The Alain review: Goodbye Normalization, Hello Neutral Rates  

6 December 2018

The Alain Review:Portfolio Manager and Head of Mining from Finance SA Alain Corbani wraps up the the movers and shakers in the realm of commodities this November. Follow Alain’s series HERE.

During the month of November, gold was up 0.21% and closed at US$1217.55 an ounce. Silver declined 0.73% and closed at US$14,24 an ounce. Platinum fell 3.48% and closed at US$805 an ounce. Palladium was up 11.37% and closed at US$1205 an ounce, a new historical high. The FTSE Gold Mines index was up 1.57% in Euros; the S&P / TSX Gold Index was up 1.36%.

As of November 27, 2018, gold net speculative positions stood at 1.9 million ounces, resulting from a decline of gold long futures positions. The US Dollar index was up 0.15% at 97.27 while real interest rates were sequentially 5 basis points lower.

In constant search for accretive growth, gold mining companies continue focusing on projects generating profitable returns at a gold price of $1250. IAMGOLD Corporation announced positive results from a Feasibility Study for the IAMGOLD/Sumitomo Metal Mining Co., Ltd. (“Sumitomo”), Joint Venture Côté Gold Project in Northern Ontario. The FS establishes economic and operational improvements relative to the Pre-feasibility Study results announced in June 2017. The Extended Mine Plan adds two additional years to the Base Case Mine Plan and increases the IRR to 15.2%.

Corvus Gold, published a Preliminary Economic Assessment Results for its Combined North Bullfrog and Mother Lode Deposits, in Nevada. Most of the PEA resource show an overall strip ratio of 1.08-1 and an IRR of 38% with an estimated payback period of 2.1 years.

INV Metals announced a Positive Feasibility Study for its 100% owned Loma Larga Gold-Copper-Silver Project located in Ecuador. With the projected 12 year mine life, the Feasibility Study demonstrates an after-tax 24.7% IRR and a 2.6-year payback period. That same logic of pursuit for accretive growth, pushed Pan American Silver Corp. and Tahoe Resources Inc. to announce a merger by which Pan American is to acquire all of the outstanding shares of Tahoe in order to create a diversified primary silver asset portfolio across the Americas. At closing of the transaction, existing Pan American and Tahoe shareholders will own approximately 73% and 27% of Pan American, respectively.

The US monetary normalization policy that has been in place for more than two years and which has pushed rates up (and plagued the upward move of gold) is starting to give way to the notion that the Federal Reserve is getting close to a neutral policy stance exacerbated or validated by a fear related to the flattening and potentially the inversion of the US yield curve. In such an environment gold is likely to appreciate, inflation being well anchored in this economic landscape.

Alain Corbani
Head of Mining & Manager of the Global Gold and Precious Fund
Finance SA, Paris, France hosts a variety of articles from a range of sources, our content, while interesting, should not be considered as formal financial advice. Always seek professional guidance and consult a range of sources before investing.

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MiningIR hosts a variety of articles from a range of sources. Our content, while interesting, should not be considered as formal financial advice. Always seek professional guidance and consult a range of sources before investing.
James Hyland, MiningIR