A Weekly Recap of All Things Resources to Friday, October 27th

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By Rod Blake

On reviewing last week’s market action, the most striking item to me was that all five of the major North American markets that I follow were down on the week. This doesn’t happen very often as combined, these markets cover almost every aspect of the economy from big cap industrials to pharmaceuticals, technology, banking and resources. I looked through my notes and the last time this happened was in February as Russia invaded Ukraine. And that makes sense as the sudden uncertainty of the Russia/Ukraine and now the Israel/Hamas conflict forced investors to hit the sell button on most every market except for safe, defensive positions such as gold.

The way I see it “Bad things happen.” This was a line I told my clients many times over my career. They often had large gains that were thought to be safe, but here was this broker urging them to take profits. My reasoning wasn’t that their investment was bad, but because I knew from experience that the overall market can turn on dime and wipe away hard-earned profits. I first experienced this as a young broker during the market crash of 1987. And then much later I was having a very good time sponsoring and investing in uranium companies when the huge tsunami hit four nuclear reactors in Japan in March of 2011. This caused the uranium markets to collapse almost overnight and negated any gains that might have been collected. So, I still suggest one should take profits accordingly, as one never knows when bad things might happen.

During the week

The week began with another mega-merger in the oil & gas sector. This time Chevron Corporation ‘CVX-N’ announced the giant American integrated energy company would take over fellow integrated company Hess Corporation ‘HES-N’ in an all stock and debt deal valued at some US$60-billion.

PrairieSky Royalty Ltd. ‘PSK-T’ shares’ rose by $0.47 or 1.96% to $24.43 after the Calgary, AB based oil royalty company pleased the street with its 3rd-quarter financials.

Under the heading of ‘Go Big or Go Home’ – Imperial Oil Ltd. ‘IMO-T & N.A’ announced a $1.5-billion share buyback program, to be completed by the end of this year.

This as the closely followed Baker Hughes Petroleum Rig Count reported the number of active American drilling rigs rose by 1-rig over the past week to 625, down by 143 from this time last year. In Canada – the number of active rigs fell by 2-rigs to 193, down by 16 from a year ago.

Lithium fell to a new 6-month low of US$22,438 per tonne.

All of which helped to pull lithium giant Albemarle Corporation ‘ALB-N’ stock down to a new 3-year closing low of US$134.44.

Investors were still in a negative mood for most of the week – pushing the Dow 30, S&P 500 and NASDAQ Indexes down to new 5-month respective closing lows of 32,418, 4,117, and 12,596.

Meanwhile the TSX Composite fell to a new 1-year low of 18,737.

IMPACT Silver Corp. ‘IPT-V’ shares’ rose by $0.01 or 4.55% to $0.235 after the Vancouver, BC junior miner reported the reopening and first production of its newly acquired Plomosas zinc mine in Chihuahua, Mexico.

Kinross Gold Corp. ‘K-T’ & ‘KGC-N’ shares’ rose to a new 18-month closing high of $7.42.

Agnico Eagle Mines Ltd. ‘AEM-T & N’ reported 3rd-quarter gold production of 850,429 ounces – some 5.3% more than the same quarter one year ago.

The price of Eldorado Gold Corp. ‘ELD-T’ stock surged up by $1.28 or 9.36% to a new 3-month closing high of $14.95 after the Vancouver, BC based miner surprised investors with improved 3rd-quarter production figures.

This, as the price of gold bullion surged up above $2,000 and close at a new 5-month high of US$2,006 a troy ounce.

Clean energy mineral uranium rose to a new 13-year high of US$73.00 a pound.

Investors were especially negative on junior issues for most of the week – driving the TSX Venture Exchange down to a new 31/3-year closing low of 516.

Teck Resources Ltd. ‘TECK.B-T’ & ‘TECK-N’ stock fell by $4.74 or 8.90% to $48.49 after Canada’s largest mining company’s 3rd-quarter financials fell short of analysts’ expectations.

The Canadian Loonie followed crude oil down to a new 7-month low of US$0.7210.

The price of Precision Drilling Corp. ‘PD-T’ stock ‘PD-T’ dropped by $3.02 or 3.64% to $80.00 after the Calgary, AB based petroleum service company’s 3rd-quarter financials failed to meet the street’s expectations.

West Fraser Timber Co. Ltd. ‘WFG-T & N’ shares’ rose by $1.08 or 1.21% to $90.26 after the Vancouver, BC based forest giant pleased investors with the company’s 3rd-quarter financials.

Natural gas and uranium were the commodities showing the greatest gains going into the weekend, while lithium and silver were off the most.

The four senior North American markets were all negative going into the weekend as investors turned to cash ahead of another Israel/Hamas and Russia/Ukraine weekend. Going the other way – the TSX Venture rallied on Friday, as did the price of gold bullion.

For the Week – the DJI lost 2.14% to 32,418 while the S&P 500 lost 2.53% to 4,117 and the NASDAQ fell by 2.63% to 12,634. Up norththe TSX lost 1.98% to 19,737 while the TSX Venture was unchanged at 521. The CBOE Volatility Index or VIX dropped 2.03% to 21.27.

With currencies – the Canadian dollar fell by 1.11% to US$0.7210 while the U.S. dollar ‘DXY’ rose by 0.40% to 106.57.  

With commodities – gold bullion gained 1.26% to US$2,006, as silver lost 1.11% to US$23.11, while copper gained 2.55% to US$3.62, while lithium lost 4.15% to US$22,438. Crude oil lost 0.56% to US$85.03 while natural gas rose by 18.15% to US$3.45, and uranium gained 5.80% to US$73.00. With soft commodities – lumber fell by 0.61% to US$490. Overall – the CRB Commodities Index was unchanged at 323.

One Last Thought – I find it interesting how just a month or two ago when local (Vancouver) gasoline prices were north of $2 a litre – many people and media and politicians were taking the oil companies to task for gouging the consumer. Now, with gas at about $1.75why aren’t these same folks praising big oil for helping out consumers?

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