copper grade sweetener, as well as additional precious metals. It postpones the inevitable grade decline until 2022. In terms of grade reconciliation, the last technical report put the grade reconciliation at 117% on grade, and HBM has since said the copper grade bias is expected to exist through the ore body. As a result there will be a revision to reserves and resources in April, though this is expected to be less than the actual reconciliation achieved to date.

 

Turquoise Hill: Q4 head grades were 0.53% vs. a reserve grade of 0.86%, in-line with the mine plan. However as the underground comes on-line grades are going to move substantially higher, to nearly double the reserve grade. In summary from the last technical report:

 

 

It might be a few years away yet, but at some point you'd have think TRQ is due a big re-rating.

 

 

Doug Casey on why he’s buying #Gold & #MiningStocks

There could be a buying panic in gold and it could go much higher. We're in a new bull market for gold at this point, but nobody cares. Or even knows that's true. The same is true for silver. Although, silver is primarily an industrial commodity. It's the poor man's gold for many reasons.

Justin: How much higher could gold head?

Doug: Well, these things usually move in a hyperbolic curve. They start out slowly. Then, they accelerate. Same type of thing we saw with cryptocurrencies.

I think gold will do the same, although not to the same extent. My prediction by the end of this year is that gold will hit $2,000. In 2019, $3,000. In 2020, $4,000. By the time this bull market peaks, gold could reach $10,000. But I hate to say things like that…because it sounds so outrageous.

But look at the number of dollars in existence ($3.635 trillion in the M-1 money). Divide that by the 260 million ounces of gold the U.S. Government is supposed to own, and you get a gold price of $13,982/ounce.

Look at the number of dollars that are outside the U.S.—$10 trillion, $20 trillion, who knows?—and that liability is growing by $50 billion annually with the balance of trade deficit.

…

Money is a medium of exchange and a store of value—it shouldn't also be a political football, and a means for the State to finance itself. Gold itself should be used as money. Remember that the dollar—like the franc, the pound, the mark, and what-have-you—were just names for a specific quantity of gold.

So a six-to-one shot from here is not at all unreasonable over the next several years. And that would mean very good things for gold stocks.

Justin: So, it's safe to assume you're buying gold stocks?

Doug: Resource companies are essentially the only stocks that I'm buying right now. And that's because nobody's interested in them. They're very cheap. Of course mining itself is a crappy business. You can't invest in it, only speculate. But it's a great speculation now.

I probably do, on average, a private placement a week in mining stocks, which is quite a lot.

The only thing I'm afraid of is having too many stocks. You can't effectively monitor more than 15 or 20 stocks. And then you lose track of them. You can't keep up. You forgot why you bought them.

Unless I really like the stock and I'm planning on following it in particular, I sell the basic stock after the four-month hold period and keep the warrants in case I get lucky.

Justin: What else are you buying right now?

Doug: Well, I buy gold coins whenever the opportunity presents itself. I try to be disciplined about that. I just put them away and forget they exist. Unlike gold stocks, you can do that with gold coins.

Read the whole article here: https://www.zerohedge.com/news/2018-02-18/doug-casey-why-gold-could-go-hyperbolic

#Gold & #Silver Commitments of Traders

#Gold shares are not oversold but are in neutral territory and physical gold and silver is in neutral territory and this for weeks already.

Commitments of Gold Futures Traders show

large speculators (hedge funds and money

managers) reduced their long positions taking

the losses. Net commericial gold traders

reduced their short positions cashing in gains.

Net commercial dealers almost always win

against large speculators, although they have

sometimes to be very patient. Positions are

still very large but we like what we see that

short sellers are satisfied with their gains

(attachment 1).

As per Dr. Murenbeeld's Gold Monitor the

speculators on COMEX have finally cut back

on their net-long positions by 159 tonnes

equivalent through last Tuesday. We are sure

long liquidation had further accelerated during

the later part of the week.