We got more bullish news for the precious metals after the June CPI number, which again came in hot, increasing 5.20% year/year and 0.90% month/month (10.80% annualized). This was followed by hot inflation data measured by the producer price index (PPI), which increased 7.20% year/year. The PPI should be a leading indicator (and to a degree, it is) for the heavily manipulated CPI measure. The PPI is an index measuring the increase in producer prices. To maintain margins, if producers face higher costs, they will pass it onto the consumer; but because of how the CPI and PPI are calculated, using it as a leading indicator isn't as accurate as it should be.
Unlike the May CPI data release, the metals have traded marginally higher several days after the numbers were released, though they did get hit on Friday. If gold can have another strong week next week (gold appreciating to $1,840-$1,850/oz.) +/-, the short-term downtrend will be broken, and the metals will head higher. Gold and silver have the ultimate tailwind; inflation.
Further supporting precious metals prices are the fall in nominal rates. This is a result of there being too much liquidity in the system. However, the Fed can't withdraw it from the market for various reasons, including the fact deficit spending in the second half of the year will be directly monetized by the Fed. The reverse repo market has grown significantly over the last month. This is essentially done so the Fed can prevent all the excess liquidity from getting into the economy.
$AGI, $USAS, $AYA, $CXB, $DSV, $EGO, $AG, $F, $GATO, $GCM, $HL, $HSTR, $KNT, $KRR, $KL, $LUG, $NGD, $OR, $SLVR, $TFPM, $VGCX
Alamos Gold: Reported results from the ongoing underground exploration drilling program at Young-Davidson which has been successful at extending gold mineralization outside of Mineral Reserves and Resources. Gold mineralization Is extended 150m below the existing Inferred resources with highlights including:
- 34.57m @ 3.35 g/t Au
- 11.25m @ 5.42 g/t
- 9m @ 4.36 g/t
- 13.7m @ 5.79 g/t
- 3.84m @ 8.32 g/t
The $7m exploration budget for Young Davidson (YD) is the first significant exploration program at the mine since 2011. There is little reason to engage in exploration as the company has been focused on the lower mine expansion and because YD still has a 14-year mine life based on reserves.
America’s Gold and Silver: Provided an exploration and corporate update at the Galena Complex in Idaho. The Phase I drill program is complete, and an updated MRE will be released before the end of August 2021. The targeted resource additions through June are expected to be at least 50m oz. The company also released the results of a drill program targeting the downdip extension of the Silver Vein, highlighted by 3.8m @ 3,345 g/t Ag and 2.80% Cu, 4.1m @ 2,460 g/t Ag and 2.1% Cu, and 2.2m @ 3,996 g/t Ag and 4.0% Cu.
Aya Gold & Silver: Announced record quarterly production in Q2 2021 of 439k oz. Ag at improved recovery rates. The company continues its aggressive exploration program with the goal of identifying 50m oz. of silver in 2021, setting the stage for a significant mill expansion over the next couple of years.
Calibre: Reported strong Q2 production and provided an update regarding the progress it made at the Eastern-Borosi (EB) high-grade "spoke." Gold production in Q2 was 43.5k oz. Au, keeping the company on track to meet full-year production guidance of 170-180k oz. The company's cash position continues to grow despite an aggressive ongoing drill program, standing at US$66.3m, an $8.1m increase over Q1. During the quarter, an average of 550tpd of ore was delivered from the Pavon Norte mine (to the Libertad mill), a 57% increase over Q1, 2021. Calibre is targeting 1ktpd by the end of 2021. At EB, Calibre completed 75% of the infill, metallurgical, geotechnical, and hydrological drilling and acquired most of the required surface rights during the quarter. Calibre drill highlights include:
- 6.5m @ 9.07 g/t Au (Eastern Borosi)
- 1.9m @ 25.90 g/t Au (Eastern Borosi)
- 2.2m @ 26.49 g/t Au (Eastern Borosi)
- 7.1m 6.42 g/t Au (Eastern Borosi)
- 5.4m @ 11.37 g/t Au (Libertad mill site)
- 4.4m @ 13.83 g/t Au (Libertad mill site)
- 2.8m @ 16.78 g/t Au (Libertad mill site)
- 7.1m @ 5.50 g/t Au (Limon mill site)
Discovery Silver: Announced results from 13 diamond drill holes along the Josefina high-grade vein trend at its Cordero project. The results from this program will be incorporated in a new resource estimate in 3Q 2021 and PEA in 4Q 2021. Phase 2 drilling is ongoing and is focused on resource definition and expansion. Highlights include:
- 1.1m @ 1,570 g/t Ag, 16.25 g/t Au, and 26% Pb + Zn
- 28.5m @ 122 g/t Ag, 0.06 g/t Au, and 3.0% Pb + Zn
- 1.4m @ 1,385 g/t Ag, 0.49 g/t Au, and 18.40% Pb + Zn
- 4.5m @ 385 g/t Ag, 1.15 g/t Au, and 17.80% Pb + Zn
- 1.3m @ 420 g/t Ag, 0.32 g/t Au, and 23.70% Pb + Zn
El-Dorado Gold: The Company produced 116k oz. Au during the quarter, bringing first-half gold production to 227.8k oz. Production is expected to fall in the second half of the year at Kisladag, partially negated by higher production at Lamque for the full-year 2021 estimated gold production of 430-460k oz. El-Dorado has one of the highest 5yr production growth profiles amongst its mid-tier peer group, with output at Lamaque expected to increase, potentially significantly, and developing its development assets in Greece.
