ORENINC INDEX – Monday, March 16^th 2020

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Last Week: 43.95      

This week: 58.81

The Oreninc Index increased in the week ending March 13^th, 2020 to 58.81 from 43.95 a week ago as a large bought deal was announced.

The coronavirus continues to bite hard as it spreads around the world, infecting more people, causing more deaths, battering the global economy, metals pricing and stock markets.

Soap and avoiding unnecessary social contact are your friends as there are now more than 145,369 cases confirmed and 5,429 deaths, but on the positive side of the ledger, 71,694 people have recovered, according to figures from Johns Hopkins University.

Italy has now had more than one thousand deaths and the country is on lock-down and US president Donald Trump imposed unprecedented travel restrictions including a 30-day halt on visitors from the European Union, which have been repeated by many Latin American countries including Colombia, Venezuela, Peru, Bolivia, Paraguay and Argentina. Guatemala is to ban arrivals from the US and Canada. Airlines including Delta and Lufthansa requesting financial aid.

Some delegates who attended the PDAC conference in Toronto a week ago have been infected with the virus, as has the wife of Canadian premier Justin Trudeau (who also attended the PDAC). Canada has shut down its parliament.

A growing number of conferences are being cancelled or postponed including the Zurich Gold Forum, the World Copper Conference and Expomin in Chile. Others will surely follow.

The bull market in US stocks came to a crashing halt as it marked its 11th birthday, with the S&P 500 and the Dow Jones indices dropping over 20% from their record peaks. They are now in a bear market as markets saw the biggest single-day selloff since the 1987 Black Monday crash. The nosedive from the February high took half the time of the 1929 crash—the previous record—, reported Bank of America. As investors sought an exit, the benchmark 10-year US Treasury yield fell to a record low of 0.387% Monday before recovering later in the week.

Markets began to steady after US president Donald Trump declared the COVID-19 outbreak a national emergency and opened up $50 billion of funds to state and local governments.

With central banks around the world promising action to support the economy. The European Central Bank left interest rates unchanged but announced measures to support the European economy including a new €120 billion asset purchase program for the rest of the year. The US Federal Reserve announced a liquidity package which could amount to more than US$5 trillion. The Bank of England cut its main rate by 50 basis points to 0.25% and launched a package of measures. Iceland and Norway have also reduced rates by 50 basis points.

In the metals space, the copper price fell to its lowest level in more than three years. The gold price has fallen about 5% in the past couple of weeks, feeling the pain as other asset classes have and not helped by the US Labor Department showed jobless claims falling by 4,000 to a seasonally adjusted 211,000.

With health and market issues dominating headlines, geopolitical news is passing under the radar such as Russian president Vladimir Putin looking to hold onto power past 2024 by backing a proposed constitutional amendment to allow him to seek another two terms, potentially until 2036.

With the world economy in slowdown, an oil war is brewing as Saudi Arabia, the world’s biggest oil exporter, is expected to ramp-up production in April when a three-year OPEC deal with Russia expires, which has sent oil prices plummeting to their lowest levels since February 2016. The production surge is reportedly in response to Russia’s refusal to back an OPEC plan to curb output, while others view it as a thinly veiled attack on the US shale oil industry.  Fuel represents about 25% of costs in an open pit mine and so miners will benefit from falling oil prices. But president Trump may have stopped the bleeding by instructing the Secretary of Energy to purchase large quantities of crude oil to fill the US Strategic Reserve “right up to the top”.

On to the money: total fund raises almost doubled to $120.78 million, an eight-week high, which included one brokered financing for $75 million, a 14-week high, and one bought-deal financing for $75 million, also a 14-week high. The average offer size increased to $6 million / $5.25 million, a 6-week high, while the number of financings increased to 23.

Volatility in the spot gold price continued with the yellow metal surging to US$1,703/oz before falling sharply to close the week down at $1,529/oz from US$1,673/oz a week ago. The yellow metal is up 0.83% so far this year. The US dollar index has surged closing up at 98.74 from 95.95 last week. The VanEck managed GDXJ almost halved as it plummeted to close down at US$22.17 from $40.12 a week ago. The index is down 47.54% so far in 2020. The US Global Go Gold ETF followed suit and closed down at US$10.09 from US$16.13 a week ago. It is down 37.59% so far in 2020. The HUI Arca Gold BUGS Index closed down at 163.70 from 240.27 last week. The SPDR GLD ETF inventory surged to 963.79 tonnes mid-week before selling off to close down at 931.59 tonnes from 955.6 tonnes a week ago.

In other commodities, spot silver lost almost US$3/oz as it closed down at $14.72/oz from $17.35/oz a week ago. Copper seems to be riding out the storm in relatively good shape as it closed down at US$2.46/lb from $2.56/lb a week ago. The oil price continued its descent as WTI lost the best part of another US$10 a barrel as it closed down at $31.73 a barrel from $41.28 a barrel a week ago.

For the first time, the Oreninc summary is including the Chicago Board Options Exchange Volatility Index (VIX or fear index) which represents the market’s expectation of 30-day forward-looking volatility and derived from the price inputs of the S&P 500 index options. Historically speaking, a VIX below 20% reflects a healthy and relatively moderate-risk market while a VIX of greater than 20% signifies increasing uncertainty and fear in the market. This week the VIX closed up at 57.83 from 41.94 a week ago.

The Dow Jones Industrial Average fell off a cliff this past week as it closed down at 23,185 from 25,864 a week ago. Canada’s S&P/TSX Composite Index closed down again at 13,716 from 16,175 the previous week. The S&P/TSX Venture Composite Index closed down at 391.12 from 506.54 last week.

Summary

• Number of financings increased to 23.
• One brokered financing was announced this week for $75 million, a 14-week high.
• One bought-deal financing was announced this week for $75 million, a 14-week high.
• Total dollars increased to $120.78 million, an eight-week high.
• Average offer size increased to $6 million, a 101-week high. Or $5.25 million

Financing Highlights

SilverCrest Metals (TSX-V:SIL) entered into bought-deal financing to raise $75 million.

• 1 million shares @ $8.25.
• Syndicate of underwriters led by National Bank Financial, Eight Capital and Scotia Capital.
• Proceeds to be used for exploration and development of the Las Chispas project in Sonora, Mexico.
• Deal announced a 4% discount to SilverCrest’s share price, but its stock rapidly lost 28% and sold down to $6.15 then continued down to $5.97 the next day. Ouch!

Major Financing Openings

• Silvercrest Metals (TSX-V:SIL) opened a $75.08 million offering underwritten by a syndicate led by National Bank Financial on a bought deal basis. The deal is expected to close on or about April 3rd.
• Skeena Resources (TSX-V:SKE) opened a $20 million offering on a best efforts basis. The deal is expected to close on or about April 15th.
• Magna Gold (TSX-V:MGR.P) opened a $6 million offering on a best efforts basis.
• Nickel Creek Platinum (TSX:NCP) opened a $4.4 million offering on a best efforts basis. Each unit includes half a warrant that expires in five years.

Major Financing Closings

• First Mining Gold (TSX:FF) closed a $8.53 million offering on a best efforts basis. Each unit included half a warrant that expires in three years.
• Eastmain Resources (TSX:ER) closed a $3.84 million offering on a best efforts basis. Each unit included half a warrant that expires in two years.
• Dunnedin Ventures (TSX-V:DVI) closed a $2.8 million offering on a best efforts basis.
• SRG Mining (TSX-V:SRG) closed a $2.39 million offering on a best efforts basis.