SWOT Analysis: More Acquisitions in the Metals Space
-- Published: Monday, 18 September 2017 | Print | Disqus
By Frank Holmes
The best performing precious metal for the week was gold, down slightly 1.86 percent. Jeff Christian, managing director of research consultancy CPM Group, thinks that the price of gold is headed much higher in the next three years, reports TheStreet.com. “We thought gold would find a bottom in 2015 and that by 2020 we could see gold set a new record gold price in nominal terms, above $1,700 an ounce,” Christian said.
According to Deutsche Bank strategist George Saravelos, it doesn’t look like the U.S. dollar will see a reversal of fortunes anytime soon, reports Business Insider. Since January, the greenback has lost around 11 percent versus a basket of peers. In a note to clients, Saravelos says there are a couple of key changes showing that the dollar is in trouble.The first is that the market still isn’t pricing additional rate hikes and the second is that the drivers of the foreign exchange market are seeing a fundamental shift. If the dollar stays low, gold could continue to shine.
This week, Victoria Gold Corp. announced analytical results from its ongoing 2017 Dublin Gulch campaign, specifically the Olive zone.Exploration drilling at Olive included 3.3 meters of 1.5 g/t gold, highlighting that additional, near-Olive gold mineralization exists at Dublin Gulch and validating the Potato Hills Trend mineralization model, according to a press release.
Although all of the precious metals were down this week, the worst performer was platinum, dropping 3.83 percent. Platinum investors were spooked by Impala Platinum’s annual results earlier in the week, reports Business Day, as production came in below targets. In addition, Bloomberg reports that the company’s Zimbabwe unit has authorized the handover of 24,000 hectares of land to the Zimbabwe government.
Gold weakened on Thursday following the announcement of better-than-expected U.S. inflation data for August, reports Kitco News. The U.S. consumer price index (CPI) rose 0.4 percent in August, led by increased gasoline and shelter costs. Gold prices plunged in an immediate reaction to the data released by the U.S. Labor Department.
Canadian mining company Eldorado Gold on Monday threatened to suspend a major investment in Greece in 10 days, reports the Associated Press, accusing the government of delaying permits and licenses. Eldorado is one of Greece’s largest foreign investors, but its mines in the northern part of the country have faced “vehement opposition from parts of local communities on environmental grounds, with protests often turning violent,” the article reads. The decision will take effect September 21 unless talks with the government end permit delays.
Alamos Gold announced its friendly acquisition of Richmont Mines, whereby Alamos will acquire all of the issued and outstanding shares of Richmont. The arrangement further enhances Alamos’ position as a leading intermediate gold producer, reports Bloomberg. The acquisition provides Alamos with a high-quality, free cash flowing mine in a world class jurisdiction. In other company news, Centerra Gold has reached a comprehensive settlement with the government of Kyrgyz Republic, where the company agreed to make a one-time lump sum payment totaling $57 million. The company will continue to work closely with the government to expeditiously satisfy the strategic agreement. U.S. Global’s gold portfolio manager Ralph Aldis is doing his own boots-on-the-ground review of another company this week, Klondex Mines. The photo below shows a large gold bearing quartz vein in the company’s Hollister Mine, specifically from the Gloria Vein.
After China outlawed new initial coin offerings last week, the Asian nation said it will ban the trading of bitcoin and other virtual currencies on domestic exchanges, reports Bloomberg. While dealing another large blow to the cryptocurrency market, this could mean a rush to gold as investors move back to the yellow metal as a store of value. In addition, the People’s Bank of China has done trial runs of its own prototype cryptocurrency, the article continues, taking it a step closer to being the first major central bank to issue digital money.
Amid a recent rally in the price of gold, many metal producers are seeking acquisitions. Shandong Gold Group, one of the biggest Chinese miners of the metal, is considering bids for EMR Capital’s Indonesian gold and silver mine, reports Bloomberg. China Gold International is also exploring a possible bid. EMR Capital is a resources-focused private equity firm, and its sale of the Martabe mine could fetch as much as $1.5 billion, the article continues.
Rising gold prices, along with government measures to enforce India’s jewelry industry, are stifling demand in the world’s second-largest bullion market, reports Bloomberg. Typically buying explodes at the start of the traditional festival season of Diwali, but as bullion climbs nearly 10 percent on the Indian market this year, paired with global tensions and reduced chances of a further hike in U.S. rates, the demand outlook has soured, the article continues.
According to Bloomberg, the U.S. is poised to experience its first annual decline in solar-panel installations, as a drop in rooftop demand slows growth in the world’s second-biggest market. Possibly adding to the decline is a trade complaint that could prompt President Trump to impose tariffs on imported panels. Imposing tariffs would mean “installations would significantly drop,” the article continues.
An ex-trader with UBS Group has been arrested and charged with fraud and conspiracy over his suspected role in manipulating the price of precious metals, reports Bloomberg. Andre Flotron, a Swiss citizen, is the second person publicly charged in the U.S. investigation into the fixing of gold, silver, platinum and palladium prices, and could face up to 25 years in prison. “Flotron’s arrest extends the Justice Department’s examination of whether bank traders conspired to rig interest-rate benchmarks and manipulate currency exchanges from 2008 to 2013,” the article reads.
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