Gold SWOT: Call Activity in Largest Gold Miners ETF Is the Highest since March

Strengths

• The best performing precious metal for the week was gold, up 2.50%. Osisko Gold has amended the CSA stream agreement, effectively reducing the upfront payment for the silver stream to $75 million (previously $90 million). The company has also entered into a backstop financing agreement with Metals Acquisition Corp., providing up to $75 million in financing as an update to the previously announced copper stream option.
• Artemis Gold updated the market on the timing of the BC Mines Act permits, indicating it expects to receive the permits this quarter. The BC Mines Act permits are the final permitting milestone for the project. Major construction is still planned for the end of the first quarter, and substantial pre-construction work is underway or already completed.
• Skeena Resources Ltd. announced that it has closed a royalty sale with Franco-Nevada Corporation pursuant to which Skeena granted a 0.5% net smelter returns royalty on the Eskay Creek gold-silver Project to Franco-Nevada in exchange for a closing cash consideration of C$27 million and contingent cash consideration of C$1.5 million. As highlighted in the Company’s September 26, 2022, news release, Skeena repurchased this 0.5% NSR from Barrick Gold Corporation after it was initially granted in connection with the acquisition of Eskay Creek.

Weaknesses

• The worst performing precious metal for the week was silver, down 0.21%. Despite positive news at the end of the week, Bloomberg reported three leading Chinese solar-panel makers are ramping up production in a boon to clean energy. Solar demand has been growing but production was hamstrung in 2021 and 2022 due to a spike up in polysilicon prices during the pandemic. Polysilicon prices have collapsed 50% from last year’s high which should expand their margins, giving producers an incentive to boost profits now. which should lead to increased silver demand.
• Exchange-traded funds (ETFs) cut 38,791 troy ounces of gold from their holdings in the last trading session, bringing this year's net sales to 3.77 million ounces, according to data compiled by Bloomberg. The sales were equivalent to $70.4 million at the previous spot price.
• Fortuna Silver Mines was down after the company on Thursday called a decision by Mexico's Secretary of Environment and Natural Resources to re-assess a 12-year extension of the environmental impact authorization for its San Jose mine in the country "incomprehensible," as it plans to challenge the ruling.

Opportunities

• MAG Silver reports that it has received confirmation from Fresnillo, the operator of the Juanicipio Project, that final testing of the downstream power distribution and control systems at the project is now complete. The entire system has now been energized and commissioning of the project has formally begun. Fresnillo’s objective is to reach full nameplate capacity in the second quarter of this year. Once commissioning is concluded, higher grade mineralized material will be processed at the Juanicipio plant and could also continue to be processed at the nearby Saucito and Fresnillo operations if required.
• Trading in call contracts of VanEck Gold Miners ETF so far this year is the most active since March, reports Bloomberg, underscoring expectations the precious metal will continue to outpace resource assets. The fund, which has invested about $13 billion in a portfolio including Newmont Corp., Barrick Gold Corp. and Franco-Nevada Corp., has jumped 7% in 2023 bringing to 40% its gain since a low on September 26, the article continues.

• New Found Gold Corp. said that it plans to expand its diamond
  drill campaign at the Queensway project in Newfoundland and Labrador to
  500,000 meters from 400,000 meters. The company said its expanded drill program is fully funded out of its current cash and marketable securities balance of $90 million.

Threats

• The feasibility study update for Osisko has lowered the NAV estimate to C$88 million (from C$161 million previously). The lower NAV is due to lower grade (following the feasibility study grade 3.78g/t), and a 2024 startup, which is later than consensus.
• Gold eased from a six-month high this week as Treasury yields rebounded following Federal Reserve minutes that indicated interest rates may stay high for a long time. In an unusually blunt warning to investors, central bank officials cautioned against underestimating their will to keep interest rates high. Yields on benchmark 10-year government bonds rose Thursday, following a run of declines that drove bullion to the highest since June this week.
• The gold price ticked down from fresh six-month highs as the headline manufacturing index from the Institute for Supply Management disappointed expectations in December, contracting slightly more than expected. The ISM manufacturing index was at 48.4% last month versus the consensus forecast of 48.5%. The monthly figure also marked a 0.9 percentage-point increase from November’s reading of 49%.