Gold SWOT: K92 Mining Delivered One of the Strongest Operational Results in Its History

Strengths

• The best performing precious metal for the week was palladium, up 7.31%, perhaps on continued accumulation by the palladium ETFs. For instance, the abrdn Physical Palladium Shares ETF has seen its shares outstanding increase by 72% in 2024. Despite a slight fall in the price of palladium since the start of the year, money is flowing into this fund.
• According to Business Times, global central banks currently hold some 1.16 billion ounces of gold that are collectively worth more than $3 trillion, according to new data from the International Monetary Fund (IMF). The yellow metal now accounts for just under one-fifth of the $15.45 trillion worth of foreign exchange reserves held by the world’s central banks.
• K92 Mining delivered one of the strongest operational results in its history, reports Stifel. Production of 44,300 ounces gold was a strong beat to the estimated 31,600 ounces gold. Positive grade reconciliation and higher-grade stopes mined in the third quarter were the reasons for the strongest gold head grade since the fourth quarter of 2020. The share price rose nearly 16% on the production beat.

Weaknesses

• The worst performing precious metal for the week was silver, down 1.93%, after four weeks of consecutive gains. Gold fell early in the week as the dollar continued to push higher and U.S. inflation came in hotter than expected. Despite the negative print, gold pushed higher on Thursday and even more so on Friday. The yellow metal essentially ended the week flat, unfazed by the headlines as the market seems to be anticipating higher prices.
  
• Dundee Precious Metals’ third quarter production results came in below RBC’s estimates, driven by operational challenges at Ada Tepe. Full-year guidance was reiterated, with increased production at Ada Tepe anticipated in the fourth quarter on higher grades and improved fleet availability.
• Aris Mining reported third quarter 2024 gold production of 54,000 ounces, which missed expectations. Due to the lower-than-expected production, the company decreased the 2024 production guidance at Segovia to 185,000-195,000 ounces from 200,000-220,000 ounces.

Opportunities

• Over the weekend, OceanaGold revealed that its Waihi and Macraes mines have been selected as part of a list of 11 mining projects under the New Zealand Government's Fast-Track Approvals Bill. The bill establishes a new permitting framework for major development initiatives. It is anticipated that the Fast-Track Approvals Bill will be enacted later this year and will feature an expert panel tasked with evaluating the projects and advising the joint Ministers on approval decisions, reports Scotia.
• Mexico's plan for a ban on open pit mining was not included in a list of 100 pledges outlined by incoming President Claudia Sheinbaum on October 1, the day of her inauguration. Sheinbaum signaled in her campaign that she supported the policies of her predecessor, President Andrés Manuel López Obrador — also known by his initials AMLO — who took a hard line on the mining sector, including pushing for a ban in Mexico's legislature. While analysts said they still expect Sheinbaum to hew closely to AMLO's policies, the new president may take a different approach on certain issues, reports S&P, including her predecessor's proposal to ban open pit mining.
• According to Canaccord, gold and gold equities have consistently outperformed during QE cycles. Further, supporting the gold price is the sharp increase in U.S. debt levels. The Congressional Budget Office recently raised its forecast for the U.S. deficit to $2 trillion for 2024, around 7% of GDP, with deficits expected to average 6.3% of GDP over the next decade.

Threats

• West African Resources saw its shares plunge by as much as 25% after reports emerged that the Burkina Faso government plans to revoke mining permits. Multiple news outlets, including Reuters, cited President Traore’s recent radio address, in which he suggested that the government is targeting miners who have not complied with the Mining Code. Speaking on the two-year anniversary of his takeover, Traore stated, “We know how to mine our gold, and I don’t understand why we should let multinationals do it... We are going to withdraw mining permits.”
• Equinox Gold issued 24.8 million shares to satisfy the conversion of a $130 million convertible held by Ninety Fourth Investment Company. However, BMO was immediately engaged by Ninety Fourth to offer the shares in a secondary placement as they wanted cash and not shares. Equinox did not receive any proceeds from the offering.
• After briefly arresting four Barrick Gold employees, the government of Mali is seeking $512 million in back taxes and dividends from the company under the revised mining code. B2Gold, Resolute Mining and Allied Gold have already come to a settlement and Barrick was the only major mining company left to come to terms with the government, hence the arrest. Malian officials have said companies can accept the new law or leave the county.