A Weekly Recap of All Things Resources to Friday, June 2nd
‘That’s a Wrap’
By Rod Blake
The new trading week began quietly with The Americans enjoying their Memorial Day long weekend. The recent market action had some portfolio managers feeling everything was good in the investing world in that they had positioned their portfolios around the handful of Artificial Intelligence (AI) stocks that were pulling the tech sector higher while the breadth of the market was falling further and further behind.
The way I see it – When one stock or sector greatly out or under performs the breadth of general market it is deemed to be ‘Trading at the Margin’. That is, that group is out on the edge of the page or out of step with the checks and balances of normal market parameters. This time it is the handful AI stocks that are trading at the margin. An at the margin trade can go on for some time be very powerful as portfolio managers – who are paid to outperform the market – are almost forced to take positions in these high-flying AI stocks for fear of being left behind. This trade will go on for as long as new money keeps coming into the sector and usually ends when the market senses that the new money supply is drying up. Prices can abruptly return to the norm when the money that wants out greatly overpowers the few buyers that are still looking to get long. I think the last time we had such an extreme an at the margin market with these dynamics was in the Dot-com era of 1999 – 2000. If you recall – this was when all of the new computer chip and program stocks were revolutionising the personal computer (PC) industry. Almost every PC had an ‘Intel Inside’ sticker on it. That tech market ended abruptly in early 2000 and it took the NASDAQ some 13-years to recover. Resource markets have also had strong ‘At the Margin’ trades. You might remember – gold at US$850 in 1980, the Canadian diamond rush in the early 1990s, uranium at US$140 in 2007, and crude oil at US$140 in 2008 were but a few and most also ended abruptly.
Baytex Energy Corp. ‘BTE-T’, Crescent Point Energy Corp. ‘CPG-T & N’, Paramount Resources Ltd. ‘POU-T’ and other Alberta based petroleum companies reported a return to normal work operations following the recent forest fires in Northern Alberta and British Columbia.
This as the price of crude oil once again falls below US$70 to US$67.83 a barrel.
The key Baker Hughes Petroleum Rig Count reported the number of active American drilling rigs fell by 15-rigs over the past week to 696, down by 31 from this time last year. Across the line – the number of active rigs rose by 10, for loss of 20 in the past year.
With another example of the wonders of the mineral world – Montreal, Quebec based Amex Exploration Inc. ‘V-AMX’ doing regional exploration work on its Perron gold property in the Abitibi region of Quebec reported finding a 600 metre x 300 metre zinc anomaly.
Zinc is currently trading at a 21/2-year low of about US$1.04 a pound.
Eldorado Gold Corp. ‘ELD-T’ cashed up in the financial markets by raising $81.5-million from the European Bank for Reconstruction and Development (EBRD) and an additional $135-million from BMO Capital Markets and National Bank Financial.
The price of Centerra Gold Inc. ‘CG-T’ & ‘CGAU-N’ stock rose by $0.73 or 9.80% to $8.18 after the Toronto, ON based miner announced the Turkish Ministry of Environment had approved the company’s amended Environmental Impact Assessment (EIA) for the Őksϋt mine in Turkey – allowing Centerra to restart full operations in the near future.
Governments in Canada continue their support of electric vehicles (EVs). This time – the governments of Quebec and Canada announced a joint $300-million funding towards a $600-million EV battery plant in Bécancour, Que. to be operated by General Motors Co. ‘GM-N’ and South Korea’s POSCO Future M.
Meanwhile – the Toronto Transit Commission (TCC) has awarded a contract to Nova Bus of Saint-Eustache, Quebec to supply up to 541 long-range battery-electric buses over the next 4-years to Canada’s largest city.
This as the price of lithium recovered to a new 2-month high of US$41,855 a tonne.
Uranium stocks rose in concert after a U.S. Senate committee endorsed an initiative to add uranium to the United States Critical Minerals List.
This as the price of Uranium rose to a new 1-year high of US$54.60 a pound.
The TSX and TSXV fell to new respective 21/2-month lows of 19,572 and 596.
Anyone who has worked in the mineral exploration field knows that forestry and mining complement each other. Case in point – Goldcliff Resource Corp. ‘GCN-V’ credited recent forestry activity in helping the Kelowna, BC based junior explorer to uncover a number of new exploration targets at the company’s Panorama Ridge property near Headley, BC including trenches and pits that may go back to the early 1900s.
The Canadian federal government reportedly funded an additional $3-billion to the Trans Mountain Pipeline Expansion bringing the total cost of the controversial pipeline expansion up to $30,9-billion.
The major markets roared into the weekend after the Americans passed their controversial debt ceiling bill, with the S&P 500 up to a new 9-month high of 4,282 and the NASDAQ up to a new 13-month high of 13,241.
Simultaneously – the CBOE Volatility Index or VIX fell to a new 3-year low of 14.60 (What could possibly go wrong?)
For the Week – the DJI gained 2.02% to 33,763 with the S&P 500 up 1.83% to 4,282 and the NASDAQ ahead by 2.04% to 13,241. Up north – the TSX gained 0.53% to 20,025 and the TSX Venture rose by 0.83% to 609. The CBOE Volatility Index or VIX fell by 18.66% to 14.60.
With currencies – the Canadian dollar improved by 1.39% to US$0.7447 as the U.S. dollar ‘DXY’ lost 0.26% to 103.94.
With commodities – gold bullion gained 0.05% to US$1,947, with silver up by 1.29% to US$23.60, while copper gained 1.64% to US$3.72, and lithium surged up by 30.11% to US$41,855. Crude oil lost 1.10% to US$71.87 and natural gas lost 9.92% to US$2.18, while uranium gained 1.87% to US$54.60. With soft commodities – lumber lost 1.23% to US$481. Overall – the CRB Commodities Index was unchanged at 288.
And Finally – The uses of Artificial Intelligence (AI) seem to be expanding exponentially. Now it has been reported that South Korea is using AI to estimate the weight (140 kilograms) and health of 39 year old North Korean leader Kim Jong Un.