Gold was near flat this week, up just 0.3% to US$1,796/oz as there was limited major economic news flow especially in contrast to a series of material announcements that had been made over the past several weeks, driving equity market volatility.
This week we look at metals price forecasts for 2023, with expectations for a broad decline, with precious metals outperforming base metals, and the shifts in the TSXV Top 10 Gold stocks by market cap from January 2022 to December 2022.
The producing and junior gold miners rose, with the GDX up 0.9% and GDXJ gaining 2.5% and the larger cap TSXV gold stocks were mixed even as gold only edged up and the equity markets were near flat on limited major economic news flow.
Gold was near flat, up just 0.3% to US$1,796/oz, and equity markets were near flat
as there was limited major economic news flow especially in contrast to the series of
major announcements over the past two months that drove considerable stock
market volatility. The markets will likely remain relatively subdued heading into the
holiday period, although there may be an upwards lilt to the market because of
'window dressing'. This occurs when funds will make some moderate purchases of
the stocks they hold to bump up their prices slightly giving their returns for the year
a small lift and improving their overall performance
It appears that gold will just break US$1,800/oz this year, having averaged US$1,801/oz, and even a dip in these last few trading days will not drag it down below this benchmark level, which it has held for a second year, with 2021 averaging exactly US$1,800/oz. While we didn't make an explicit forecast for gold in 2022, we expected it to 'hold up' this year, and it has certainly done that. We had also been cautious on any potential upside for gold, and beyond one brief spike towards US$2,100/oz on geopolitical risk in March 2022, sustained upside for gold was limited this year.
With 2022 now nearly behind us, we can see that the performance of metals prices this year has been quite mixed, especially in contrast to the surge in 2021. Last year almost every major metal was up over 20% or more with gold the only laggard, and even it was up 2%. In 2022, based on averages to November, six of these ten metals declined, with only aluminum, nickel and zinc seeing major gains. These price movements in 2022 are still reflecting market distortions caused by the global health crisis, with certain metals having faced lingering shortages driven by shutdowns even as demand rebounded through 2021 and 2022, causing substantial price spikes.
By 2023 it is expected that most of these supply chain distortions will have been largely worked out, and that these metals markets will return to being driven by the 'normal' forces of supply and demand. However, just as the supply side recovers, a major decline in demand is expected in 2023 from a global recession, which is being driven by surging interest rates. The World Bank forecasts that almost all of the major metals' prices will decline, with five base metals down -18% or more and the tin price expected to see the worst performance, dropping -31%. The precious metals are expected to fare slightly better, with gold down -6%, silver down -3% and platinum the only gainer, but only by 4%. These three precious metals have a monetary and risk hedge element to their demand which will support them, and while they are partly driven broader industrial demand, it is not to the high degree of the base metals.
For comparison, we also look at the metals' price forecasts of the London Metal Exchange which also targets a decline for gold, silver and copper, but to a lesser degree than the World Bank. WB has gold, silver and copper down -5.6%, -3.0%, and -17.6% in 2023F, versus -2.7%, -0.4% and -9.7%, respectively, for the LME. Nonetheless, we see a similar general theme, which is an outperformance of the precious metals like gold and silver versus base metals like copper. Overall, it seems to imply that overall risk will be rising and monetary stability still in question with high inflation and rising rates, driving a move towards the inflation and risk hedges of precious metals, while base metals are potentially hit by a global economic slowdown.
While we agree with the broad themes of these forecasts for 2023, with precious metals holding up versus the base metals, we believe that there is potential for an even wider spread in the price movement between the two groups. We see a chance that precious metals, especially gold, actually rise next year, as inflation could remain relatively high while the Fed could be forced to pull back on its aggressive monetary stance sooner than expected if both rising unemployment and geopolitical risks continue. At the same time, forces which have already been put in motion this year by the huge rise in interest rates could drive the economy down more than expected, hitting the base metals prices even harder than these current forecasts.
With the year coming to a close, this week we look at the shifts in the Top 10 TSXV
Gold by market cap over the year, with significant changes in the sector leaders, with
only five of January 2022's Top 10 in the December 2022 Top 10. The number one at
the start of the year, Great Bear Resources, was off the list by February 2022, after
being acquired by Kinross, with the company pre-Initial Resource Estimate but with
strong drill results and continuity across a large project in Ontario (Figure 7).
Three of the Top 10 from January 2022 graduated from the TSXV to the TSX, as their operations became more established and there were able to meet the stricter listing requirements of the main exchange. One was Rupert Resources, at number four in January 2022, operating the Rupert Lapland project in Finland, for which a PEA was released in November 2022, and it was one of the largest of the TSXV gold stocks, before moving to TSX in December 2022. Arizona Metals, number six at the start of 2022, also graduated to the TSX this year in October, after continued strong drill results from the exploration stage Kay Mine gold-copper-zinc project in Arizona.
