Member Info for TheItalian

Historically, gold has proven to be an excellent store of value and is arguably the best hedge against inflation and stock market volatility. CFRA has a positive view on gold miners based on the following reasons: asset valuation multiples are expanding and asset bubbles are emerging in certain areas, and budget deficits are increasing at alarming rates, creating the specter of future inflation.
CFRA expects central banks to be one of the key drivers of gold demand in the coming years, primarily due to diversification of reserve risk away from the U.S. dollar. In 2018, central banks demand for gold as a reserve asset rose 73% compared to 2017, the highest central bank buying in 50 years; this level of central bank purchases continued in 2019, attributed to geopolitical concerns and the uncertain macroeconomic environment, according to the World Gold Council (WGC). As of the fourth quarter of 2020, the U.S. dollar share of global foreign exchange reserves fell from 71% in 2019 to 59% in 2020, a 25-year low.
The other important driver of demand growth is gold-backed ETFs, which are fully backed by physical gold. In 2020, gold ETFs posted record annual net inflows of $47.9 billion, or 877 tonnes, increasing gold holdings by over a third and reaching an all-time high of 3,752 tonnes.
In May 2018, Goldcorp Chairman Ian Telfer claimed that the world had reached peak gold—a situation where global gold mine production reached its peak and will start declining—and all major gold deposits have already been discovered. In fact, 15 of the world’s 20 largest gold miners (including Barrick Gold Corp., Newmont Mining Corp., AngloGold Ashanti Ltd., and Kinross Gold Corp.) suffered from a decline in their overall remaining years of production (reserve life index) from 2008 to 2017, according to an article published by S&P Global Market Intelligence (SPGMI) in August 2018. SPGMI noted that the increase in gold exploration budgets over the past decade failed to produce any significant discoveries. Spending on gold exploration was at historically high levels in the 10 years prior to 2018, nearly 60% higher than the preceding 18-year period; however, only 215.5 million ounces of gold have been defined in 41 discoveries, eight times below the 1,726 million ounces of gold in 222 discoveries over the preceding 18 years.

CFRA thinks the copper market will soon be entering a structural deficit (even under a bearish demand scenario), with electric vehicles (EVs) and power grid investments driving most of the demand growth, more than offsetting the potential slowdown in the Chinese construction and infrastructure investment. Copper is an important component of power cables and renewable energy generation systems due to its excellent conductivity. We anticipate a strong price rally for copper due to tight supply—a positive catalyst for copper miners.
The growth in EVs will provide a major new source of secular growth for copper, in CFRA’s opinion. All types of EVs consume a large amount of copper—about three to four times as much as conventional cars—as it is used in everything from batteries to copper rotors, electric motors, wiring, and charging infrastructure (such as charging ports and higher overall electricity demand). Copper demand for EVs is expected to increase from 650,000 tonnes in 2020 to 3.3 million tonnes in 2030, according to Reuters. From 2020 to 2027, the global EV market size is projected to grow at a compound annual growth rate (CAGR) of 17.4%, reaching $985.7 billion by 2027 from $246.7 billion in 2020, according to Fortune Business Insights.
Policies, such as the formation of targets and implementation of EV and charging standards, continued to play a critical role in the development of electric mobility, according to the International Energy Agency (IEA). Despite the Covid-19-related worldwide decline in car sales, global EV sales in 2020 topped 3 million, and for the first time, Europe overtook China as the world’s largest EV market. Under the impact of announced policy ambitions (Stated Policies Scenario), the IEA forecasts global EV stock (excluding two/three-wheelers) to reach nearly 140 million in 2030. The International Copper Association also estimates that the number of plug-in EVs will reach 58 million by 2027, requiring more than 40 million charging ports, driving copper demand for port charging cables, charging units, and wiring to electrical panels to over 100,000 tonnes per year. CFRA thinks the upcoming charging infrastructure spree should drive strong additional demand for copper, which could be as large as 10 million incremental tonnes over the next decade in the U.S. alone, or an average of 5.2% global annual growth.
On the supply side, most of the copper projects that are slated to come online over the next few years are relatively small, and the increase in new supply is likely to be slower than the decline rates at larger mines, in CFRA’s opinion. Starting in 2021, we expect copper production to struggle to keep up with the increasing demand.

Gold Underperformed in the First Half of 2021
Prior to 2020, gold’s all-time high closing price was in August 2011 at nearly $1,892 per ounce. That previous record was broken in late July 2020 and a new record was set in early August 2020 at $2,058 per ounce. Gold started 2021 at nearly $1,900 per ounce but has traded below $1,800 per ounce for most of the year, while industrial metals have experienced strong bull runs. Despite gold’s recent underperformance, an unprecedented level of negative interest rates across the globe and heightened risk of inflation should continue to support gold demand.
Gold’s role as a hedge against inflation is a major focus now, as major governments continue to stimulate economies with quantitative easing. Central banks continue to keep interest rates low and inject more money into economies that have an insatiable demand for easy money, which should eventually lead to higher inflation. CFRA views the current environment as a positive backdrop for gold fundamentals.

