Dovish Fed / SoftBank Bets on AI / Gold Junior Commences Production
Published: 7/15/2024
Author: FRC Analysts
Key Highlights
- Last week, the US$ was down 0.7%, while the S&P 500 was up 1.1% WoW, reaching record highs, driven by dovish statements from the Fed, soft inflation data, and a cooling labor market
- A gold junior under coverage and its partner Kinross Gold (NYSE: KGC) have commenced production at their mine in Alaska
- A Japanese tech company under coverage beat our revenue forecast; one of its flagship products promotes hair growth and mitigates hair loss
- The Realized HODL ratio (RHODL) of Bitcoin decreased last week, suggesting potential for a downtick in near-term prices
- SoftBank (TSE: 9984) is paying over 100 times revenue for a chipmaker, reflecting intense interest in the growing AI chip sector
Contango Ore, Inc. (CTGO)
PR Title: Pours first gold, and completes HighGold acquisition
Analyst Opinion: Positive - CTGO and partner Kinross Gold have commenced production at their Manh Choh mine in Alaska. This project has potential to operate for 4.5 years, producing 225 Koz/year (67.5 Koz for CTGO), with an average grade of 8 gpt; making it a medium-sized/ultra high-grade open-pit gold mine. As outlined in our May 2024 update report, through its acquisition of HighGold Mining, CTGO has assembled a portfolio of projects capable of potentially producing over 200 Koz of gold per year. HighGold owns an ultra high-grade gold project in coastal Alaska with resources totaling 1.1 Moz. This project can be advanced to production quickly and cost-effectively.
Skyharbour Resources Ltd. (SYH.V, SYHBF)
PR Title: Expands high-grade uranium mineralization at the Moore uranium project; announces a discovery at Russell Lake uranium project (Saskatchewan)
Analyst Opinion: Positive - All seven holes intersected uranium mineralization at shallow depths, expanding the Main Maverick zone at the Moore uranium project. Key intercepts include 1 m of 7.3% U3O8, within 5 m of 4.61% U3O8, and 11.5 m of 1.11% U3O8. Additionally, initial findings from a two-phase drill program at the Russell Lake project have been encouraging, with grades reported up to 3.0% U3O8.
Advanced Gold Exploration (AUHIF, AUHI.CN)
PR Title: Expands the Buck Lake property claims (Ontario)
Analyst Opinion: Positive - The company has acquired 81 copper exploration claims contiguous to its Buck Lake property. Previous drilling on these claims has intersected massive sulphides, suggesting the potential for hosting a copper/zinc volcanic massive sulfide (VMS) deposit. Buck Lake itself has seen limited exploration so far, with only one drill hole conducted, and a geophysical survey identifying a 2 km anomaly associated with VMS deposits.
Churchill Resources Inc. (CRI.V, CRICF)
PR Title: Announces $2.5M private placement
Analyst Opinion: Positive - Proceeds will fund exploration efforts at two nickel projects – Taylor Brook and Florence Lake in Newfoundland and Labrador. These properties exhibit potential for hosting nickel sulphide deposits, which are a primary source of class 1 nickel used in lithium-ion batteries.
Updates on Financials, Technology, Energy, and Special Situations Companies Under Coverage
Pixie Dust Technologies, Inc/ NASDAQ-PSDT
PR Title: Announces FY2024 (ended April 2024) results
Analyst Opinion: Mixed - Revenue was up 41% YoY, beating our estimate by 10%. However, due to higher G&A expenses, net losses were up 14% YoY, and 3% higher than our estimate. We will publish a detailed update shortly. Pixie is a Japanese technology company focused on applying its proprietary wave control technology across a wide range of applications for consumer personal care/healthcare, and businesses. One of its flagship products promotes hair growth and mitigates hair loss. The company also offers products for individuals who are deaf or hard of hearing, and those interested in improving their cognitive abilities.
FRC Top Picks
The following table shows last week’s top five performers among our Top Picks, including four junior resource companies, and a biotech company. The top performer, E3 Lithium, was up 52%. Last month, E3 completed a highly promising pre-feasibility study on its lithium project in Alberta.
| Top Five Weekly Performers | WoW Returns |
| E3 Lithium Limited (ETL.V) | 51.6% |
| Hemostemix Inc. (HEM.V) | 22.2% |
| Contango Ore Inc. (CTGO) | 12.2% |
| Giga Metals Corporation (GIGA.V) | 10.7% |
| Southern Silver Exploration Corp. (SSV.V) | 7.4% |
| * Past performance is not indicative of future performance (as of July 15, 2024) |
Source: FRC
Our top picks have outperformed the benchmark (TSXV) in four out of seven time periods listed below.
