Gold and Central Bank Double Talk
Another week of losses for gold. For the fifth straight week gold has registered losses. Losses I expect to accelerate going into next week’s Fed decision on a possible rate hike.
Gold was down approximately 1% this week, closing at the $1,161 level, correlating in near union with dollar, which was up approximately 1% for the week.
Once again, understanding the role central banks play in the currency markets is critical to calling tops and bottoms. Whether it’s in the major indices, the dollar or gold and the related equities, it’s impossible to look at one market in isolation and make a call.
Expect lower gold prices but not without a few head-fakes.
On Thursday December 8, 2016 the European Central Bank did its usual round of double talk. Part dovish, part hawkish, all BS, it announced it was extending its quantitive-easing program until at least December 2017 while reducing its bond-buying program after March.
The result was a higher dollar, lower Euro, lower gold, lower silver.
Silver closed near the $16.96 level, leaving it up nearly 1.3% for the week. Silver prices were higher prior to the ECB decision.
Copper was up nearly 0.9% for the week, closing near the $2.65/lb. level.
Platinum closed in the $912 range for a weekly loss of approximately 1.8% while palladium was down approximately 1.4%, closing in the $733 range.
Brent crude was up over $54 to close the week — its highest since July 2015 — while U.S. crude closed just over $51 a barrel.
Week in Juniors
Sibanye Gold (NYSE: SBGL)
Acquisition alert. Someone stepped up and bought a company. Not that the market cared for the deal, but it’s nice to see a company look ahead and write a check.
On December 9, 2016 Stillwater Mining announced that it had entered into an agreement with Sibanye Gold to acquire Stillwater for $18.00 per share in cash representing an aggregate enterprise value of $2.2 billion.
The $18.00 per share transaction price represents a 61% premium to Stillwater's volume-weighted average share price over the 52 weeks prior to the announcement of the transaction, a 25% premium to its volume-weighted share price over the 30 trading days prior to the announcement, and a 23% premium to its closing share price on December 8, 2016.
For its troubles, shares of Sibanye dropped by as much as 15%.
Mick McMullen, CEO of Stillwater Mining Company, commented:
"This compelling all-cash transaction delivers immediate value to shareholders and appropriately recognizes the value of Stillwater's high-grade and long-life assets and world-class metallurgical and PGM recycling complex, as well as Stillwater's potential for brown field expansions through the development of our Blitz and Lower East Boulder projects.
"This announcement is a testament to the significant operational and productivity improvements that Stillwater has achieved over the past several years. In particular, Sibanye recognizes the world-class nature of our asset base, our operational excellence, our skilled team, and our strong commitment to the environment and workforce safety. Sibanye has indicated its commitment to maintaining and investing in Stillwater's Montana operations and will look to leverage our best practices, industry leading mining expertise and proven ability to drive improvements and efficiencies whilst improving safety across their entire business. I would like to thank the many Stillwater employees whose hard work has transformed the company into a world-class operator with the assets and team able to deliver value over many future decades."
Once the beatdown in gold is over — the next 4-12 weeks — this will look like the good deal that it is. In the interim, Sibanye might see a lower share price for a while.
Nevsun Resources Ltd. (TSX: NSU) (NYSE: NSU)
You like good drill results? I love them.
On December 7, 2016 Nevsun delivered more spectacular results from ongoing drilling of the Upper Zone at the company's Timok copper-gold project.
Highlights from the release:
Drilling continues to confirm continuity and the high-grade nature of the Upper Zone
New massive and semi-massive sulphide intersections include:
- TC160121: 182.3m @ 4.17% Cu, 4.80g/t Au, including 40.5m @ 11.61% Cu, 12.9g/t Au
- TC160119: 86.2m @ 9.47% Cu, 8.83g/t Au, including 46.5m @ 15.61% Cu, 11.29g/t Au
- TC160117: 98.8m @ 9.82% Cu, 8.86g/t Au, including 33.0m @ 20.04% Cu, 14.35g/t Au
- TC160114: 171.0m @ 4.94% Cu, 5.21g/t Au, including 10.5m @ 11.09% Cu, 7.82g/t Au and 24.0m @ 10.27% Cu, 6.71g/t Au, and 7.5m @ 7.88% Cu, 3.78g/t Au
Additional 18,500m of drilling in progress to further improve confidence in the resource
Nevsun CEO, Cliff Davis, commented:
"The assays reported today represent about 25% of the planned in-fill drilling designed to confirm and upgrade the resource of the Timok Upper Zone mineralization. The work on our Pre-Feasibility Study is progressing well. Recent meetings with both the Prime Minister of Serbia and the Minister of Mines and Energy have demonstrated the State's very strong support for international investment and in particular, the development of the Timok Project.”
