Mining Monthly: March Edition
What you need to know:• The precious metals and mining market significantly outperformed broader indices in the month of March with the GDX rising 15% versus the TSX being down slightly
• Gold rallied heavily following the collapse of several major banks and the U.S. Fed guiding for a pause on rates in the near term
• This month only strengthens our confidence that 2023 will be a standout year for both precious metals and base metals and encourage investors to position themselves accordingly
Sentiment Update
Following a down month in February, the precious metals rebounded sharply in the month of March and pressed on to break through recent highs. Gold rose 7.2% in the month to $1,969.7/oz, silver rose 14.5% to $24.0/oz, and copper sat flat, down just 1.8% to $4.10/lb. Mining equities significantly outperformed broader markets with the GDX and the GDXJ rising 15.0% and 13.4%, respectively compared to the TSX which was down slightly. On the other hand, battery metals struggled with lithium and nickel down 35% and 7% respectively.
Gold rallied heavily following the collapses of Silicon Valley Bank, First Republic Bank, and Credit Suisse as investors fled to the safe haven asset. This caused a 10% rally in gold starting on March 8th, going from $1,818/oz to over $2,000/oz by March 20th. Gold then rejected the phycological $2,000 level, as seen multiple times over the last few years. In the following days, the U.S. fed chose to increase rates by 25-bps as the market expected. There was originally a 25% chance of a 50-bps hike, but the risk of contagion due to banking collapses shifted that to either a 25-bps hike or no hike at all. Powell guided that the Fed is close to pausing rate hikes and that the collapse of Silicon Valley Bank was due to poor management and that there poses no contagion risk. The Fed’s policy statement called the U.S. banking system “sound and resilient”. However, Powell did confirm that the Fed still intends to fight inflation and will monitor how the banking failures slows demand and lending. Powell also stated that he does not expect any rate cuts in 2023, contrasting with the market’s perception. Gold rallied 1.6% after the announcement, compared to the -1.7% move on the S&P500.
On March 14th, the inflation data came out as 6.0% YoY and 0.4% MoM, in line with consensus expectations and well below the 6.4% posted last month. Core inflation came in at 5.6% YoY, also in line with consensus. We reiterate that with inflation declining at a measly pace, we think that in 2023, gold will increasingly be viewed as a safe-haven especially considering deteriorating economic data (and now bank failures), potential for lower interest rates in the back half of the year, and various central banks accumulating gold.
Agnico-Eagle Mines is a gold mining company with mining operations in Canada, Mexico and Finland. Co. earns a proportion of its revenues from the production and sale of gold in both dore bar and concentrate form. The remainder of revenue and cash flow is generated by the production and sale of byproduct metals. The revenue from byproduct metals is mainly generated by production at the LaRonde mine in Canada (silver, zinc, copper and lead) and the Pinos Altos mine in Mexico (silver).
Alamos Gold is engaged in the exploration, mine development, and the mining and extraction of precious metals, primarily gold. Co.'s s primary asset is the Mulatos Mine and holds the mineral rights to the Salamandra group of concessions in the State of Sonora, Mexico, which includes several known satellite gold occurrences.
Endurance Gold is engaged in the exploration and development of mineral properties in North America and has not yet determined whether its properties contain ore reserves that are economically recoverable. The recoverability of the amounts expended on mineral interests by Co. is dependent upon the existence of economically recoverable reserves, the ability of Co. to obtain necessary financing to complete exploration and development of its mineral properties and upon future profitable production or proceeds from disposition of its mineral interests.
Equinox Gold is in the business of mineral exploration and is actively engaged in the acquisition and exploration of copper and other mineral properties in Central and South America.
First Quantum Minerals is engaged in the production of copper, nickel, gold, zinc, platinum-group elements and acid, and related activities including exploration and development. Co. has operating mines located in Zambia, Australia, Finland, Turkey, Spain and Mauritania. Co. is developing the Trident project in Zambia, the Cobre Panama copper project in Panama, exploring the Haquira copper deposit in Peru and the Taca Taca copper-gold-molybdenum porphyry deposit in Argentina. Co.'s operating segments are individual mine development projects or mine operations. The Corporate and Other segment evaluates and acquires new mineral properties and includes Co.'s metal marketing division.
Franco-Nevada is a gold-focused royalty and stream company with additional interests in silver, platinum group metals, oil and gas and other resource assets located in the U.S., Canada, Mexico, Peru, Chile and Africa. Co.'s portfolio includes 340 mineral and oil and gas assets covering properties at various stages from production to early stage exploration.
Rio Tinto is a mining group based in the United Kingdom and Australia. Co. is engaged in the business of finding, mining and processing mineral resources. Co.'s major products are iron ore, aluminium, copper, diamonds, coal, uranium, gold and industrial minerals (borax, titanium dioxide and salt). Co.'s activities span the world but are strongly represented in Australia and North America with significant businesses in South America, Asia, Europe and Africa. Co.'s operations comprise four principal product groups - Iron Ore, Aluminium, Copper and Diamonds, and Energy & Minerals.
Rio Tinto is engaged in finding, mining and processing mineral resources. Co. has four product groups: iron ore, which supplies the global seaborne iron ore trade; aluminium, which includes bauxite mines, alumina refineries, and aluminium smelters; Copper and Diamonds, which has managed operations in Australia, Canada, Mongolia and the U.S., and non-managed operations in Chile and Indonesia, with by-product including gold, silver, molybdenum and others such as sulphuric acid, rhenium, and lead carbonate; and Energy and Minerals, which comprises mining, refining and marketing operations across borates, coal, iron ore concentrate and pellets, salt, titanium dioxide and uranium sectors.
Atrium Research provides institutional quality issuer paid research on North American public equities using deep fundamental analysis. Our research reports are disseminated through Bloomberg, FactSet, Capital IQ, Reuters and many more, as well as through our social media and email distribution lists.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.