A Weekly Recap of All Things Resources to Friday, September 1st

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‘That’s a Wrap’

By Rod Blake

In reviewing last week’s markets, I had mixed feelings when I saw that the TSX Venture Exchange had dropped by almost 1% to end the week at a new 7-month low of 581.

The way I see it – As a broker who primarily made a living from the resource sector, I lived and breathed the performance of the TSX Venture Exchange – the world’s premier market for public resource companies. Interestingly, one benefit from following a market for over 30 plus years is that one recognises patterns that have come before and may be repeated. Now while last week’s drop to a near 2023 low was very disappointing, the fact of the matter was that the Venture has been underperforming the other North American bourses for the entire year as investors found little interest in the resource sector as they chased artificial intelligence (AI) stocks higher and higher. But, looking past the underperformance, one encouraging trading pattern I noticed was something I’ve seen many times before and if it plays out as I suspect, could be very rewarding. To me, last week’s drop of the Venture looked like an ‘Exhaustion Trade’. An exhaustion trade is when investors finally throw in the towel and just want to get out of that sector or market at any price. Bids are hit until the last exhausted investor is taken out. This is exactly what the Venture needed in order to mount any resemblance of a rally as the exhaustion trade takes shares that would ordinarily be overhanging market out of the way and puts them into friendlier hands. If I’m right and last week was an exhaustion bottom for the resource sector, then one might be encouraged to accumulate one’s resource favourites in anticipation of a resource market rally to come.

In keeping with my comments last week regarding the market’ renewed interest in uranium – the price of yellowcake rose to a new 16-month high of US$58.50 a pound and Cameco Corporation ‘CCO-T’ & ‘CCJ-N’ stock closed at a new 16-year closing high of $50.80 a share.

NexGen Energy Ltd. ‘NXE-T & N’ share price moved up $0.06 or 0.84% to $7.17 after the Vancouver, BC based uranium developer secured a US$110-million convertible debenture financing to help facilitate advancement of the company’s prize Rook uranium project in Saskatchewan’s uranium rich Athabasca Basin.

Similarly – Fission Uranium Corp. ‘FCU-T’ stock rose by $0.01 or 1.33% to $0.76 after the Vancouver, BC uranium developer announced the addition of five people to the company’s technical team. Those technical skills will be key in helping the advancement of Fission’s flagship PLS uranium project, also in Saskatchewan’s Athabasca Basin.

While North American environmentalists may be right in singling out China’s seemingly poor effort on converting their coal-fired power plants to renewable energy, the same criticism can’t be said about the country’s auto industry. Case in point – China automaker BYD Company Ltd. ‘BYDDY-OTC’ reported 2nd-qiarter sales of the company’s hybrid and electric vehicles (EVs) rose by 98% year-over-year to 700,244 units, of which 90% were in their domestic market. For comparison – Tesla Inc. ‘TSLA-N’ reported global 2nd-quarter sales of 466,140 vehicles.

Vietnam is also getting attention in the EV market after startup domestic EV automaker VinFast Auto Ltd. ‘VFS-N’ went public in New York about 3-weeks ago. The stock launched at about US$10 and is now trading at about US$30 a share after peaking at about US$88 earlier in August.

Meanwhile – the price of lithium fell to a new 3-month low of US$27,717 per tonne.

After dealing with mine start-up and weather-related issues – Minera Alamos Inc. ‘MAI-V’ shares’ rose by $0.02 or 6.78% to $0.315 after the Toronto, ON based junior gold producer projected a much better 2nd-half 2023 production forecast for its flagship Santana gold mine in Sonora, Mexico.

Moving a mineral ore body towards production is a methodical step-by-step process that requires some, if not a lot of patience, as witnessed by shareholders of Taseko Mines Ltd. ‘TKO-T’ & ‘TGB-N.A’. Their company completed one more critical step in this endeavour and patient shareholders were rewarded when their investment rose by $0.07 or 3.85% to $1.89 after the Vancouver, BC based miner announced the company had filed a key Programmatic Agreement (PA) for its Florence Copper Project in Pinal County, Arizona. The PA stipulates requirements for the treatment, handling and protection of cultural resources found on the project site.

Tidewater Midstream & Infrastructure Ltd. “TWM-T’ stock surged up by $0.11 or 11.34% to $1.08 after AltaGas Ltd. ‘ALA-T’ agreed to buy  the Calgary, AB based company’s Pipeline Natural Gas Processing Plants and storage facilities in Alberta’s Montney region in cash & stock deal of some $650-million.

Whitecap Resources Inc. ‘WCP-T’ joined the growing list of petroleum companies increasing returns to shareholders. The Calgary, AB company’s share price rose by $0.53 or 4.80% to $11.58 after announcing it was raising its monthly dividend by 26% to $0608 per share.

Crude oil moved up to a new 9-month high of US$85.72 a barrel.

While the CRB Commodity Index reached a new 1-year high of 319.

The influential Baker Hughes Petroleum Rig Count reported the number of active American drilling rigs fell by 1-rig over the past week to 63, down by 129 from this time last year. Up north – the number of Canadian active rigs dropped by 3-rigs to 187, down by 21 from a year ago.

Led by uranium, oil and gold – the resource markets were positive going into the weekend.

For the Week – the DJI gained 1.43% to 34,838 with the S&P 500 up 2.50% to 4,516 and the NASDAQ ahead by 3.24% to 14,032. Across the line – the TSX gained 3.57% to 20,545 and the TSX Venture rose 1.89% to 592. The CBOE Volatility Index or VIX dropped 16.52% to 13.09.

With currencies – the Canadian dollar gained 0.01% to US$0.7353 and the U.S. dollar ‘DXY’ rose by 0.07% to 104.26.

With commodities – gold bullion gained 1.41% to US$1,941, while silver lost 0.08% to US$24.18, as copper rose by 0.80% to US$3.80, and lithium fell 7.07% to US$27,717. Crude oil gained 6.91% to US$85.72 as natural gas rose 8.24% to US$2.76, and uranium rose by 0.43% to US$58.50. With soft commodities – lumber lost 2.33% to US$503. Overall – the CRB Commodities Index was up by 2.24% at 319.

One Last Thought – While it’s one thing to “talk the talk”, it’s a much bigger step to “walk the walk”. Case in point – Since 2016, Natural Resources Canada as provided funding for some 43,000 electric vehicle (EV) chargers of which only a little more than 7,600 are in place and operational.

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