Performance by Sector
| Total Return | 1 Week | 1 mo | 3 mo | 6 mo | 1 yr | 3 yr | Since launch |
| Mining | -0.9% | -5.9% | -3.2% | 13.8% | -12.6% | -35.1% | 8.1% |
| Cannabis | N/A | N/A | N/A | N/A | N/A | -44.6% | -23.6% |
| Tech | 0.0% | 0.0% | -6.0% | 0.0% | -40.7% | -31.0% | -4.5% |
| Special Situations (MIC) | 4.5% | 1.5% | 1.4% | 8.6% | 29.4% | -14.5% | -12.0% |
| Private Companies | N/A | N/A | N/A | N/A | 6.7% | 20.5% | 30.5% |
| Portfolio (Total) | 0.0% | -4.5% | -3.6% | 9.2% | -4.4% | -17.9% | 5.0% |
| Benchmark (Total) | 2.9% | 3.9% | 3.1% | 5.4% | -4.9% | -34.5% | -32.8% |
| Portfolio (Annualized) | - | - | - | - | -4.4% | -6.4% | 0.5% |
| Benchmark (Annualized) | - | - | - | - | -4.9% | -13.2% | -3.7% |
1. Since the earliest initiating date of companies in the list of Top Picks (as of July 15, 2024) 2. Green (blue) indicates FRC's picks outperformed (underperformed) the benchmark. 3. Past performance is not indicative of future performance. 4. Our complete list of top picks (updated weekly) can be viewed here: Top Picks List
Market Updates and Insights: Mining
Last week, global equity markets were up 1.2% on average (up 0.7% in the previous week). The US$ is down 0.7% WoW, while the S&P 500 is up 1.1% WoW, reaching record highs, driven by dovish statements from the Fed, soft inflation data, and a cooling labor market. We continue to believe that the Fed will cut rates in Q4-2024.
Source: FRC / Various
Last week, metal prices were down 1.1% on average (up 2.3% in the previous week).
Gold producer valuations were up 5.0% last week (up 5.6% in the prior week); base metal producers were up 3.0% last week (up 2.8% in the prior week). On average, gold producer valuations are 12% lower (previously 17%) than the past three instances when gold surpassed US$2k/oz.
| 08-Jul-24 | 15-Jul-24 | ||||
| Gold Producers | EV / R (forward) | EV / EBITDA (forward) | EV / R (forward) | EV / EBITDA (forward) | |
| 1 | Barrick | 3.09 | 6.45 | 3.20 | 6.54 |
| 2 | Newmont | 3.30 | 7.51 | 3.45 | 7.81 |
| 3 | Agnico Eagle | 4.66 | 8.54 | 4.93 | 9.04 |
| 4 | AngloGold | 2.51 | 5.82 | 2.53 | 5.84 |
| 5 | Kinross Gold | 2.61 | 5.78 | 2.77 | 5.92 |
| 6 | Gold Fields | 2.78 | 5.14 | 2.91 | 5.54 |
| 7 | Sibanye | 0.70 | 3.86 | 0.70 | 3.82 |
| 8 | Hecla Mining | 4.54 | 13.94 | 5.10 | 14.79 |
| 9 | B2Gold | 1.67 | 3.27 | 1.80 | 3.49 |
| 10 | Alamos | 4.91 | 9.17 | 5.53 | 10.00 |
| 11 | Harmony | 1.76 | 5.27 | 1.78 | 5.42 |
| 12 | Eldorado Gold | 2.50 | 5.12 | 2.63 | 5.31 |
| Average (excl outliers) | 2.77 | 5.99 | 2.93 | 6.25 | |
| Min | 0.70 | 3.27 | 0.70 | 3.49 | |
| Max | 4.91 | 13.94 | 5.53 | 14.79 | |
| Base Metal Producers | EV / R (forward) | EV / EBITDA (forward) | EV / R (forward) | EV / EBITDA (forward) | |
| 1 | BHP Group | 2.99 | 5.75 | 3.02 | 5.76 |
| 2 | Rio Tinto | 2.22 | 4.73 | 2.24 | 4.78 |
| 3 | South32 | 1.63 | 7.38 | 1.59 | 7.17 |
| 4 | Glencore | 0.46 | 6.02 | 0.46 | 5.96 |
| 5 | Anglo American | 1.92 | 5.65 | 1.90 | 5.56 |
| 6 | Teck Resources | 2.97 | 7.00 | 3.56 | 8.18 |
| 7 | First Quantum | 3.93 | 12.80 | 3.96 | 13.05 |
| Average (excl outliers) | 2.30 | 7.05 | 2.39 | 7.21 | |
| Min | 0.46 | 4.73 | 0.46 | 4.78 | |
| Max | 3.93 | 12.80 | 3.96 | 13.05 | |
Source: S&P Capital IQ & FRC
We are maintaining our metal price forecasts.
