A Weekly Recap of All Things Resources to Friday, July 7th

‘That’s a Wrap’

By Rod Blake

As the brokers, investors, traders and portfolio managers reviewed the first half of the year it was easy to discern that the U.S markets were enjoying a bull market and were trading at or near 15-month highs as technology and especially artificial intelligence (AI) technology stocks pulled those markets higher, while the Canadian markets – over weighted with resources, and especially gold and oil stocks – were a drag.

The way I see it – Bull markets tend to run until they stop. And while this sounds simplistic it is true. Bull markets begin when investor sentiment is at its lowest and end without warning when investor sentiment is at its highest. What is also true is that they tend to climb a wall of worry. Since last October, the American markets have looked further out into the future than the traditional 8-months and ignored higher interest rates and hints of a recession. Now the question is – can the bull continue to run as we enter the traditional season of summer doldrums? And, is the resource sector, with the TSX Venture Exchange, that has been languishing at or near multi-year lows, and now suddenly up some 5% in the past 2-weeks, beginning to climb its own wall of worry?

The price of crude oil caught a lift early in the week on word that Russia was cutting production buy some 500,000 barrels per day (bbls/d), adding to the 1-million bbls/d cut announced earlier in the year by the Saudi Arabia.

Just how big is the global oil market? According to Elements by Visual Capitalist – the value oil production topped US$2-trillion in 2022 – more than the production value of the top 10 metals combined. For comparisons – iron ore production was worth US$283-billion, while gold production was worth US$196-billion and copper was US$183-billion.

The key Baker Hughes Petroleum Rig Count reported the number of active American drilling rigs rose by 6-rigs over the past week to 680, down by 72 from this time last year. Up north – the number of Canadian active rigs increased by 8 to 175, unchanged from this time a year ago.

A company issuing a small amount of stock to settle debts can go almost unnoticed to the casual observer, but issuing almost 14% of company’s float certainly will. As was the case for Iconic Minerals Ltd. ‘ICM-C’ that saw its share price drop by $0.015 or 12% to $0.115 after the Vancouver, BC based junior company issued over 17-million shares to settle some $3-million of dept.

Resource investors know that key people are important to their companies. So it was of great interest to see the price of Osisko Gold Royalties Ltd. ‘OR-T&N’ stock drop by $2.01 or 9.83% to $18.44 on the sudden and unexplained departure of company President and Chief Executive Officer Sandeep Singh.

There are gold mines and then there are exceptional gold mines. Such is the case of the Lundin Gold Inc. ‘LUG-T’ Fruta del Norte gold mine in southeast Ecuador with an average processing grade of some 11 grams per tonne (g/t) gold. With grades like that it was not too surprising when Lundin’s share price rose by $0.60 or 3.85% to $16.20 after the Vancouver, BC based miner handily beat the street’s expectations with its 2nd-quarter production figures.

Ontario, finally acknowledging that wind and solar energy is not going to be enough to power the province in the future, announced the province’s Bruce Power nuclear plant on Lake Huron will double its capacity to 4.8GW to meet the anticipated electrical needs of some 4.8-million households.

German automaker Mercedes-Benz Group AG ‘MGB-DE’ joined an ever-increasing list of electric vehicle (EV) manufacturers to adopt Tesla’s North American Charging Standard (NACS) giving their EVs access to Tesla’s 12,000 Superchargers.

The North American markets limped into the weekend on fears that better than expected employment figures on both sides of the border would lead to higher interest rates.

For the Week – the DJI lost 1.96% to 33,735 with the S&P 500 down by 1.15% to 4,399 and the NASDAQ off by 0.92% to 13,661. In Canada – the TSX lost 1.61% to 19,831 and the TSX Venture fell by 0.97% to 615. The CBOE Volatility Index or VIX rose by 9.33% to 14.83.

With currencies – the Canadian dollar lost 0.20% to US$0.7533 and the U.S. dollar ‘DXY’ fell by 0.66% to 102.26.

With commodities – gold bullion gained 0.37% to US$1,925, with silver up by 1.36% to US$23.06, while copper rose by 0.53% to US$3.77, and lithium gained 0.52% to US$42,534. Crude oil gained 4.77% to US$73.86 while natural gas lost 8.24% to US$2.56, and uranium fell by 0.98% to US$55.65. With soft commodities – lumber improved by 1.51% to US$537. Overall – the CRB Commodities Index was up by 2.08% at 294.

And Finally – Young people might consider a carrier in mining as according to the Mining Industry Human Resources Council – Canada’s mining industry will have a shortage of some 80,000 – 120,000 workers by 2030.