While we include Orezone Gold in January 2022, it actually moved to the TSX at the very end of December 2021, driven by an advanced development project at the time, Bombore in Burkina Faso, which continued to progress over the past year and entered commercial production in December 2022. While Eskay Mining, at the exploration stage in BC, dropped out of the Top 10, it is still in the Top 20.
Five of the companies from January 2022 remain in the Top 10 as of December 2022,
and four of these have moved up in position. The January 2022 number two, New
Found Gold has moved to number one in the absence of Great Bear. The company
is developing the Queensway project, which has the highest consistent grades of the
large TSXV gold stocks and increasing evidence of continuity. As with Great Bear,
the company has held off on an Initial Resource Estimate so far as the project
continues to expand to more zones, and it looks like a potential takeover target.
However, the company's market cap it still down -33% this year as investors have
become increasingly risk averse, and earlier stage exploration companies, even those
with particularly impressive drill results like New Found Gold, are getting hit as the
market is looking for increasingly more concrete evidence to support valuations, at
least an Initial Resource Estimate, if not a PEA or Feasibility Study.
Number two Artemis has risen from number three in January, with its Blackwater project in British Columbia, one of the largest of the TSXV gold stocks, at a very advanced stage, having secured financing and already started the early stages of construction. The advanced stage of Blackwater helped support Artemis' share price, which is down just -17%, considerably ahead of several companies in the Top 10 still at the exploration stage. The third largest market cap stock, Osisko Development, is down -48 even though it had three projects in production this year. However, this was only test mining at Bonanza Ledge in BC, part of the PEA-Stage Cariboo project, which was completed, and at Tintic in Utah, which the company acquired this year. There was also processing of a stockpile from San Antonio, which is at the Initial Resource Estimate stage. Prime Mining, at the exploration stage for its Los Reyes project in Mexico, has dropped from seventh to eight place, and is down -51% even as it delivered strong drill results throughout the year. Tudor Gold declined -46% but rose from tenth to ninth place and is at the Initial Resource Estimate stage for its Treaty Creek project in BC and reported moderate grade drill results in 2022.
Five new stocks entered the Top 10 since January 2022, with the biggest gainer
Reunion Gold, up 388% to fourth place, the only one of the Top 10 starting the year
around the C$100mn market cap level. The company operates Oko West in a
historically prolific gold belt in Guyana, which is at the exploration stage and surged
over 2022 on very high-grade gold results. Gabriel Resources, the second largest
newcomer, at number five, is up 119%, mainly from progress on its arbitration case
with the UN over its Rosia Montana project in Romania. The project is at a newly
designated World Heritage Site which prevented development, and Gabriel
Resources is expected to receive some compensation for this from the arbitration
tribunal. G Mining Ventures, in sixth place, has seen the second largest gain in market
cap, up 55%, with a Feasibility Study released early in 2022 for its advanced
Tocantinzinho project in Brazil, with the mine in the early phases of construction.
Robex Resources, one of only two companies in the Top 10 in full production, has reached seventh place with steady output at its Nampala mine in Mali and exploration at its Kinero project driving up its market cap 20%. The other producer, Minera Alamos, operating in Mexico, is in tenth place, with its Santana mine in its first full year of production, limiting its market cap decline to -18%, and the Initial Resource Estimate-stage Cerro De Oro and PEA-stage La Fortuna projects in development.
The producing gold miners all rose and the TSXV junior gold miners were mixed as
gold edged up and the equity markets were nearly flat (Figures 9, 10). For the
producing miners, Barrick's JV operating the Veladero project in San Juan, Argentina
completed energizing its new power line. Iamgold reported that Sumitomo Metal
Mining would provide up to $340mn in funding for the Cote Gold project and the sale
of the Boto Gold Project and surrounding exploration assets for $282mn to Managem.
Alamos announced a Normal Course Issuer Bid to cancel up to 10% of its public float
and entered into an agreement to sell a portfolio of non-core royalties to Metalla
Royalty and Streaming for US$5.0 in Metalla shares (Figure 11).
For the Canadian juniors operating mainly domestically, Laurion Mineral Exploration appointed Mr. Vikram Jayaraman, of global engineering, project delivery and asset management company DRA Americas, to its Technical Advisory Board (Figure 12). For the Canadian juniors operating mainly internationally, Prime Mining completed its $21.045mn bought deal private placement of 14.030 mn units at $1.50/unit including the full exercise of the over-allotment option and Thor Explorations announced drill results from the Makosa deposit at its Douta Gold project (Figure 13).