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Oreninc index up as bought deal announced

Commentaries & Views

Last Week: 18.10      

This week: 30.33

The Oreninc Index increased in the week ending March 27th, 2020 to 30.33 from 18.10 as another large bought deal was announced.

With deaths attributed to the COVID-19 virus outbreak more than doubling in the past week to almost 35,000 and almost 750,000 cases reported, including 150,000 in the USA, the world is increasingly in lockdown mode to contain the outbreak. High profile people who have contracted the virus now include UK prime minister Boris Johnson and heir to the throne Prince Charles. The Tokyo Olympic Games have also been postponed until 2021.

The number of US coronavirus cases is almost double the number in China, which appears to have slowed the rate of new infections down sufficiently such that it is relaxed travel restrictions and restarting economic activity.

However, the big news this week was a US$2 trillion stimulus package agreed in the US aimed at helping businesses and the newly unemployed. The measures include loans to corporations, tax breaks and direct payments to companies and individuals.

Equity markets have experienced extreme volatility this past week. US markets jumped earlier in the week in response to news of the stimulus package, with the Dow Jones Industrial Average advancing 1,770 points (9.5%) before falling away as the week progressed.

Details on how the stimulus will be distributed are as yet unclear, although clearly needed as the US Dept of Labor data showed first-time US jobless claims skyrocketed to a seasonally adjusted record of 3.3 million, due to layoffs as companies struggle to cope with the sudden and dramatic slowdown in activity due to the COVID-19 outbreak. The previous high was 695,000 claims in October 1982. The figures next month are expected to be even worse by some analysts.

Purchasing managers indexes around the world fell with many hitting record lows.

In Europe, the European Central Bank said its €750 billion euro Pandemic Emergency Purchase Program (PEPP) includes scrapping issuer limits on purchases of bonds and widened the scope of buying to include instruments with as little as 70 days left to maturity.

Gold saw increasing support as the combination of low interest rates and the financial stimulus package brought expectations of inflation and a weakening of the US dollar.

Oil prices continue to fall with a barrel of West Texas Intermediate trading below $22 a barrel. US oil production is rapidly falling with wells being idled at the fastest rate in 35 years.

On to the money: total fund raises jumped to $91.6 million, a two-week high, which included no brokered financings and one bought deal financing for $75 million, a two-week high. The average offer size jumped to $5 million, a two-week high, while the number of financings remained unchanged at 18.

The spot gold price saw a strong rebound with the yellow metal closing up at US$1,628/oz from $1,498/oz a week ago. The yellow metal is up 7.31% so far this year. The US dollar index pulled back to close down at 98.32 from 102.81 last week. The VanEck managed GDXJ recovered to over $33 before pulling back as the week ended to close up at $29.91 from $24.66 a week ago. The index is down 29.22% so far in 2020. The US Global Go Gold ETF also regained lost ground as it closed up at $12.73 from $10.85 a week ago. It is down 27.51% so far in 2020. The HUI Arca Gold BUGS Index closed up as well at 194.21 from 166.29 last week. The SPDR GLD ETF inventory saw a sharp 6% rebound as it closed up at 964.66 tonnes from 908.18 tonnes a week ago.

In other commodities, spot silver recovered as it closed up at $14.47/oz from $12.61/oz a week ago. Copper was flat on the week as it closed down a cent at $2.16/lb from $2.17/lb a week ago. The oil price continued its descent as WTI closed down at $21.84 a barrel from $22.63 a barrel a week ago.

The Chicago Board Options Exchange Volatility Index (VIX or fear index) fell a smidge, closing down at 65.54 from 66.04 a week ago.

The Dow Jones Industrial Average had a strong bounce as it closed up at 21,636 from 19,173 a week ago. Canada’s S&P/TSX Composite Index also rebounded to close up at 12,687 from 11,851 the previous week. The S&P/TSX Venture Composite Index closed up at 388.58 from 356.54 last week.

Summary

  • Number of financings decreased to 18.

  • No brokered financings were announced this week.

  • One bought-deal financing was announced this week for $75 million, a two-week high.

  • Total dollars increased to $91.6 million, a two-week high.

  • Average offer size increased to $5 million, a two-week high.

Financing Highlights

Orla Mining (TSXV:OLA) opened a $75.03 million offering on a bought deal basis.

  • Syndicate of underwriters led by Stifel Nicolaus.

  • 36.6 million shares @ C$2.05 each.

  • Newmont and Agnico Eagle intend participate to maintain their respective ownership positions, as will Pierre Lassonde.

  • Proceeds will fund exploration and development at its Camino Rojo gold oxide project in Zacatecas, Mexico.

  • The deal is expected to close on or about April 3rd.

Major Financing Openings

  • Orla Mining (TSXV:OLA) opened a $75.03 million offering on a bought deal basis. The deal is expected to close on or about April 3rd.

  • Alexco Resource (TSX:AXR) opened a $7.5 million offering on a best efforts basis. The deal is expected to close on or about March 27th.

  • Nickel Creek Platinum (TSX:NCP) opened a $1.5 million offering on a best efforts basis. Each unit includes a warrant that expires in five years.

  • Euro Manganese (TSXV:EMN) opened a $1.01 million offering on a best efforts basis.   

  • Revival Gold (TSXV:RVG) opened a $1 million offering on a best efforts basis. The deal is expected to close on or about March 26th.

Major Financing Closings

  • QMX Gold (TSXV:QMX) closed a $6.77 million offering underwritten by a syndicate led by Canaccord Genuity on a bought deal basis. Each unit included half a warrant that expires in two years.

  • Goldsource Mines (TSXV:GXS) closed a $6.6 million offering on a best efforts basis. Each unit included half a warrant that expires in 30 months.

  • Copper Fox Metals (TSXV:CUU) closed a $1.48 million offering on a best efforts basis. Each unit included a warrant that expires in a year.

  • Explorex Resources (CSE:EX) closed a $1 million offering on a best efforts basis.
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 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.