The Timok Project is located in eastern Serbia near the Bor mining and smelting complex.
The Timok Project is focussed on the Cukaru Peki ("Timok") deposit, which includes the high-grade Upper Zone (characterized by massive and semi-massive sulphide mineralization) and the Lower Zone (characterized by porphyry-style mineralization).
The Upper Zone has an extremely high copper and gold content consisting of 1.7 million tonnes of indicated resource grading 13.5% copper and 10.4 g/t gold and 35.0 million tonnes of inferred resource grading 2.9% copper and 1.7 g/t gold.
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IDM Mining (TSX-V: IDM)(OTC: RVRCF)
On December 6, 2016 IDM announced another set of very good results at its Red Mountain project.
Below are the main takeaways from the release:
- U16-1214: 27.00 meters true width at 6.20 g/t Au and 23.25 g/t Ag; AV Zone infill
- U16-1217: 3.81 meters true width at 7.30 g/t Au and 15.35 g/t Ag; JW Zone north step-out
- U16-1218: 6.49 meters true width at 21.36 g/t Au and 18.03 g/t Ag; AV Zone down-dip step-out
- U16-1220: 34.01 meters true width at 8.85 g/t Au and 13.28 g/t Ag; AV Zone infill and metallurgical hole
- U16-1224: 18.22 meters true width at 9.12 g/t Au and 27.87 g/t Ag; JW Zone down-dip step-out
- U16-1226: 6.0 meters true width at 12.75 g/t Au and 44.19 g/t Ag; Marc Zone south step-out
Rob McLeod, president and CEO of IDM Mining, commented:
"The majority of IDM's drilling during 2016 was planned to upgrade resources and gather technical data for our feasibility study, however these results have extended the known limits to mineralization in all three primary zones with mineralization open for further expansion to the north, south and down-dip,""Of particular significance is U16-1224, which intersected the widest portion of mineralization in the JW Zone yet identified, suggesting potential for another thick area of mineralization as seen in the Marc and AV zones.”
All results from the 2016 program at Red Mountain have been received. Step-out holes during 2016 were drilled on 25 meter spacing along strike and down-dip from known mineralization, the minimum required for indicated resource classification.
Geologic modeling is currently underway, with the objective of completing an updated Resource Estimate in early 2017.
The updated Resource Estimate will be incorporated into IDM's ongoing Feasibility Study work. IDM is planning further underground resource expansion and exploration drilling in 2017.
Westhaven Ventures Inc. (TSX-V: WHN)(OTC: WTHVF)
Last but not least, a company with a tiny market cap, very good people — including D. Grenville Thomas, P. Eng. (President & CEO, Director): Founder and past Chairman of Aber Resources Ltd., discoverer of the Diavik Diamond Mine (now Dominion Diamond Corp.), 2009 Canadian Mining Hall of Fame inductee, and recipient of PDAC’s Prospector of the Year Award in 1999 — a track record of discovery behind it, and a very good share structure.
On December 6, 2016 Westhaven reported drill results from its 10,871 hectare Prospect Valley gold property, located on the Spences Bridge Gold Belt (SBGB) approximately 25 kilometers to the west of Merritt, B.C.
The drill program consisted of 1,508 meters over eight holes. Highlights from the release:
PV16-04 intersected 0.70 g/t Au (Gold) and 5.71 g/t Ag (Silver) over 95.8 meters starting at bedrock surface including,
- 1.36 g/t Au and 10.43 g/t Ag over 38 meters and
- 2.23 g/t Au and 15.18 g/t Ag over 15 meters.
Gren Thomas, president and CEO, commented:
“Westhaven had a very productive field season in its first year working on Prospect Valley. The recently completed drill program intersected significant near surface gold mineralization and the prospecting and mapping programs found multiple high grade gold grab samples, expanding the area of immediate focus in all directions. These recent findings have reinforced management’s belief in the Property’s potential to host significant gold mineralization. Planning is already underway for what should be a very busy 2017.”
The limited drill program focused on two areas. In the Discovery South Zone drilling targeted the western down dip extension of previously drilled near-surface gold mineralization.
In the Southeast Extension drilling targeted coincident gold-in-soil geochemical and shallow IP chargeability anomalies as well as a deep, stronger IP chargeability anomaly that extends north-south over a strike length of 900 meters.
The news release went on to highlight plans for future drilling in 2017. Keep an eye on Westhaven.
With over 46% insider ownership and 75 million shares outstanding fully-diluted, Westhaven may prove to be a worthwhile speculation for the next leg up in the gold bull that I expect to resume in 2017.
To your wealth,
For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Resource Stock Digest Premium, and Resource Stock Digest Trader. For more about Gerardo, check out his editor page.