The Copper Bull Run Has Only Just Begun
Copper prices rebounded sharply from the Covid-19 low and the fundamental outlook for copper is strong. In May of this year, copper reached an all-time high of $4.75 per pound – it eclipsed the previous record-high price of $4.53 per pound. CFRA thinks copper is in the early phase of a long-term bull market, supported by very strong fundamentals on both the demand and supply side.
China’s ongoing investment in infrastructure remains robust and other major countries are proposing large infrastructure stimulus which should provide meaningful incremental demand. CFRA forecasts strong secular growth globally in copper consumed by electric vehicles and the necessary charging infrastructure. As the world progresses towards a sustainable and energy-efficient future, copper has an important role to play. Copper is used to increase the efficiency of numerous electrical technologies, from motors and transformers to solar and wind energy systems. Renewable energy should continue to gain share of the global energy market, and this should be a long-term secular tailwind for copper. Wind and solar energy projects require 4x to 6x as much copper per megawatt. Furthermore, as renewable energy grows, so does the need for energy storage, which is very copper-intensive.
There are supply constraints that also paint a bullish picture. We expect the world will see only limited supply growth from greenfield and brownfield projects. Some of the largest mines in the world have been producing lower ore grades, a trend that we think will continue. And political uncertainty in Chile and Peru (combined account for nearly 40% of the global supply) could hinder new investment in copper mines.

Montecristo, that was August 1944!

I went on a hike on Mount Vesuvius today, came back and found out we are at 30p.
What did I miss?

Greetings to all Solgers.
Many of you are still arguing about this or that scenario, one timeline or another, when we have miserably failed for years to see what ended up coming.
Lets just chill, this will eventually come home but likely at a time and in a way that is not what we discuss.
GLA

Jerry, have you got a link to it please?

@Dillon, I hope you are right!
But I think you are being unfair to your team...

Now, with Basel 3 rules kicking in shortly, it will be interesting to see if there is any material price action in gold.

Luckyorange, that is a well known pattern called cup and handle, and the gold price has been flirting with a breakout for some time now, so far failing after the end of May peak just generated a retrace.

BBG, I am very long SOLG, even after selling some at the beginning of the year. Not sure I want to add more, with this volatility probably more responsible to diversify.

rcgl2, I had the same reading and didn't expect a drop below 30p, but if I may interject, I think we are just witnessing the combination of two events:
1) a market that does not go up eventually comes down as there is not sufficient momentum to sustain a price level, so we are just yo-yoing as we wait for something truly material to happen;
2) this welcome peace with CGP probably just really means that we are waiving the white flag to BHP as NM failed to impose his belligerent agenda and that comes at a cost to us because BHP will not want to pay the high prices we like to talk about here.
Just my opinion of course. I have given up on the £1+ target, happy if we see 45-60p at some point as things are.

Colonel, while I don't disagree with anything in your comment, where did you take July as the time for a deal of some sort? Just wishful thinking or based on some specific input?
Just for reference, I suffer in silence as I expect the end of the year or even Q1 2022 for the PFS as the first possible trigger for some form of corporate activity.

Best guess, the price will drop to 30.50 but no further, before recovering.
The price move is not SOLG specific, the sector is under pressure.

AG, I might be wrong but I think the company commented on the grades but not the quantities, which was left to interpretation.

78.4p at the feasibility stage based on today's data points. With the improvements that the feasibility study is supposed to deliver and in the right macro climate we can look at a 90-235p target in my opinion.
We are priced just below my fair price of 30.1p for exploration stage, but if risk appetite or some positive buzz should come about we could easily jump to 45p at some point before we get the PFS.
All IMHO, DYOR.

Miss G, welcome back, you are always a good omen!

Not that I think the price will drop to that level, but 14p seems to be a reasonable support level. Painful even if it does not drop to that level though, even the current price is quite depressing.
Worth noting that OMI and other juniors are priced at a discount unlike last year; the investors' appetite is not there at the moment at the macro level, so it's unfortunately a matter of waiting for the sector to become hot again, which might be the case once the majors ramp up their M&A.
Just my own thoughts, DYOR and GLA.

@Qalibashi, we are all frustrated but many shares are suffering, and if you look at OMI it's crazy what happened in the last three days. All in all, in such volatile times it's more important than ever to keep some cash and use the retraces to buy if you believe in the company.
Personally, and considering that SOLG and OMI are my current largest holdings, I think we are due some stress over the next months but they will both come good.
GLA.