First Majestic Silver: The Company produced 3.3m oz. Ag and 46.54k oz. Au during the quarter, which includes a partial quarter of contribution (two months). The company also guided the second half of 2021. In the 2H 2021, silver production is forecast to be 6.7-7.6m oz. Ag (including 4-4.5m oz. from San Dimas) and 111-124k oz. Au. Consolidated cash costs and AISC are expected to be elevated at $12.20-$13.60/AgEq oz. and $17.57-$19.53/AgEq oz. Higher costs are primarily due to the AISC of $1,816-$1,949/oz. Au at Jerritt Canyon. Jerritt Canyon hasn't been invested in properly. Now, First Majestic can provide it with adequate capital investment and optimize operations, which is expected to push costs lower, perhaps significantly. First Majestic revised their capital budget 22% higher to $205m.
Fiore: Reported higher calendar year Q2 2021 production of 11.75k oz. Au from its Pan open-pit mine in Nevada. The company is building its cash position, which currently stands at US$18.5m. The first ore on the new leach pad in June 2021 and commenced irrigation in July, which is expected to increase production in calendar quarter Q3 (the company's fiscal Q4). Gold Rock, the next project to be built, announced drill results, highlighted by 24.4m @ 2.85 g/t Au and 40.4m @ 0.70 g/t. The phase 2 drill program is expected to start in Q3, targeting extensions of the three southeast plunging veins at depth. The targeted resource additions for the phase 2 drill program are an additional 50m oz. Ag (100% basis).
Gatos Silver: The Company announced a public offering of up to 7.25m shares (approx. 13% dilution). They can offer up to 2.093m shares (Electrum will remain the company’s largest shareholder). The proceeds from the equity raise will be used to retire the outstanding debt on the joint venture, which works out to an attributable debt repayment of $154.8m. The stocks sold off very hard the day it was announced, making no sense as it has fallen far more the dilution to be incurred. It’s never fun when a company dilutes shareholders. Still, in this case, the funds will be used to deleverage the company from relatively high debt levels (relative to its cash flow generation).
Gran Colombia: Produced a total of 16.8k oz Au at its Segovia Operations in June 2021, bringing the total gold production for the second quarter of 2021 to 52,198 ounces compared with 44,377 ounces from Segovia in the second quarter of 2020. The company also produced 54,573 ounces of silver at Segovia in the second quarter of 2021, up from 41,342 ounces of silver in the second quarter last year. For the first half of 2021, Segovia's gold and silver production totaled 101,256 ounces and 111,888 ounces, respectively, up from 94,723 ounces of gold and 87,260 ounces of silver in the first half of 2020. The real story for Gran Colombia going forward is twofold) Aris Gold completing the Marmato expansion (which Gran Colombia has a significant interest in) and the near and medium-term future with Toroparu. Gran Colombia is undertaking an updated PEA even though there have been other PEA's and FS's published. Ideally, the company will commence construction in the 1H 2023 as the company will also have to undertake an updated FS.
Hecla Mining: The Company produced 10.1m AgEq in Q2 2021, consisting of 3.5m oz. Ag, 59k oz. Au plus lead and zinc. The Lucky Friday mine continues to see production grow as the company produced the second-highest quarterly silver production since 2016. Hecla generates plenty of free cash at current metal prices as the company increased its cash position by $42m in Q2 to $181m.
Heliostar Metals: announce results from nineteen additional drill holes completed at the Apollo target at the Unga project in 2021. Drill highlights At Apollo include:
- 1.52m @ 9.81 g/t Au
- 1.52m @ 7.0 g/t
- 22.9m @ 2.04 AuEq g/t
- 1.52m @ 7.07 g/t
- 1.52m @ 4.32 g/t
K92 Mining: The Company achieved record quarterly throughput with 75,667 metric tons processed, a 53% increase relative to Q2 2020. K92 produced 25k AuEq oz. in Q2 as production was materially impacted by a surge in CV-19 cases in PNG and the suspension of expatriate travel between Australia and PNG from mid-March through mid-May. Due to positive drill results, the first production stoping from the Judd vein system is expected in Q4, which should increase production further. The significant Phase III expansion continues as it transforms the Kainantu gold mine into a tier-I asset (which will increase production to a base of 318k oz. Au and potentially above 400k oz. p.a. if the excess capacity from the Phase II expansion is utilized. It will also become one of the highest margin gold mines, with AISC forecast to be $362/oz. net of copper byproducts (which could be lower if strong copper prices persist).
