A Weekly Recap of All Things Resources to Friday, August 2nd
‘That’s a Wrap’
By Rod Blake
Watching the market action over last couple of weeks to Friday, July 26th, it would seem that the big cap American markets are rolling over, led by the air coming out of the highly inflated Magnificent Seven artificial intelligence (AI) balloon. In Canada, the markets are holding up relatively well despite a significant drop in some commodity prices.
The way I see it – The Magnificent Seven AI bull market is almost 2-years old, which is a long time to go without a significant pull back or even a correction. Historically, one would say this run is closer to the end than the beginning. This week a number of the AI companies are releasing their 2nd-quarter reports, which could be a harbinger of things to come.
The sharp drop in the price of copper over the past 2-months has been stunning, as the red metal has fallen $1 or 20% from an all-time high of US$5.08 a pound to last Friday’s close of US$4.09. The markets tend to look some months ahead, and copper is said to have a PHD on the economy. If that is so, then Doctor Copper is signalling a downturn in the economy later this year or going into 2025.
I also wonder if the copper and lithium markets are signalling that the rush to get into the great new electrification of everything market is overdone. Lithium rolled over from all-time highs in November 2022, and now copper is coming off its all-time high. Both of these metals were said to be critical to the electrification process and projected to be in short supply. Now it would seem the world has quite enough copper and lithium thank you very much. Investors rushed into these stocks, especially lithium, and they were all the rage – until they weren’t.
The lithium and lithium equity markets remind me of the cannabis markets of 2014 – 2016 when cannabis was legalized by the Canadian government. I knew this market very well as I sponsored the first Canadian public company to enter the new cannabis industry. Just as the lithium space a few years ago, investors rushed into the cannabis markets and pushed the price of the commodity and the equities to crazy heights. Then, just as with lithium today, the cannabis story got too long in the tooth, the market got oversupplied, and prices of cannabis and the corresponding equities collapsed and are mostly still suffering to this day. Thankfully, the dynamics electrifying the world is much greater than that of cannabis, so the downturn in lithium and lithium stocks should not be as severe – but one never knows.
Some lithium issues experienced more selling pressure early with:
American Lithium Corporation ‘LI-V’ fell to a new 4-year closing low of $0.55 and Lithium America Corp. ‘LAC-T & N’ dropped to closed at a new all-time low of $3.35.
Lion Electric Co. ‘LEV-T’ shares’ plunged lower by $0.22 or 18.33% to an all-time closing low of $0.98 after the Montreal, PQ based medium and heavy-duty electric vehicle manufacturer released less than expected 2nd-quarter financials that included the layoff of 300 people or 30% of the company’s workforce.
Going the other way – the stock of NFI Group Inc. NFI-T’ rose by $1.92 or 11.20% to a new 2-year closing high of $19.07 after the Winnipeg, MB based electric bus and coach manufacturer impressed the street with the company’s 2nd-quarter report.
Dragonfly Energy Holdings Corp. ‘DFLI-Q’ stock price rose by $0.06 or 8.33% to close at US$0.78 after the Reno, NV based lithium battery and energy storage company signed a potential US$30-million licensing agreement with battery manufacturer Stryten Energy – giving Stryten global distributor rights to Dragonfly’s Battle Born Batteries.
This as the price of lithium dropped to close at a new 3-year low of US$11,235 a tonne (t).
Senior gold producers attracted some buying with Newmont Corporation ‘NEM-N’ & ‘NGT-T’ climbing to a new 15-month closing high of US$49.58, Agnico Eagle Mines Ltd. ‘AEM-T & N’ closing at a new 4-year high of $106.53 and Eldorado Gold Corp. ‘ELD-T’ & ‘EGO-N’ reaching a new 7-year closing high of $23.41.
Going the other way – Snowline Gold Corp. ‘SGD-V’ -a market darling just a few months ago – dropped to a new 8-month closing low of $4.17.
And beleaguered Victoria Gold Corp. ‘VGCZ-V’ fell to close at a new all-time low of $0.57.
Vizsla Silver Corp. ‘VZLA-V- stock rose to a new 2-year closing high of $2.91.
Zinc fell to close at a new 3-month low of US$1.21.
Interest sensitive pipeline stocks continued to attract investors with TC Energy Corp. ‘TRP-T & N’ closing at a new 11/2-year high of $59.71. The Calgary, AB based energy company also announced the sale of a 5.34% equity interest of its western Canadian NGTL System and Foothills pipeline assets to a consortium of 72 Indigenous communities in a deal valued at some $1 billion.
