A Weekly Recap of All Things Resources to Friday, February 9th

‘That’s a Wrap’

By Rod Blake

As I reviewed last week’s market action, one thing that really stood out to me other than the continued U.S. big cap market rally, was that – gold bullion rose by some $17 or about 8^% to US$2,035 an ounce in spite of a rising U.S. dollar – to once again be within the striking distance of $42 or just 2^% of its all-time high of US$2,077 set late last December.

The way I see it – Gold going up in the face of a headwind of a rising America Buck goes against the common narrative that gold needs a weak U.S. dollar and low interest rates in order to increase in value. That might be today’s thinking, but that is not always the case. I’ve been around the sun quite a few times and I can distinctly recall gold rising from about US$125 to US$850 from 1976 – 1981. A period in time when interest rates rose from about 5^% to some 20^% and the U.S. dollar ‘DXY’ spiked up from about 83 to 160. This period in time, although relatively short lived, was when gold stocks were trading at record high multiples similar that of the Magnificent Seven big cap artificial intelligence (IA) stocks are today. This is the second upswing in gold in the past month. The last one failed to take out the previous high. Could this be the time? And could gold then go on another all-time record run and force the pundits to write another narrative. I wouldn’t bet against it.

How low is the market’s interest in gold companies? Gold is near a record high yet the price of the world’s largest gold miner, Newmont Corporation ‘NEM-N’ fell to a new 4^1/2-year closing low of US$33.36, and senior producer B2Gold Corp. ‘BTO-T’ & ‘BTG-N.A’ sank to a new near 4-year closing low of $3.52.

Caterpillar Inc. ‘CAT-N’ shares’ rose by $6.31 or 2^% to an all-time closing high of US$321.40 after the world’s largest heavy equipment manufacturer sighted increased infrastructure and energy activity in beating the streets expectations with its 4^th-quarter and full year 2023 financials. Cats’ Canadian distributors, Vancouver, BC based Finning International Inc. ‘FTT-T’ at $39.72 and Toronto, ON based Toromont Industries Ltd. ‘TIH-T’ at $118.55 are also trading at near record highs.

Precision Drilling Corp. ‘PD-T’ stock rose by $4.20 or 5.26^% to close at $84.07 after the Calgary, AB based energy services company impressed investors with its 4^th-quarter and full year 2023 financials and better yet, issued a positive outlook for the year ahead.

The price of Enerplus Corporation ‘ERF-T & N’ rose by $1.57 or 8.15^% to close at $20.84 on word that the Calgary, AB based oil & gas company was in the sights of giant American petroleum producer Devon Energy Corp. ‘DVN-N’ as a possible takeover target.

This as the price of natural gas fell to a new 10-month low of US$1.86 per million British Thermal Units (MMBtu).

The mainstream media seems to focus on China as a global growth story, but to the south – India’s economy is quickly gaining momentum – especially in the energy sector where India Prime Minister Modi estimates his country’s energy demand will double by 2045. Also, The Energy Information Administration (EIA) forecasts that India will be the country with the largest growth in oil demand through 2030. Meanwhile, India’s energy minister said his country is keeping the price of crude low by buying Russian oil. He further explained that if India bought only Middle East oil the price of crude would rise to US$150 a barrel.

ARC Resources Ltd. ‘ARX-T’ shareholders’ were pleased to see their investment rise by $0.82 or 4.00^% to close at $32.31 after the Calgary, AB based energy company handily beat the street’s expectations with its 4^th-quarter and year-end 2023 production and financial results.

The influential Baker Hughes Petroleum Rig Count reported the number of active American drilling rigs rose by 4-rigs in the past week to 623, down by 138-rigs from this time last year. Across the line – the number of Canadian active rigs was unchanged at 232, down by 18-rigs from one year ago.

Lithium stocks finally caught a bid with Lithium Americas Corp. ‘LAC-T & N’ rising by $0.49 or 9.46^% to $5.67, while Standard Lithium Ltd. ‘SLI-V & N.A’ gained $0.19 or 9,90^% to $2.11, and Sigma Lithium Corp. ‘SGML-V’ rose $2.24 or 12.73^% to $19.83 as the price of lithium  finally broke a painful 15-month downtrend and rose by $310 or 2.34^% to US$13,540 a tonne (t). Whether this is a short dead cat bounce or the start of a sustained rally remains to be seen.

This as General Motors Co. ‘GM-N’ and LG Chem Ltd. announced a deal where the South Korean industrial giant would supply US$18.61-billion of electric vehicle (EV) battery cathodes to GM from now through to 2035 from LG’s battery plant in Tennessee.

Meanwhile, Canada Nickel Company Ltd. ‘CNC-T’ & ‘CNIKF-OTCQX’ stock rose by $0.04 or 2.92^% to $1.41 after the Timmons, ON based mineral developer announced the company planned to build both a nickel net-zero carbon emissions processing plant and a stainless-steel net-zero carbon emissions processing plant in the Timmons area. The plants are designed to supply 80,000 tonnes of nickel and 500-000 tonnes of stainless steel annually to Ontario’s EV industry.

And while many junior resource companies are struggling to attract financings to advance their projects – not so much in the uranium sector – as Vancouver, BC based Fission Uranium Corp. ‘FCU-T’ announced a $75-million “Bought Deal” financing to help advance the company’s PLS uranium project in northern Saskatchewan’s Athabasca Basin. As well, Vancouver, BC based Uranium Royalty Corp. ‘URC-T’ & ‘UROY-Q’ closed a previously announced US$22.9-million “Bought Deal” financing. The funds to be used for future royalty acquisitions and the purchase of physical uranium.

Copper fell to a 3-month low of US$3.69 a pound late in the week, which no doubt helped to draw the share price of copper producer Hudbay Minerals Inc. ‘HBM-T & N’ down to a 2-month closing low of $6.91.

The big cap rally continued south of the border with the NASDAQ reaching a new 1^1/4-year closing high of 15,991 while the Dow 30 and S&P 500 Indexes closed at respective new all-time highs of 38,726 and 5,027.

Crude oil and lithium were the best performing commodities during the week while natural gas and copper performed the worst.

The American major markets were all up going into the weekend; while the resource loaded TSX Composite and TSX Venture were down.

For the Week – the DJI gained 0.39^% to 38,672 with the S&P 500 up 2.47^% to 5,027 and the NASDAQ ahead by 2.32^% to 15.991. In Canada – the TSX lost 0.36^% to 21,010 and the TSX Venture fell 1.80^% to 547. The CBOE Volatility Index or VIX dropped 0.92^% to 12.93.

With currencies – the Canadian dollar rose by 0.01^% to US$0.7429 while the U.S. dollar ‘DXY’ lost 0.76^% to 104.08. 

With commodities – gold bullion lost 0.54^% to US$2,024, while silver gained 0.04^% to US$22.61, as copper fell 3.40^% to US$3.69, and lithium rose 1.99^% to US$13,506. Crude oil gained 5.92^% to US$76.54, while natural gas lost 10.58^% to US$1.86, and uranium gained 6.00^% to US$106.00. With soft commodities – lumber lost 0.54^% to US$552. Overall – the CRB Commodities Index rose by 2.61^% to 315.

And Finally – I’ll leave you with a quote from noted investment authority Warren Buffet who said – “Good investing is not necessarily about making good decisions – it’s about consistently not screwing up”.