A Weekly Recap of All Things Resources to Friday, June 14th

‘That’s a Wrap’

By Rod Blake

One quick look at last week’s final market figures (T.a.W. – 6/7^th) clearly revealed that commodities and resource issues, as represented on the TSX Composite Index and TSX Venture Exchange, were the clear losers, while big cap artificial intelligence (AI) companies, as represented by the Dow 30, S&P 500 and NASDAQ Exchanges, were the clear winners.

The way I see it – Commodities don’t like a strong American dollar. And resource stocks, by extension don’t like a strong U.S. greenback as well, unless they’re in the midst of a new discovery where exploration news outweighs a rising U.S. dollar. Last week saw not one, but two U.S. dollar rallies. One early in the week based on perceived U.S. Fed interest rate cuts, or lack of, and a second rally late in the week based on foreign election results in Mexico and Europe. This double U.S. dollar whammy pushed down commodity prices along with most resource stocks and left the TSX Composite (-1.18^%) and Venture (-3.76^%) having their worst week in almost 2-months.

This may be a healthy correction. When, you may ask, is a correction healthy? A healthy correction occurs when issues are bid up to quickly to heights that don’t justify their prices. If one looks at the charts of the four major commodities that influence the TSX and Venture – crude oil, copper, gold and silver – one can see that that crude oil at US$87 peaked in early April, while copper at US$5.11, gold at US$2,433 and silver at US$32.20 all peaked later in May. All four commodities had significant gains on the year with crude oil up some 24^%, copper up 36^%, gold up 22^%, and silver up an amazing 45^% in just 5-months. These extraordinary gains were just too much for the market to maintain, and thus, with the catalyst of a surging U.S. dollar, had to correct to a more sustainable level. Last week’s correction of 5 – 15^% still leaves these key commodities with healthy gains on the year to date but are now priced where the market can hopefully build a base for further advancements later in the year. This is why I call this a healthy correction.

Now let’s look at the markets themselves. With last week’s correction, the TSX is still just down just 1.65^% from its peak and the Venture is off 4.4^%. After lagging for many months, it looks like the resource markets are finally outperforming their underlying commodities.

To summarize – commodity prices have corrected but are still well up on the year. The resource markets are also still up on the year. So far the bull market is still in play, but now resource stocks are outperforming their underlying commodities. Should commodities stabilize at these lower levels and move higher, then look for resource stocks to follow suit, but with even greater magnitude.

Last week’s AI enthusiasm spilled over into the new week with the S&P 500 reaching a new all-time closing high of 5,434 and the NASDAQ closing at a new all-time high of 17,689.

Torex Gold Resources Inc. ‘TXG-T’ thought of its shareholders and laid out a comprehensive multi-year exploration strategy that will see the Toronto, ON based miner expend some $31-million a year to fully explore and develop the company’s prized Morelos Property south of Mexico City.

One of the most difficult things that a junior miner has to achieve is to make money. Not necessarily to be profitable, but to at least be cash flow positive so the company can advance its project and pay its bills and make payroll. Failing that, the company must have access to financing capital to keep it going until it can create its own funding. Unfortunately, junior miner Nevada Copper Corp. ‘NCU-T’ couldn’t create enough start-up money to fund itself or raise cash in the capital markets. As such, the Yerington, NV based miner filed for Chapter 11 Bankruptcy Protection in a last gasp effort to try and preserve the assets of its Pumpkin Hollow Copper Project in Nevada.

Crude oil weighted stocks may be correcting but some of those more weighted to natural gas are doing quite well. Case in point – NuVista Energy Ltd. ‘NVA-T’ stock rose to a new 2^1/2-year closing high of $13.77.

Advantage Energy Ltd. ‘AAV-T’ announced the Calgary, AB based company would purchase Charlie Lake and Montney natural gas assets in northwest Alberta in an all-cash deal of $45-million.

This as Natural gas rose again to close at a new 7-month high of US$3.15 per million British thermal units (MMbtu).

Well service provider Trican Well Services Ltd. ‘TCW-T’ saw its stock price rise to a new 7-month closing price of $4.75.

