- The best performing precious metal for the week was silver, up 2.06%. Silver just wrapped up a fourth quarterly gain, the longest run for the precious metal since 2011. A fifth advance over the final three months of the year looks to be a decent prospect. The drivers here are familiar, and rest more on silver’s role as a financial asset than its use as an industrial input -- a Federal Reserve that is cutting interest rates; a weaker U.S. dollar; and rising ETF holdings will combine to lift prices, according to Bloomberg.
- Coeur Mining announced its intention to purchase 100% of SilverCrest Metals in an all-share transaction, again highlighting the rarity of companies that have greater than 50% of their revenue coming from silver, while most silver is produced on a by- or coproduct gold or lead production. Two other companies that are silver dominant are Aya Gold & Silver Inc. and Vizsla Silver Corp.; these might be names that SilverCrest’s investors may rotate into so they can maintain their high silver exposure.
- Hungary’s central bank has raised its gold reserves, citing the precious metal’s role as a haven amid rising market uncertainty, according to a National Bank of Hungary statement. The central bank raised its gold reserve by more than 10 times in 2018 to 31.5 tons and then tripled it in 2021, Bloomberg data shows.
Weaknesses
- The worst performing precious metal for the week was palladium, down 1.85%. According to Stifel, for Visla Silver’s Panuco project, investors have overly discounted Mexico permitting risk for this project (the current share price implies a discount rate of 19% at spot and is at 1x NAV). The permitting and development risk may remain, but relative to other projects being bought out, like SilverCrest Metals, Panuco has higher grades and larger resource base.
- According to Morgan Stanley, South African gold economics remain marginal. The gold price has traded in a relatively tight range around cost curve support since the middle of 2023. It currently sits 3% below the December 2023/ June 2024 range.
- According to Bank of America, the latest estimate from energy analysts Ember predicts solar installations reaching 334 gigawatts (GW), and globally for 29% growth year-on-year. In metal terms, solar silver demand is expected to rise by 20% year-on-year to 232 million ounces. The lower growth rate in silver demand versus installations is a result of thrifting to reduce the metal usage intensity per GW. Thrifting is not new but may not noticeably affect an unsatiable demand for clean renewable energy.
Opportunities
- According to BMO, Osisko Gold Royalties remains active with corporate development and deploying capital into new investment opportunities. The Dalgaranga gold project benefits from existing infrastructure, and production from an underground operation is expected within the next two years with an anticipated life of +12 years.
- Costco Wholesale is expanding its precious metal offerings to now include one-ounce platinum bars on its website available for purchase online only to loyalty members. In April, Costco struck gold with sales of one-ounce gold bars that were generating monthly sales of $200 million. They next rolled out a package of 25 one-ounce silver bars priced as a lot for $675, initially. Precious metals are finally catching a bid with a new customer base.
- Goldman raised their gold price forecast from $2,700 per ounce to $2,900 for early 2025, for two reasons. First, their economists now look for faster declines in short-term interest rates in the West and China. Goldman’s forecast of central bank and other institutional demand in the London over-the-counter (OTC) market shows that purchases remained strong through July, averaging 730 tons annualized year-to-date, or about 15% of global annual production estimates, with a large contribution from China.
Threats
- Cash must still be tight at some operations, as Equinox Gold announced an equity offering to pay off a $130 million convertible note held by Ninety Fourth Investment Company LLC and BMO Capital Markets, then placed the new issue with other investors as the debt holder wanted cash, not shares. Equinox Gold did not receive any proceeds from the offering. It’s just another example of companies using equity to make debt disappear.
- Two North Carolina mining operations that produce more than 80% of the world’s high-purity quartz, a material critical to the solar and semiconductor industries, have now been halted for almost a week due to Hurricane Helene. Reports on Friday, indicate only minor damage to mine site facilities but surrounding roads and infrastructure challenges could slow some shipments, but it was unlikely there would be a major supply disruption, as reported by Bloomberg.
- Allied Gold also came to the market this week with an overnight marketed placement of C$192 million at a share price of C$3.10 to fund their growth initiatives, including all rights and obligations. Yes, it was just a month ago that Allied Gold struck a protocol agreement with the Malian government for a one-time upfront (undisclosed) cash payment to settle all outstanding disputes, allegations, audits and assessments, including those related to tax, customs levies, maintenance and management of the mine and satellite areas, will be settled. It’s not clear how much of the proceeds will be devoted to settling with the Malian government.