Pembina Pipeline Corp. ‘PPL-T & N- rose to close at a new 2-year high of $53.51.
Crude oil dropped to a new 2-month closing low of US$74.07 a barrel (bbl).
Cenovus Energy Inc. ‘CVE-T & N- announced the company had achieved its net debt target of $4.0-billion and going forward, the giant Calgary, AB based oilsands producer would return 100% of excess free funds flow (EFFF) to shareholders.
Petroleum drillers were in favour with Precision Drilling Corp. ‘PD-T’ & ‘PDS-N’ shares’ rising to a new 11/2-year closing high of $106.36 while Trican Well Service Ltd. ‘TCW-T’ stock closed t a new 1-year high of $5.18 as both companies’ please the street with their 2nd-quarter financials.
This as the key Baker Hughes Petroleum Rig Count reported the number of active American drilling rigs fell by 3-rigs in the past week to 586, down by 73-rigs from this time last year. Across the line – the number of Canadian active rigs was up by 8-rigs to 219, up by 31-rigs from one year ago. Â
TransAlta Corp. ‘TA-T’ & ‘TAC-N’ shares’ rose by $0.89 or 8.56% to a 11/2-year closing high of $11.29 after the Calgary, AB based electrical power producer impressed the street with its 2nd-quarter financials.
West Fraser Timber Co. Ltd ‘WFG-T & N’ shares’ rose to close at a new 2-year high of $123.04.
While the stock price of Western Forest Products Inc. ‘WEF-T fell to a new 14-year closing low of $0.41.
Uranium fell to a new 71/2-month closing low of US$82.30 a pound (lb).
Which no doubt helped the stock price of Cameco Corporation ‘CCO-T’ & CCJ-N’ to fall by $5.93 or 9.44% to a new 4-month closing low of $56.91 after the Saskatoon, SK based uranium giant’s 2nd-quarter report fell short of investor expectations.
NexGen Energy Ltd. ‘NXE-T & N’ shares’ fell by $1.10 or 11.96% to close at a 11/2-year low of $8.10 after the Vancouver, BC uranium developer reported a marked increase in anticipated costs to get the company’s flagship Rook 1 Project in Saskatchewan’s Athabasca Basin into production.
Going the other way – the closing price of energy products distributor Superior Plus Corp. ‘SPB-T’ dropped to a new 4-year low of $7.70.
Filo Corporation ‘FIL-T’ share price jumped by $2.78 or 8.77% to a new all-time closing high of $32.00 after the Vancouver, BC based mineral developer agreed to be taken over by international mining giant BHP Group Ltd. ‘BHP-N’ and Lundin Minng Corp. ‘LUN-T’ in a cash and stock deal that valued Filo at $33.00 a share.
It’s not bad enough that most Canadians are suffering with recent high interest rates, but now that trip to the United States is becoming more expensive as – the Canadian dollar dropped to close at a new 9-month low of US$0.7205.
The TSX Composite rose to a new all-time closing high of 23,111.
Uranium and gold bullion led commodities higher on the week, while lithium and crude oil dropped the most.
The CRB Commodities Index fell to a new 41/2-month closing low of 324.
The North American markets cratered going into the weekend as U.S. labour data inferred that a recession was just over the horizon.
The CBOE Volatility Index or VIX surged up to close at a new 16-month high of 23.55.
For the Week – the DJI lost 2.10% to 39,737, while the S&P 500 fell 2.05% to 5,347 and the NASDAQ was off 3.35% to 16,776. Up north – the TSX fell 2.57% to 22,228 and the TSX Venture lost 3.97% to 556. The CBOE Volatility Index or VIX surged up 43.69% to 23.55.
With currencies – the Canadian dollar lost 0.022% to US$0.7212, while the U.S. dollar ‘DXY’ fell 1.07% to 103.20.Â
With commodities – gold bullion gained 2.09% to US$2,437, while silver rose 2.04% to US$28.50, as copper gained 0.49% to US$4.11, and lithium fell 3.38% to US$11,375. Crude oil lost 3.10% to US$74.07, while natural gas fell 1.01% to US$1.97, and uranium gained 3.40% to US$85.05. With soft commodities – lumber lost 1.18% to US$504. Overall – the CRB Commodities Index fell 1.82% to 323.
And Finally – “Shrinkflation” – the term for putting less of a product in a container is a term coming to the forefront more often these days, as a new study Community Researchers has found that since 2019 – 55% of product categories have experienced shrinkflation of up to 25%.