The influential Baker Hughes Petroleum Rig Count reported the number of active American drilling rigs fell by 4-rigs in the past week at 590, down by 97-rigs from this time last year. Up north – the number of Canadian active rigs grew by 17-rigs to 160, up by 1-rig from one year ago.  

Lithium continued searching for a bottom as the key electric vehicle (EV) battery commodity fell to a new 2^1/2-month low of US$13,410 a tonne (t).

Which no doubt helped to pull the price of Lithium Americas Corp. ‘LAC-T & N’ stock to fall to a new all-time closing low of $3.83.

Century Lithium Corp. ‘LCE-T’ shareholders were pleased to see the share price of their beleaguered investment rise by $0.025 or 7.81^% to close at $0.345 after the Vancouver, BC based mineral developer filed a positive technical report that supported the April 29^th Feasibility Study of the company’s flagship Clayton Valley Lithium Project in Nevada.

Meanwhile – Statistics Canada reported that 46,744 new zero-emission vehicles (ZEVs) were registered in Canada in the first quarter of this year – up 53^% from the same quarter in 2023. ZEVs made up 11.3^% of all new Canadian 1st-quarter motor vehicle registrations.

Uranium Energy Corp. ‘UEC-N’ stock rose by $0.36 or 6.46^% to close at US$5.93 after the Corpus Christi, TX based mineral developer released a positive S-K 1300 technical report summary that almost tripled the measured resource of the company’s Burke Hollow Project in the Gulf of Mexico region of Texas to over 6-million pounds of uranium oxide (U₃O₈).

Uranium fell to a new 6-month closing low of US$82.75 a pound.

Energy Fuels Inc. ‘EFR-T’ & ‘UUUU – N.A’ announced the Lakewood, CO company had successfully achieved commercial production of separated neodymium-praseodymium (NdPr) at its White Mesa Mill in Utah which meets the applicable product specifications of rare earth elements (REE) metal makers.

Vizsla Silver Corp. ‘VZLA-T & N’ stock rose by $0.04 or 2.41^% to $1.70 after the Vancouver, BC based explorer released more encouraging diamond drill hole silver/gold assays from the company’s flagship Panuco project in Mexico.

Going the other way – I-80 Gold Corp. ‘IAU-T’ & ‘IAUX-N’ shares’ fell to an all-time closing low of $1.39.

Major Drilling Group International Inc. ‘MDI-T’ shares’ fell by $0.55 or 5.82^% to $8.90 after the Moncton, NB based driller’s 4^th-quarter and fiscal year end 2024 financial and operating results fell short of investor expectations.

Forestry stocks continued under pressure with paper and packaging company Cascades Inc. ‘CAS-T’ stock closed at a new1^1/2-year low of $9.05.

Crude oil and gold bullion led resources higher for the week while lithium and lumber led to the downside.

The IA weighted S&P 500 and NASDAQ Exchanges were up on the week while the Dow 30 and the two Canadian markets were down.

For the Week – the DJI lost 0.54^% to 38,599, while the S&P 500 rose 1.59^% to 5,432 and the NASDAQ improved by 3.25^% to 17,689. In Canada – the TSX lost 1.67^% to 22,639 and the TSX Venture fell 2.38^% to 574. The CBOE Volatility Index or VIX rose 3.60^% to 12.66.

With currencies – the Canadian dollar gained 0.21^% to US$0.7281, and the U.S. dollar ‘DXY’ rose 0.55^% to 105.52.

With commodities – gold bullion gained 1.70^% to US$2,332 as silver rose 1.43^% to US$29.55, while copper gained 0.22^% to US$4.50, and lithium lost 4.05^% to US$13,411. Crude oil gained 4.13^% to US$78.49, while natural gas lost 0.70^% to US$2.89, and uranium lost 1.43^% to US$86.00. With soft commodities – lumber fell 2.94^% to US$496. Overall – the CRB Commodities Index gained 1.17^% to 346.

One last thought – The price of electric vehicles (EVs) continues to come down. According to Akyurek – the average price of a new EV has declined by 18^% in the past year and the price of pre-owned EVs has dropped by 11.4^%. Still, the average price of a new EV is $74,132 while the average price of all new vehicles is 66,499.