2023 may see another lithium squeeze

While precious metal prices have been relatively high this year, it could be too early to leap into junior gold stocks, said Rick Rule, president and CEO of Rule Investment Media. On Friday Rule recorded Kitco Roundtable with Kitco correspodent Paul Harris and mining audiences manager Michael McCrae. Gold gained $150 in March — its best month since July 2020, noted Kitco's Anna Golubova. Analysts are seeing markets contradicting the Fed's messaging, and gold may have lots more upside, including testing and breaking record highs in April. Gold stocks are catching up. The GDX, an index of gold companies, is up 18% for the month, but it is still significantly off its 52-week high. "A move up may be right in terms of direction, but [investors] may be wrong in terms of timing," said Rule who likes the macro environment for gold but sees other factors weighing on the sector. "When we are in a risk-off environment, the riskiest assets on the planet are non-producing exploration companies," noted Rick. "The gold price can go up, but the shares of companies that inconveniently happen to have not much gold will continue to go down."

The same news that drove gold higher this week also gave copper a lift, noted mining audiences manager Michael McCrae.  On Thursday McCrae recorded Kitco Roundtable with correspondent Paul Harris.Gold started off the week strong due to wobbles in the banking sector. Credit Suisse, the European banking giant, was taken over by UBS on the weekend.  The markets then turned to the Fed and its rate hike. The Federal Reserve raised its main interest rate by a quarter-point, but the Fed also suggested that rates would not continue to rise. A weakening U.S. dollar also worked in favor of the metals, noted Kitco contributor Jim Wyckoff. On Thursday April gold was last up $47.70 at $1,996.90 and May silver was up $0.509 at $23.30.The lower dollar also worked in copper's favor. The metal reached $4.11 pound mid week.  Looking ahead, McCrae noted that the resource sector should get a boost when the senior gold producers announce their first quarter financial results in April, which should be exceptional due to higher than average gold prices during the start of 2023.Roundtable also talked about First Majestic Silver's Jerritt Canyon woes and Albemarle's big investment.

It is a tough time to finance gold exploration projects, says Ari Sussman, executive chair of Collective Mining, who just announced a S$30M bought deal, but conditions will improve as 2023 progresses as investors seek safe haven investments in real assets.

 While relatively high gold prices favor the producers, weak financing conditions are going to be a drag on companies not yet producing, noted Kitco correspondent Paul Harris. On Friday Harris recorded Kitco Roundtable with mining audiences manager Michael McCrae and Meridian Mining Executive Chairman Gilbert Clark. Meridian Mine (TSX:MNO) is focused on advancing its Cabaçal gold-copper deposit in Brazil. Earlier this week the company released a positive preliminary economic assessment for the project showing an after-tax net present value of $573 million and a 58.4% internal rate of return using $1,650 oz gold and $3.59 lb copper. Clark said the project's strong economics is something not seen by the markets for many, many years. Looking at the broader market, Harris said there are two factors that are holding back gold juniors. "I think the outlook for the gold juniors, developers and the explorers is not quite so rosy," said Harris. "A lot of people think...it is going to be a tough year to raise equity."Harris added that critical metal companies like copper and lithium have "taken off like a rocket" limiting the amount of funds available for precious metal companies. "[With] a limited pool of capital available, that naturally means there's perhaps going to be less available for the gold juniors."The gold index or GDX is down nearly 10% year-to-date and 30% for the year.

Although gold prices are down from the start of the year, miners still have healthy margins at the current price levels, noted Kitco correspondent Paul Harris.  In February Harris recorded Kitco Roundtable at BMO Global Metals, Mining & Critical Minerals Conference with Mining Audiences manager Michael McCrae and Adriatic Metals CEO Paul Cronin.Adriatic Metals (ASX:ADT) will commence production at its Vares silver project in Bosnia & Herzegovina in Q3 of this year. Adriatic describe Vares as one of the highest margin polymetallic projects globally. Post-tax NPV is estimated at $1.062 billion and IRR at 134%.  After gold got as high as $1,960 ounce in January, Harris noted that the BMO conference opened in late February with the metal suffering a four-week slide dipping into the low $1,800 range.  "Perhaps [the drop is] a little bit painful, but the producers...still have 40% to 50% margins," noted Harris. "They're making a lot of money."

The Fed is expected to keep up its fight against inflation rather than ease, and that is bad for gold.  On Saturday Mining Audiences Manager Michael McCrae recorded Kitco Roundtable. 

Early this week B2Gold said it would acquire Sabina Gold & Silver for C$1.1 billion (US$823.66 million).On Friday's Roundtable mining audiences manager Michael McCrae and Kitco correspondent Paul Harris talked about yet another big M&A in the gold sector. Early this month number one gold miner Newmont made a $16.9 billion offer for number seven ranked Newcrest. This week Newcrest said the offer under values the company. McCrae and Harris also talked about LG Chem buying a stake in Piedmont Lithium.    

Newcrest Mining, which has a number of assets in B.C., received a $16.9 billion bid from Newmont early this week.  On Friday Kitco correspondent Paul Harris discussed on Kitco Roundtable how Newmont's portfolio would change if the deal goes through.  By gold production Newmont is the world's number one gold miner. Newcrest is ranked number seven. 

The gold market saw significant losses on Friday as the precious metal dropped $50 on the day following a shockingly solid employment report out of the U.S., said mining audiences manager Michael McCrae.  On Friday McCrae recorded Kitco Roundtable.  The U.S. economy added a staggering 517,000 jobs in January as the unemployment rate dropped to 3.4% — the lowest level since 1969, noted Kitco reporter Anna Golubova. This took many by surprise as market consensus calls were looking for just 185,000 new positions.  This week's big mining news was General Motors making a $650 million equity investment in Lithium Americas to help advance Thacker Pass. A court decision is still pending on whether Thacker should proceed. Earlier this month a U.S. judge said she will rule "in the next couple of months" about whether former U.S. President Donald Trump erred in 2021 when he approved Lithium Americas Corp's plan to build Thacker, according to a report by Reuters.Lithium Americas is targeting 80,000 tonnes per annum of battery-quality lithium carbonate from Thacker. 

Gold finished last week with its sixth consecutive gain, but the Federal Reserve could slow the metal, noted mining audiences manager Michael McCrae.  On Monday McCrae recorded an episode of Kitco Roundtable.  Fed chair Jerome Powell is giving a press conference on Monday. The Twin Metals decision was also covered. The Department of Interior cancelled two hardrock leases in northeastern Minnesota. Twin Metals has been trying to advance an underground mine in the area. The miner called the decision stunning and disappointing.