Karora Resources: Announce record quarterly consolidated gold production since the Higginsville acquisition of 29,831 ounces for the second quarter of 2021 from its Beta Hunt and Higginsville mines in Western Australia. Gold sales were also a record, with 30,412 ounces sold during the quarter. Production was 20% higher relative to Q1, and the company remains on track to achieve production guidance of 105-115k oz. Au. Karora's cash balance increased in Q2 by $5.4m to $82.2m. During the second quarter, Karora announced its growth plan to more than double consolidated gold production from 99k oz in 2020 to 185,000 – 205,000 ounces by 2024. Costs are forecasted to continue to decline, with 2024 AISC of US$885-US$985 per ounce via a phased expansion of Karora's Beta Hunt underground mine and increasing milling capacity to 2.5 Mtpa at the HGO processing facility.
Kirkland Lake Gold: The Company announced a quarterly production record for Q2. Kirkland produced 379.2k oz. Au, a 15% increase over the comparable period in 2020 and 25% higher than Q1 2021. Fosterville produced 158k oz. Au, while Detour Lake achieved record quarterly production of 165.88k oz. Macassa produced 55.3k oz. Production is likely to moderate in the second half, with lower production expected from Fosterville partially negated by higher production expected from Detour Lake and Macassa. Kirkland retains one of the strongest balance sheets amongst senior gold producers with a net cash position of $855m. The ongoing expansion of the Macassa mine is tracking one month ahead of schedule, with completion expected before year-end 2022.
Lundin Gold: Reported Q2 production of 180.8k oz. Au, with average throughput of 3,808tpd @ 11.08 g/t. This brings 1H 2021 production to 212.9k oz. Au as the Company remains on track to achieved full-year 2021 guidance of 380-420k oz. Au. We believe Lundin Gold will either be sold or acquire additional assets in the near future. Another company in the Lundin family that would make a good takeover target is Bluestone Resources in Guatemala.
New Gold: Reported Q2 2021 operational results. Total production was 105,705 AuEq oz. (66,989 ounces of gold, 240,029 ounces of silver, and 18.2 million pounds of copper). New Gold has been a perennial destroyer of shareholder value, highlighted by falling output and elevated costs. At this point, New Gold is barely a gold company as gold accounts currently account for approx. 62-68% of total revenue. At quarter-end, the company had a cash position of $138m and liquidity of $464m.
Osisko Gold Royalties: The mid-tier royalty and streaming company reported second-quarter deliveries and sales of 20.18k AuEq oz., excluding that earned from its Renard diamond stream, which will re-commence deliveries in 2022. Production could be higher in the second half of the year with the start-up of the Santana mine and increased production from Eagle. The company also provided several asset updates, including continued exploration success at Canadian Malartic, highlighted by intercepts such as 52m @ 6.3 g/t and 8.6m @ 3.50 g/t Au. Drill results from Cariboo continued to impress, and Osisko Development began drilling at San Antonio. Osisko Mining's Windfall project continued to get better, this time with a new mineralized system being discovered. 1km north of the known deposits.
Silver Tiger Metals: Reported drill holes from its El Tigre. Highlights from this release include:
- 10.8m @ 303 g/t Ag, 0.11 g/t Au, 0.13% Cu, and 1.59% Pb + Zn
- 1.5m @ 534 g/t Ag, 0.09 g/t Au, 0.20% Cu, and 6.39% Pb + Zn
- 0.50m @ 527 g/t Ag, 0.20 g/t Au, 0.25% Cu, and 1.24% Pb + Zn
- 21.9m @ 125 g/t Ag, 0.17 g/t Au, 0.06% Cu, and 1.21% Pb + Zn
Triple Flag Precious Metals: The mid-tier royalty and streaming company reported AuEQ sales of 22,537 oz during Q2, bringing the trailing twelve-month total to 77,481 oz. Attributable production increased 40% vs. the comparable period in 2020, while revenue generated increased 48% over the same period. Production should remain relatively steady in Q3 and Q4 as the company remains on track to achieve attributable production guidance of 83-87 AuEq oz. in 2021.
Victoria Gold: Q2 production was 32,140 oz. Au, bringing the first-half production to 58.9k oz. Metric tons milled increased to 2.3mt from 1.6mt in Q1, while the strip ratio fell from 2.9 to 1.5 at 0.81 g/t Au, down from 0.87 g/t. Production in the second half of the year will increase, and the company should provide an update regarding Project 250K and Project 2040.
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