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‘That’s a Wrap’

By Rod Blake

Resource investors had quite the ride last week in that many of the commodities and resource stocks they followed that were at multi-month, multi-year or even all-time highs early in the week suddenly fell sharply going into the weekend on nothing more than U.S. Fed comments reiterating previous remarks about higher for longer interest rates.

The way I see it – Resource investors just experienced a “reality check”! It’s a term I used many times in the brokerage business and it happens after the price a commodity or a resource stock moves up too quickly or exponentially and then sharply falls when sellers overwhelm any buyers that are left and pushes the issue lower. Bull markets usually start linearly. That is, a straight line, lower left to upper right chart pattern where buyers only outweigh sellers by a small margin. This straight-line pattern lets sellers get out uniformly as new buyers come in. Everything changes when the chart pattern goes from linear to exponential as over enthusiastic buyers greatly outweigh any sellers that are left. This pattern is recognized by a chart that breaks far above its linear trend or rises in an upward curving pattern. If one looks at the charts of the markets favourite minerals gold, silver and copper, zinc and nickel, they all broke out well above their linear patterns and some went exponential anywhere from this March or April until the sell off late last week. That was over 2-months of buyers bidding up issues to greater and greater heights to a point where everyone who wanted to be was “all in”. All in means the issue is fully invested, leaving very few buyers to support the market when it turns (and they always turn). The resulting selloff can come from seemingly nowhere and be quite startling as we saw last Thursday. We used to say these selloffs took the stock out of the hands of amateurs or speculators and put it back into the hands of the professionals.

If the fundamentals for the commodity or stock are still good (supply/demand, economics, or news etc.) then the price will usually stabilize back near the lower or linear level and the bull market will continue again, sometimes in only a few trading sessions. A reality check can be scary but it can also create a buying opportunity. Based on current commodity fundamentals – we may have just been given that opportunity.

Investor interest in uranium issues carried over to the new week with the price of Denison Mines Corp. ‘DML-T’ & ‘DNN-N.A’ stock reaching a new 13-year closing high $3.31 while industry giant Cameco Corporation ‘CCO-T’ & ‘CCJ-N’ reached a new all-time closing high of $75.63.

Silver rebounded from last week’s selloff to climb to a new 11-year closing high of US$32.05 a troy ounce (t oz).

Which no doubt helped Endeavour Silver Corp. ‘EDR-T’ & ‘EXK-N’ to close at a new 1-year high of $5.63, while Vizsla Silver Corp. ‘VZLA-V & N’ and Pan American Silver Corp. ‘PAAS-T & N’ reached respective new 2-year closing highs of $1.87 and $30.91, and Fortuna Silver Mines Inc. ‘FVI-T’ & ‘FSM-N’ closed at a new 3-year high of $8.84.

Bravo Mining Corp. ‘BRVO-V’ stock surged up by $1.07 or 47.98% to $3.30 after the Vancouver, BC based explorer released high-grade massive sulphide copper/gold assays from the company’s Luanga Project in Brazil.

Investors continued to avoid i-80 Gold Corp. ‘IAU-T &’IAUX-N’ Nevada miners’ shares fell to another all-time low of $1.49.

Collective Mining Ltd. ‘CNL-T’ shares’ rose by $0.21 or 5.04% to $4.38 after the Toronto, ON based explorer released a number of encouraging diamond drill hole assays from the company’s Guayabales Project in Caldas, Colombia that included drill hole APC-95 reporting 513.70 metres (m) grading 2.20 grams per tonne gold equivalent (g/t AuEq).

Who knew? – When I was part of Chester Millar’s team that discovered the Afton ore body, west of Kamloops, BC over some 50-years ago with a $20,000 truck mounted percussion drill program, I never envisioned that this unique piece of geology would still be giving up its riches some 4,000 feet below surface. (I believe we hit near surface copper chalcopyrite mineralization on the third hole.) The latest news on this unique ore body from current operator New Gold Inc. ‘NGD-T & N.A’ saw the company’s stock rise by $0.16 or 5.61 % to a new 4-year closing high of $3.01, after Borehole EA24-485 returned an impressive 1.85% copper (Cu) and 1.70 grams per tonne (g/t)  gold (Au) over a core length of 217 metres (m), or an estimated true width of 40 m.

Natural gas reached a new 6-month closing high of US$2.84 per million British thermal units. (MMBtu).

ConocoPhilips ‘COP-N’ announced the acquisition of Marathon Oil Corp. in a stock & debt deal valued at some US$22.5-billion.

Calgary, AB based energy company AltaGas Ltd. ‘ALA-T’ and its Netherlands based joint venture partner Royal Vopak  – announced, after a 5-year environmental preparation and review process, a positive final investment decision for their $1.35-billion Ridley Island Energy Export Facility (REEF) large scale liquefied petroleum (LPG) and bulk liquids terminal near Prince Rupert, BC.

This as the influential Baker Hughes Petroleum Rig Count reported the number of active American drilling rigs was unchanged in the past week at 600, down by 96 rigs from this time last year. Up north – the number of Canadian active rigs rose by 8-rigs to 128, up by 31-rigs from one year ago.  

Lithium issues continued to lag with Century Lithium Corp. ‘LCE-V’ closing at a new 3-month low of $0.37, while Lithium Americas Corp. ‘LAC-T & N’ fell to a new all-time closing low of $4.58.

Some forestry stocks were also out of favour with investors with Doman Building Materials Group Ltd. ‘DBM-T’ trading down to a new 6-month closing low of $7.06 while Western Forest Products Inc. ‘WEF-T’ closed at a new 14-year low of $0.47.

The NASDAQ Exchange reached a new all-time closing high of 17,020.

The CRB Commodities Index rose to close at a new 2-year high of 351.

Natural gas and silver were the only commodities up on the week while lumber and copper dropped the most.

The lowly TSX Venture Exchange was the only North American index in the black going into the weekend as interest rate worries weighed on more conservative investors.

For the Week – the DJI lost 0.98% to 38,686, while the S&P 500 fell 0.49% to 5,278, and the NASDAQ dropped 1.10% to 16,735. Across the line the TSX lost 0.23% to 22,269 while the TSX Venture rose 0.49% to 611. The CBOE Volatility Index or VIX gained 8.30% to 12.92.

With currencies – the Canadian dollar rose 0.27% to US$0.7338, while the U.S. dollar ‘DXY’ lost 0.12% to 104.62. 

With commodities – gold bullion lost 0.26% to US$2,327, while silver rose 0.20% to US$30.41, as copper dropped 2.73% to US$4.63, and lithium lost 0.01% to US$14,528. Crude oil dropped 0.80% to US$77.18, while natural gas rose 3.61% to US$2.58, and uranium fell 2.02% to US$89.90. With soft commodities – lumber lost 3.98% to US$507. Overall – the CRB Commodities Index was fell by 0.28% 342.

And Finally – It seems that what was around can come around again, as the University of Calgary announced the reopening its oil & gas engineering program that the institution closed 2021 due to multi-year low oil prices and widespread energy sector layoffs. My – how quickly times do change.

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