Weekly Mining Commentary

Author: Sid Rajeev, Head Of Research

Global equity indices rallied in the past week based on expectations that the Democrats’ win will result in more stimulus. All seven equity indices we track were up WoW.

Current Vs Pre COVID-19 (as of Jan 11, 2021)

Source: FRC / Various

Gold and silver prices declined 5% – 7%, amid a rebound in the US$ from higher treasury yields.

Week-over-Week (Jan 11, 2021) and Year-over-Year (Jan 11, 2021) US$, Gold , Silver,Copper, Zinc, Nickel

Source: FRC/Various

Valuations of base metals producers were up 7% WoW, while that of gold producers stayed flat.

Source: S&P Capital IQ & FRC

Gold producers and Base Metal Producers from December 2020 to January 2021

Source: S&P Capital IQ & FRC

Inventory levels generally declined on the LME and the SHFE (Shanghai), supporting base metal prices.

Source: FRC / Various

Source: FRC / SHFE

We believe there is a disconnect between market sentiment/valuations, and the surge in COVID-19 cases, and weaker than expected employment data in the U.S. Except India and Russia, most of the hardest hit nations reported record high numbers of new cases in the past week. For the first time during this pandemic, the U.S. reported over 300k new cases, and over 4k deaths, on a single day (January 8, 2020).

Daily New Cases in the US, India, Russia, UK, Spain, Canada

Source: https://www.worldometers.info/coronavirus/

Although the rollout of vaccines has been slower than expected, the pace is gradually picking up. Approximately 28M people in the world have been vaccinated to date, including 9M each in China and the U.S. Currently, 2.7% of the U.S. population has received vaccinations vs 1.4% at the same time last week. This compares to 0.9% for Canada (up from 0.3%), and 3.9% in the U.K. (up from 1.39%). Israel leads the pack at 21% (up from 14%). The U.S. is currently administering 0.6M doses per day. At this rate, we estimate it will take approximately eight months to vaccinate 25% of the U.S. population. Canada’s Minister of Public Services and Procurement recently stated that the Federal government has a plan to inoculate everyone who wants a COVID-19 vaccine on or before September.

COVID-19 vaccination doses administered per 100 people, Jan 11, 2021

Source: Official Data collated by Our World in Data

We believe the six-nine month timeline for vaccine rollout, and the recent surge in cases, implies that restrictions are unlikely to be relaxed until there is a significant decline in new cases.

Our commodity price forecasts (unchanged) are shown below:

FRC Forecasts 2021 and long term on gold, silver, copper, zinc and nickel

Source: FRC