Strengths
- Palladium was the best-performing precious metal of the week, increasing by 1.3%. Exchange-traded funds (ETFs) raised their palladium holdings by 17,202 troy ounces. China continued to add to its gold reserves for the sixth consecutive month, as central banks worldwide expand their bullion holdings in response to geopolitical and economic risks. In April, China increased its gold holdings by about 8.09 tons, bringing the total to approximately 2,076 tons, following a 120-ton increase in reserves in the previous five months.
- South African platinum group metal (PGM) exports showed signs of recovery in March, with palladium and platinum increasing by 51% and 37% respectively compared to the previous month.
- American Eagle Gold announced a strategic investment by Teck Resources through structured flow-through financing, resulting in a 28.6% surge in American Eagle Gold's stock. Teck will issue 14.4 million common shares on a flow-through basis at $0.205 apiece, generating around $3 million in proceeds. Teck will subsequently acquire the shares for approximately $1.9 million, or $0.13 per share.
Weaknesses
- Silver was the worst-performing precious metal of the week, experiencing a decline of 6.9% due to aggressive selling by ETFs. A fire followed by an underground collapse resulted in the loss of at least 27 lives at a gold mine in Peru.
- The World Gold Council (WGC) reported a 17% quarter-on-quarter decline in global gold demand in the first quarter, primarily driven by a significant drop of 24% (152 tons) in global jewelry consumption.
- i-80 Gold reported lower-than-expected gold sales and higher exploration expenses in the first quarter, resulting in adjusted earnings per share (EPS) and cash flow per share (CFPS) misses.
Opportunities
- Canaccord considers SSR Mining as its top defensive pick among mid-cap precious metals producers. They highlight SSR Mining's scale, exposure to gold and silver, value potential in its assets, strong balance sheet and capable management team. Ongoing operational improvements, exploration programs and solid cash flow generation are expected throughout 2023.
- BMO notes that Wheaton Precious Metals has available liquidity of $2.8 billion, providing sufficient funding for existing commitments and future growth opportunities. The company anticipates a favorable growth outlook for the remainder of the year, with a strong pipeline of opportunities in the range of $150-350 million. While balancing shareholder returns with growth, Wheaton Precious Metals maintains a modest dividend.
- Scotia sees SSR Mining's acquisition of up to a 40% interest and operational control in the Hod Maden Gold development project in Turkey as a positive move. Leveraging the company's existing expertise in Turkey, this deal has the potential for operational synergies with Çöpler, enhancing SSR Mining's prospects.
Threats
- Royal Gold faces key focus areas in 2023, including revenue growth from various projects, the mill expansion at Pueblo Viejo and the pursuit of additional precious metals stream/royalty opportunities. The timing of sales from projects such as Mount Milligan and Andacollo may lead to quarterly sales estimate volatility.
- The bonds of Eskom Holdings SOC Ltd., a state-owned company in South Africa, have experienced a decline in value. This reflects deepening supply cuts and rolling blackouts across the nation. The utility's use of more diesel than budgeted for and ongoing challenges may impact its liquidity.
- Sibanye Stillwater's first-quarter results fell short of expectations in several production metrics, leading to downgraded production and cost guidance. A March incident caused damage to infrastructure.
