Metals & Mining Second Quarter 2020 Review and Outlook

Friday, July 10, 2020

Minerals Industry Report

Metals & Mining: 2020-2Q Review and Outlook

Mark Reichman, Senior Research Analyst, Noble Capital Markets, Inc.

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Refer to end of report for Analyst Certification & Disclosures

• Mining equities outperform the broader market. During the second quarter of 2020, mining companies (as measured by the XME) gained 31.4% compared to 20.0% for the broader market as measured by the S&P 500 index. The VanEck Vectors Gold Miners (GDX) and Junior Gold Miners (GDXJ) ETFs were up 59.2% and 76.4%, respectively. During the second quarter, gold futures prices increased 12.8%, while silver futures prices increased 31.3%. With respect to base metals, copper, lead, and zinc futures prices increased 21.5%, 10.5%, and 6.0%, respectively.
• Outlook for precious metals remains favorable. In our view, the outlook for gold remains constructive based on U.S. and global monetary and fiscal policies that support gold as a store of value. Gold’s safe-haven appeal has increased due to economic concerns caused by a resurgence of COVID-19 cases and geopolitical frictions. While silver generally lags gold during periods of rising demand for precious metals, silver finally caught a bid in May and finished the month up almost 24%. At this time, we think silver may offer more immediate upside potential relative to gold.
• Base metals should benefit from a rebound in industrial activity. Following a challenging first quarter, base metals prices, led by copper, responded to a more optimistic industrial demand outlook that was driven by supportive fiscal and monetary policies. Positive demand signals from China, the first country to begin recovering from the negative impacts of COVID-19, rippled across various commodities, including crude oil.
• Mining equities provide leverage to rising commodity prices. In our view, the backdrop is uniquely constructive for both precious and base metals since both are likely to benefit from a rising tide of fiscal and monetary stimulus and their repercussions. Publicly traded equities of mining & metals equities are an attractive way to gain metals exposure due to their leverage to commodity prices.

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ANALYST CREDENTIALS, PROFESSIONAL DESIGNATIONS, AND EXPERIENCE

Senior Equity Analyst focusing on Basic Materials & Mining. 20 years of experience in equity research. BA in Business Administration from Westminster College. MBA with a Finance concentration from the University of Missouri. MA in International Affairs from Washington University in St. Louis.
Named WSJ ‘Best on the Street’ Analyst and Forbes/StarMine’s “Best Brokerage Analyst.”
FINRA licenses 7, 24, 63, 87

WARNING

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RESEARCH ANALYST CERTIFICATION

Independence Of View
All views expressed in this report accurately reflect my personal views about the subject securities or issuers.

Receipt of Compensation
No part of my compensation was, is, or will be directly or indirectly related to any specific recommendations or views expressed in the public appearance and/or research report.

Ownership and Material Conflicts of Interest
Neither I nor anybody in my household has a financial interest in the securities of the subject company or any other company mentioned in this report.

NOTE: On August 20, 2018, Noble Capital Markets, Inc. changed the terminology of its ratings (as shown above) from “Buy” to “Outperform”, from “Hold” to “Market Perform” and from “Sell” to “Underperform.” The percentage relationships, as compared to current price (definitions), have remained the same. Additional information is available upon request. Any recipient of this report that wishes further information regarding the subject company or the disclosure information mentioned herein, should contact Noble Capital Markets, Inc. by mail or phone.

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