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SWOT Analysis: A Closer Look at Novo Resources

Commentaries & Views

Strengths

  • The best performing precious metal for the week was silver, climbing up 2.35 percent with the changing sentiment toward precious metals. Gold notched its first weekly gain in a number of weeks on weaker-than-expected inflation and retail sales data. Federal Reserve Chair Janet Yellen took a decidedly dovish stance this week, signaling the Fed was in no hurry to tighten monetary policy with monthly consumer prices growth falling short of the Fed’s target 2 percent. The gold market responded positively, with gold futures jumping sharply above $1,220 after her testimony.

  • Gold jumps after yellens inflation remarks

  • June imports of gold in India more-than-doubled compared to the same month last year, Bloomberg reports, as consumers rushed to act before the country’s new tax law went into effect. Demand rose to 72 metric tons in June, up from 31.8 tons a year earlier. The downside here is that we may see a slowdown in consumption now that jewelers have already built up their stocks for the upcoming Diwali festival and wedding season. In the long-term, however, India—the world’s second-biggest consumer after China—is expected to see a huge boost in demand. The World Gold Council (WGC) estimates imports could rise to between 850 and 950 tons by 2020, up from between 650 and 750 today.

  • Peter Grosskopf, CEO of Sprott, is bullish on gold, saying that the firm has “a good constructive long-term view that it is an asset that should be accumulated.” He added that gold “is vastly under-invested by most investors.” Now with gold prices having lost value recently on fears that the Federal Reserve will hike rates, Grosskopf sees this as a buying opportunity. 

Weaknesses

  • The worst performing precious metal for the week was gold, still up 1.26 percent. Bullion sales at Japan’s biggest retailer, Tanaka Kikinzoku Kogyo, fell a staggering 41 percent in the first half of 2017 compared to the same period last year, according to Bloomberg. Platinum bar sales disappointed as well, falling 53 percent. Tanaka reported that investors “refrained from aggressive trading” due to tighter U.S. monetary policy. Demand weakness also hit Japan’s southern neighbor Australia. The Perth Mint, the world’s number two gold refiner, recently saw sales of coins and bars fall to a five-year low. “With equities at near-record levels and greater economic confidence in the U.S. and throughout the world, there has been less interest in safe haven products,” remarked Neil Vance, the Perth Mint’s group manager of minted products.

  • Hedge fund managers’ net-long positions on gold were trimmed in half last week compared to the previous week, the largest such reduction in two years. It was the fourth straight week of declines. Bullish bets on gold stood at 37,776 contracts for the week ended July 3, significantly down from 174,658 as recently as June 6, according to the Commodity Futures Trading Commission.

  • Indian gold retailers were offering a discount on jewelry for the first time in over a month this week, a sign that demand is slipping. As discussed above, June was especially busy, as consumers loaded up on gold to avoid paying the 3 percent gold tax rate under the new Goods and Services Tax that went into effect July 1. 

Opportunities

  • Novo Resources signed a memorandum of understanding (MoU) with Sumitomo Corporation to further develop the Company’s Beatons Creek project, according to a July 7 news release. Sumitomo will provide assistance with preparation of Novo’s internal study, including basic engineering design work and other studies. Novo is also earning in to Artemis Resources Purdy Reward prospect as part of an overall $2 million farm-in and 50/50 joint venture on Artemis; conglomerate gold targets on its Karratha tenement package. Initial exploration activity at Purdy’s Reward involved a trenching program, with the first trial trench identifying in situ gold nuggets up to 4cm long in Archean conglomerates. Most recently, Novo put out a press release on July 12, sending the stock soaring 55.2 percent. The release was the first that the TSX has allowed a YouTube video to be attached to – the first video shows someone using a metal detector to find the signal of a nugget in the test pit, while the second video shows someone using an air chisel to pry out a rock containing several gold nuggets, writes Bob Moriarty for Streetwise Reports.  Novo’s share price surged 58 percent upon the discovery of the gold nuggets.

  • Nano One Materials announced it was issued a patent expanding its propriety position to include the improvements in battery performance. According to the press release, the addition of this patent builds on an already strong portfolio of intellectual property Nano One has assembled. The stock climbed nearly 40 percent post the news release. In late June, CEO of Nano One Dan Blondal announced that “commissioning of the pilot plant is complete and scaled-up production of lithium ion cathode materials that meet Nano One’s processing and battery capacity targets has been demonstrated,” according to a June 26 news release by the company. Blondal added that Nano One is now well positioned to execute its 2017 plans in bringing industrial interests to the table.

  • Golden Predator Mining  announced this week assay results for 23 reverse circulation drill holes completed at the 3 Aces Project. The company intersects 6.86 m of 20.15 grams per ton gold at the 3 Aces Project. In the July 10 press release, Golden Predator notes that “in addition to the already identified high-grade underground targets, the drilling results suggest a merging into a single gently dipping zone, providing a potential near surface bulk mineable.”

Threats

  • South Africa’s Chamber of Mines released a statement noting that the Department of Minerals has agreed to suspend implementation of the new Mining Charter, reports JP Morgan’s Dominic O’Kane. This, pending the outcome of the interdict application brought by the Chamber of Mines. JP Morgan interprets this to be a minor positive for South African mining shares, since at the very least it delays implementation of Charter requirements. “We retain our view that SA exposed companies with ability to pursue corporate re-organizations are best positioned to mitigate SA sovereign risk, these include Anglo American and Gold Fields and Anglo Gold,” the research note reads.

  • According to JP Morgan’s Chairman Jamie Dimon, the unwinding of quantitative easing might be more disruptive than you think, reports Bloomberg. Central banks are preparing to reverse massive asset purchases made after the financial crisis – the Fed, ECB and Bank of Japan bulked up their balance sheets to nearly $14 trillion, the article continues. An unwinding of this amount could influence a slew of markets. Dimon notes that all the main buyers of sovereign debt over the last 10 years will now be net sellers.

  • Tanzanian President John Magufuli has signed into law new mining bills requiring the government to own at least 16 percent state in mining projects, reports The Daily Mail. On Monday, Magufuli said that no new mining licenses would be issued until Tanzania “put things in order.” The new laws raise royalties tax for gold, copper, silver and platinum exports and also give the government the right to tear up and renegotiate contracts for natural resources, the article continues.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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