The Alain Review:Portfolio Manager and Head of Mining from Finance SA Alain Corbani takes a look at the movers and shakers in the realm of commodities in December. Follow Alain’s series HERE.
During the month of December, gold was up 5.05% and closed at US$1279 an ounce. Silver climbed 8.64% and closed at US$15.46 an ounce. Platinum fell 2.11% and closed at US$788 an ounce. Palladium was up 5.39% and closed at US$1270 an ounce, a new historical high. The FTSE Gold Mines index was up 8.72% in Euros; the S&P / TSX Gold Index was up 7.6%.
As of December 18, 2018, gold net speculative positions stood at 7.5 million ounces, resulting mainly from a decline of gold short futures positions. The US Dollar index was down 0.89% at 96.40 while real interest rates closed the year 9 basis points lower on a sequential basis.
The trend towards strategic minority shareholding positioning continues unabated: Osisko Gold Royalties Ltd. subscribes to 20,554,941 common shares of Barkerville Gold Mines Ltd. for an aggregate subscription price of $6,988,679.94. Osisko now owns 32.30% of the issued and outstanding Common Shares. Barrick Gold Corporation agrees to exercise its participation right in connection with a private placement offering by Reunion Gold Corporation. Upon closing of this additional investment, Barrick would own 15.0% of Reunion’s issued and outstanding common shares.
Exploration News
News coming from the exploration front are generally encouraging: Golden Star Resources Ltd. reports further step out and infill drilling results from its Wassa Underground Gold Mine in Ghana, demonstrating the extension and robustness of the deposit. Kirkland Lake Gold Ltd. announces new high-grade results from the ongoing underground drilling programs at the Fosterville Mine in Victoria, Australia providing confirmation of the geological model and continuity of high-grade, visible-gold bearing mineralization on the Swan Fault. Teranga Gold Corporation publishes encouraging gold intersections from surface and strong, widespread mineralization along trend and to depth at three advanced prospects in Burkina Faso. These drill results will be included in the initial resource estimate for Golden Hill expected to be released in early 2019. Marathon Gold Corporation continues intersecting high-grade gold mineralization at open-pit depths in the southwestern part of the Marathon Deposit in Newfoundland with for dual objective to widen the shallow open pit resources while decreasing the strip ratio.
And so is the emphasis on strong disciplined execution: in that respect, SSR Mining Inc. announces the commercial production at the Chinchillas mine, on schedule and on budget.
The American monetary policy of normalization implemented more than two years ago (which initially reduced the short-term visibility on the direction of the price of gold) begins to show its limits in a context of economic slowdown and measured inflation. Investors needed more visibility on the direction of rates, the signal sent by the FED in December is very clear. History might show that this signal will be identified as the likely trigger for a rebound in the yellow metal which will push the latter to significantly higher levels. The US currency has already started to show a waning bullish momentum most probably in anticipation of low if not lower expected real interest rates: the stars are aligned for an excellent year in 2019.
Alain Corbani
Head of Mining & Manager of the Global Gold and Precious Fund
Finance SA, Paris, France
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