Switzerland’s rejection of the Gold Initiative on Nov-30th should have been welcome news to gold shorts unable to keep gold away from the $1,200 area, but instead the gold price surged in spectacular form. Dec-1st saw both silver and gold undergo huge rallies fueled by short-covering which reversed the gold price $80+ from its opening lows. Big swings in November should continue to dominate December’s trading.
Now with gold and silver prices near key technical resistance levels, it will take continued buying energy to break the downtrends which have the paper gold-silver speculators in control but shaken from November’s volatile moves. With the US Dollar hitting new highs, oil price tumbling under $70, negative pressures will dominate until we can see gold break solidly above $1,225-$1,250 and silver above $17-18.
On the upside, physical demand is very strong for both metals. Negative lease rates (GOFO) which indicates physical gold shortages among the large institutions and central banks. China and Russia continue their gold buying sprees and India reported big news with November’s gold imports hit a 41-month high as buying restrictions are relaxed.
Silver is also seeing strong Indian imports with the GFMS reporting that “massive” Indian silver demand caused a large draw-down of UK silver inventories this year. The UK is not alone as there have been large declines of global silver inventories.
Gold and silver stocks continue to find shaky confidence from investors on rallies and until the fear of much lower gold and silver prices subsides, negative pressures will dominate and volatility will be at historic levels. There is also tax loss selling season in the coming weeks which will ease as we near month’s end. If gold and silver prices are bottoming out here then we could be seeing a similar set-up to 2013 where PM stocks hit their lows on the last trading day of December. The following months saw gold-silver stock indices rally 30-40%.
Following up on strong production numbers released in October, FORTUNA SILVER announced record revenue of $46.4 million and net income of $7.8 million for the quarter despite low metal prices. The revenue marked a 54% increase over the same period the year before, while cash flow from operations before adjustments was $17.8 million, a 135% increase over the same quarter in 2013.
The increase in earnings can be partially attributed to the company’s aggressive cost-cutting. All-in sustaining cash costs came in at $9.12 per oz. silver at the San Jose mine and $13.31 per oz. at Caylloma, representing a decrease of 47% and 23% respectively over 2013 numbers. Silver production increased by 63% in the quarter to 1.8 million oz. The company’s share price climbed from $3.90 at the end of October to $4.76 on December 1st.
SILVERCREST MINES also announced a profitable quarter. The company had net earnings of $0.2 million, compared with $3.7 million in the same quarter last year. It was a similar pattern across the company’s financials, with cash flow from operations dropping 67% to $2.3 million, revenue dropping 41% to $8 million after capitalizing $7.5 million sales, and all-in sustaining cash cost came to $14.99 per silver eq. oz. Adjusted earnings came to $3.6 million.
The company attributes the financial results in part to the 14% drop in its realized silver price and a 7% drop in its realized gold price. Silvercrest said higher operational costs were due to extra costs related to the transition from a heap leach to a milling operation at its Santa Elena mine. And because the company is commissioning an expansion project at Santa Elena it had to capitalize almost half its total sales of $15.5 million.
The company is working to reopen the open pit component at Santa Elena while also increasing production underground. By H1 2015 Silvercrest hopes to have underground ore production up to 1,000 tonnes per day, compared with an average of 450 tonnes per day now. In mid-November Silvercrest optioned the Cumobabi property in Sonora, Mexico from Evrim Resources.
INCA ONE GOLD hit a fresh 52-week high on news that it continues to strengthen its gold-processing profile, hiring Emilio Ortiz as mill superintendent for the Chala One gold milling plant. Ortiz joins Jamie Polar on the operations team, with both men having previously worked in management positions at Barrick Gold’s Piernia mine in Peru.
The company says it is also on track to full commission, the doubling of capacity at Chala One by the end of the year. During the month the company also closed the final $1.4 million tranche of a $5.5 million bond financing it launched in May.
EXETER RESOURCES announced encouraging results of a metallurgical study for a heap leach operation at its Caspiche project in Chile. The latest tests show an average of 90% gold recovery in the first few years of operation, which could improve the economics of the project. The study also showed that recoveries averaged 80% in later years; that the overlying mineralized gravel could work well as an underlayer for the heap; and that cyanide consumption averaged 1.1 kg/tonne.
The company is looking into using the 1.7-million-oz. gold eq. oxide resource as a way to kick-start its massive Caspiche project. Underneath the oxide resource sits another 38 million measured and indicated gold eq. ounces in the sulphides.
SEABRIDGE GOLD wrapped up this season’s drill program at its Deep Kerr after drilling 12,900 metres in 13 core holes. The company reports that the drilling expanded the known size of the deposit and confirmed geological and resource models developed after 2013’s drill program. Most importantly, the company stated that it is highly confident the 2014 results will support a substantial increase of the Deep Kerr resource, with an updated resource expected in the first quarter of 2015.
The company also released its quarterly financials, showing it invested $13.8 million at KSM in the quarter. At the end of September Seabridge had $17.3 million in cash.
GOLD RESOURCE CORP announced a 28% drop in production to 17,262 gold eq. ounces. Financials in the quarter reflected this drop, with the company reporting a net loss of $1.5 million or $0.03 per share on production of 17,262 gold eq. ounces. But the company stated that it would have been in the black except that it stockpiled 5,878 gold eq. oz. in concentrates in preparation for processing the material in the new Aguila Mill Dore facility.
Total cash cost per eq. gold oz. came to $1,324, or $364 per gold eq. oz. after by-product credits. The costs represented a 52% decrease in total cash costs per Au eq. oz. compared to the same quarter in 2013. The company saw $8.8 million in cash flow from mine site operations and ended the quarter with $24.8 million in cash and equivalents.
In keeping with it’s commitment to dividends, the company paid out $1.6 million, or $0.03/share to shareholders in the quarter.
EXCELLON RESOURCES renewed its share buyback program, giving it the option of buying back up to 5.2 million shares over the next year. In the past year the company bought back 105,800 shares at a weighted average price of $1.19, while the company’s share price ended the month at $0.63. Otherwise the company had a quiet month for news as it works to put operational challenges behind it and return to profitability.
TIMBERLINE RESOURCES got a seal of approval on its recent restructuring from the NYSE MKT, which advised the company that it was once again in compliance with the exchange’s listing standards. Timberline recently completed a 1 for 12 share rollback, and the acquisition of Wolfpack Gold (Nevada).
The company reports that there have been no delays with the environmental assessment of its Butte Highlands gold project in Montana, and expects a final environmental impact statement out by the end of 2014.
SANTACRUZ SILVER MINING has announced that, in light of volatility in precious metals and equities markets, it is suspending development at its silver-lead-zinc San Felipe project until market conditions improve.
In relation to the development suspension, the company has also amended a $28.4 million pre-paid silver purchase agreement with JMET. Rather than 4.6 million oz. silver, Santacruz will sell the company 2.6 million oz. at a reduced rate between July 2015 and August 2019. With the reduced contract Santacruz has to repay JMET $16 million, $9 million of which was paid back on the day of the announcement.
The company has also secured a minimum price protection program, which will guarantee it a silver price of at least $17 per oz. for 2015 and Q1 2016, and $16 per oz. for the rest of 2016. The program does not set a maximum metal price.
This re-negotiated deal gives Santacruz greater room and becomes a lower risk approach which should be well received under current silver market conditions.
Peter Spina
President, GoldSeek.com & SilverSeek.com
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