A Weekly Recap of All Things Resources to Friday, July 29th

‘That’s a Wrap’

By Rod Blake

Whether last week’s market action was just an oversold bear market rally or the start of a short term bull market didn’t matter on Monday morning as investors to portfolio managers alike were just pleased to start the week with a few upticks on their screens.

RBC Capital Markets estimates that due to the current energy prices – the amount of royalty and taxes paid to Canadian federal and provincial governments has risen so far this year by 200^% to $48-billion , and if the current trend continues, could reach $68-billion for 2023.

GCM Mining Corp. ‘GCM-T’ and Aris Gold Corp. ‘ARIS-T’ jointly announced that the former would take over the latter in a friendly all-stock deal to create a much larger South American focused gold mining company with a combined gold reserve of some 3.8-million ounces. The new entity will carry on under the name of Aris Gold Corporation.

Newmont Corporation ‘NEM-N’ & ‘NGT-T’ shares’ fell by $6.80 or 13.23^% to US$44.59 after the world’s largest gold miner reported a drop in 2nd-quarter earnings enhanced by an  increase in production costs.

 Similarly, the price of Copper Mountain Mining Corp. ‘CMMC-T’ stock dropped by $0.10 or 7.09^% to $1.31 after the BC based copper miner suffered a 2nd-quarter loss of some $5.5-million due to all-in copper production costs that reached US$4.93-a-pound.

Investor disillusion in the mining sector is no better reflected than that of giant gold miner Barrick Gold Corp. ‘ABX-T’ & ‘GOLD-N’ as its share price fell to 3-year closing low of $19.14.

The way I see it – mining companies are facing inflation driven costs of a magnitude that they haven’t experienced in many years. However, this time around I think the companies are in much better shape to weather the storm. Historically, mining companies always had the legacy of pouring all of their free cash flow into the ground or into takeover deals in a race to find more reserves. The resource downturn in 2011 forced miners to reevaluate their balance sheets where now most keep healthy cash reserves to protect themselves from markets such as we have today. The mining companies of today are in much better position to ride out the current bear market and position themselves for the next bull market that will surely come.

Cameco Corporation ‘CCO-T’ & ‘CCJ-N’ share price goes against the trend by rising $2.40 or 8.05^% to $32.20 after the Saskatchewan based Uranium giant reported 2nd-quarter financial results that far exceeded market expectations.

The mineral world mourned the death of Lucas H. Lundin, a 40-year veteran of the mineral industry and instrumental in the formation and growth of the Lundin Group of Companies.

Tourmaline Oil Corp. ‘TOU-T’ joined a growing list of Canadian oilpatch companies to report outstanding 2nd-quarter financials that included a special dividend of $2-per-share.

Vancouver, BC based Canfor Corporation ‘CFP-T’ increases its presence in the United States by announcing it will invest about US$210-million to build a new, state of the art sawmill complex in southern Alabama.

Calgary, Alberta based Enbridge Inc. ‘ENB-T&N’ announced it will invest $1.5-billion in cash & debt to earn a 30^% interest in the Woodfibre liquefied natural gas (LNG) facility to be built near Squamish, BC.

For the Week – The highly followed Baker Hughes Petroleum Rig Count reported the number of active American drilling rigs rose by 9-rigs to 767, an increase of 279 from this time last year. In Canada– the number of active rigs also rose by 9 to 204 for an increase of 51 in the past year.

 The DJI gained 2.96^% to 32,845 as the S&P 500 advanced by 4.24^% to 4,130 and the NASDAQ rose by 4.71^% to 12,391. Up north – the TSX gained 7.07^% to 19,693 and the TSX Venture was up by 6.25^% to 646.

Gold bullion rose by 1.67^% to US$1,769, with silver ahead by 10.17^% to US$20.36 and copper up by 8.73^% to US$3.61. Elsewhere – crude oil gained 4.19^% to US$98.62 but natural gas fell by 0.60^% to US$8.26. The Canadian dollar improved by 0.89^% to US$0.7815. Overall – the CRB Commodities Index rose by 3.65^% to 312.

And Finally – Canadians can now disregard Statistics Canada’s confusing core and non-core inflation statistics and instead rely on something much more relevant as – Beer Canada has just released its calculation that the average price of a pint of beer is up by 7.2^% in the past year to $8.50/pint.