Market Updates and Insights: Cryptos
Prices of mainstream/popular cryptos were up 12% on average last week (down 9% in the previous week).
| July 15, 2024 | |
| Crypto Stocks | EV/Revenue |
| Argo Blockchain | 1.8 |
| BIGG Digital | 5.6 |
| Bitcoin Well | 0.8 |
| Canaan Inc. | 1.3 |
| CleanSpark Inc. | 11.9 |
| Coinbase Global | 13.6 |
| Galaxy Digital Holdings | N/A |
| HIVE Digital | 3.7 |
| Hut 8 Mining Corp. | 8.2 |
| Marathon Digital Holdings | 11.3 |
| Riot Platforms | 7.6 |
| SATO Technologies | 1.7 |
| Average | 6.1 |
| Median | 5.6 |
| Min | 0.8 |
| Max | 13.6 |
Source: FRC/Yahoo Finance
The global MCAP of cryptos is US$2.31T, down 9% MoM, but up 83%YoY.
Total Crypto Market Cap Chart
Source: CoinGecko
Last week, BTC was up 10.2%, while the S&P 500 was up 1.1%. The U.S. 10-year treasury yield was down 0.04 pp.
Source: FRC/ Yahoo Finance
The global hash rate of BTC (defined as calculations performed per second/an indicator of network difficulty) is 584 exahashes per second (EH/s), up 2% WoW, and 2% MoM. The increase in hash rates is negative for miners as their efficiency rates (BTC production per EH/s) are inversely linked to global hash rates.
Total Hash Rate (BTC)
The Realized HODL ratio (RHODL), which gauges the activity of short-term holders relative to long-term holders, was down 29% WoW, but up 292% YoY. We interpret the decrease in RHODL as a sign of weakening demand, suggesting potential for a downtick in near-term prices. Historically, BTC prices have moved in tandem with this ratio. By tracking RHODL, we believe we can identify potential turning points in BTC prices.
Source: FRC/ Various
Companies operating in the crypto space are trading at an average EV/R of 6.1x (unchanged).
Source: S&P Capital IQ/FRC
| July 15, 2024 | ||
| Cryptos | WoW | YoY |
| Bitcoin | 10% | 110% |
| Binance Coin | 10% | 130% |
| Cardano | 13% | 34% |
| Ethereum | 10% | 76% |
| Polkadot | 7% | 16% |
| XRP | 21% | 25% |
| Polygon | 8% | -34% |
| Solana | 13% | 459% |
| Average | 12% | 102% |
| Min | 7% | -34% |
| Max | 21% | 459% |
| Indices | ||
| Canadian | WoW | YoY |
| BTCC | 11% | 107% |
| BTCX | 11% | 119% |
| EBIT | 12% | 117% |
| FBTC | 11% | 36% |
| U.S. | WoW | YoY |
| BITO | 11% | 40% |
| BTF | 12% | 69% |
| IBLC | 9% | 55% |
Source: S&P Capital IQ/FRC
Market Updates and Insights: Artificial Intelligence/AI
Major AI indices are up 1% WoW on average (up 2% in the previous week), and 11% YoY.
| July 15, 2024 | ||
| AI Indices | WoW | YoY |
| First Trust Nasdaq AI and Robotics ETF | 3% | -6% |
| Global X Robotics & AI ETF | 2% | 8% |
| Global X AI & Technology ETF | -0.2% | 26% |
| iShares Robotics and AI Multisector ETF | 1% | -1% |
| Roundhill Generative AI & Technology ETF | -2% | 27% |
| Average | 1% | 11% |
| Min | -2% | -6% |
| Max | 3% | 27% |
Source: FRC/Various
The following table highlights some of the most popular large-cap AI stocks. Shares of these companies are down 1% WoW on average (up 5% in the previous week), and 108% YoY. Their average P/E is 43.2x (previously 43.3x) vs the NASDAQ-100 Index’s average of 32.7x (previously 32.4x).
| AI Stocks | WoW | YoY | P/E |
| Arista Networks | -3% | 112% | 50 |
| Dell Technologies | -6% | 150% | 29 |
| Microsoft Corporation | -2% | 31% | 39 |
| NVIDIA Corp | -2% | 176% | 76 |
| Micron Technology | -1% | 101% | n/a |
| Palantir Technologies | 3% | 66% | n/a |
| Qualcomm | 1% | 68% | 27 |
| Super Micro Computer (SMCI) | -1% | 197% | 50 |
| Taiwan Semiconductor Manufacturing | 1% | 76% | 32 |
| Average | -1% | 108% | 43 |
| Median | -1% | 101% | 39 |
| Min | -6% | 31% | 27 |
| Max | 3% | 197% | 76 |
Source: FRC/Various
Key Developments:
- Japanese investment bank SoftBank Group has acquired U.K.-based AI chip designer Graphcore for US$600M. Despite Graphcore's revenue being under US$5M, we believe the high price reflects intense interest in the growing AI chip sector. We anticipate this sector to witness a surge in M&A activity in the coming year.
