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The wave of investors buying physical gold and silver over the past two years has certainly impacted the markets.
Retail demand for coins, rounds, and bars is now multiples of what it was prior to the COVID outbreak and the 2020 presidential election. Mints and refiners are still working to add enough capacity.
While American investors at large may feel more than a little nervous about their portfolios, most are still listening to their financial advisors. The decision to dump some paper assets and buy physical bullion still looks like a radical move. Only a small fraction are ready to make it.
Long-time goldbugs wonder when, and if, bullion investing might move from the “fringe” into the mainstream.
The perception is that a reckoning is coming in the conventional financial markets. If the bubbles there start popping, there will be very few places to run. It will be time for physical metal to shine.
The theory makes plenty of sense. But it has been making sense for the past one and a half decades. The “when” is, in many ways, more important than the “why.”
So when will the trickle of Americans buying bullion give way to a flood?
Correctly guessing the answer is essentially an exercise in mass psychology, which is to say it is anything but an exact science. The best we can offer is a signal we think is likely to indicate this migration has begun.
Watch the premiums for large bars – 1000 oz silver bars and one kilo gold bars. Dealers like Money Metals offer these bars and publish their pricing.
These are the bars, along with 100 oz gold, stored and traded in the COMEX vault system. Mints, refiners and other industrial users for precious metal purchase large bars for use in production. If a large investor wants to buy physical metal, these bars are by far the most economical way to do it.
Premiums for large bars are historically quite stable. Buyers have generally been able to get metal in whatever quantity was needed at something very close to the paper market price.
Demand for retail-sized coins, rounds and bars spiked higher just over two years ago when demand overwhelmed the ability of producers and dealers to supply. Large bars, however, have remained in stock and available.
At least for the most part. There was a tremor in thousand-ounce silver bar premiums in the spring of 2020.
Prices took a healthy leap higher when bullion banks sold more paper silver than they should have and were caught short by the number of buyers taking actual delivery.
Premiums have stabilized since then. Outside of that event, higher premiums have been driven exclusively by too little fabrication capacity to meet the surging demand for smaller products. Surging premiums for larger bars will indicate a shortage in supply rather than manufacturing capacity.
Mine production is sufficient to meet demand for industrial use and for a modest level of investment demand. It will not be anywhere near sufficient for any larger scale rotation out of conventional financial assets and into metal.
The inventory of COMEX silver bars dropped to a 4-year low last week. These inventories are certainly worth watching.
In truth, however, there hasn’t been a reliable correlation between lower COMEX inventory and higher prices. When declining stocks translate into higher bar premiums, investors can know something is afoot.
Categories
Red Metal Drills More Than 1% Copper
Source: Streetwise Reports 06/02/2022
You want copper? You go to Chile. One junior explorer operating near the coast there just published its first drill results and they’re above 1% copper. Now the hunt is on to find an iron-oxide-copper deposit like the ones others have found in the same copper belt — that’s the ultimate goal.
Red Metal Resources Ltd. (RMES:CSE; RMESF:OTCBB) finally got the chance to sink some diamond drill holes into its flagship Carrizal copper-gold-cobalt property in Chile and the initial assay results delivered on expectations.
Hole FAR-022-020 returned 5.7 meters of 1.10% copper (Cu), 0.12% cobalt (Co) and 0.25 gram per tonne gold (25 g/t Au). It marks the first mineralized intercept on a new vein and with cobalt fetching almost $74,000 per tonne on the London Metals Exchange, the cobalt in the ore is worth more than the copper.
The 9-hole 2,010-meter winter diamond drill program focused on extending known mineralization on the Farellon vein down dip on both the north and south ends.
In fact, most of Red Metal’s exploration work had focused on the Farellon vein. Surface sampling had revealed others but those were never drilled—until now.
Meet Gordal
The newly discovered vein — dubbed Gordal — is about 250 meters away and parallel with Farellon. Another 1.5 km of untested strike length on Gordal remains open for further exploration.
A second hole, FAR-22-017, hit 3.6 meters of 1.36% Cu, 0.01% Co and 0.42 g/t Au. Red Metals President and CEO Caitlin Jeffs says this intercept confirms continuity of the mineralized structure and extends mineralization approximately 25 meters down dip to a vertical depth of roughly 200 meters on the south Farellon zone.
Technical analyst Clive Maund called copper grades in today’s release “good” and added that they “may lead to further gains.”
These comments build on an April 8 post when he wrote “with the stock at an attractive price and under accumulation, Red Metal is a speculative buy here and a worthwhile addition to a junior portfolio.”
Jeffs sees Carrizal’s copper and cobalt grades as proof of the necessary next steps.
“My goal is to properly justify underground mining. I think we need about 1.5 percent copper equivalent. Both of those (intercepts) confirm that and one has extremely intriguing cobalt number,” Jeffs told Streetwise Reports.
She adds: “We know there’s cobalt on the property and that’s going to be a focus for the next round of exploration.”
Red Metal is waiting for the assays from five more drill holes before the company contuse mapping work and is planning an induced polarization geophysical survey to help determine more drill targets.
Meanwhile, hole FAR-22-12 hit 3.7 meters of 0.62% copper, 0.08% Co, and 0.13 g/t Au or 1.14 copper-equivalent (Cu eq).
And hole FAR-22-013 returned 4.05 meters grading 0.98% copper, 0.07% Co, 0.1 g/t Au for 1.42% Cu eq (copper-equivalent grades were calculated using $1,750 oz gold and $3.75 lb Cu, well below the current spot price).
Copper Prices On Long-Term Trend Upward
Swiss bank UBS says copper exports in Chile fell by 7% from January 2021 through the same month this year. It’s the third straight year of declines.
The reasons include lower headgrades at large Chilean mines like Escondida and Los Pelambres, water shortages and fresh development speed bumps introduced to the space by 35-year-old leftist Chilean President Gabriel Boric, who needs to look like he’s taking greater control of the country’s mining sector.
Copper prices tracked by the World Bank rose by a factor of 13.7 from 1960 to 2021 and seem to now be climbing at an even faster rate given the recent all-time highs in price per tonne.
Much of that upward price momentum stems from economic growth and development in China. The country accounted for 17.4% of the global economy in 2020, versus just 1.6% in 1990.
Continued healthy copper prices could go a long way toward moving Carrizal from an exploration play to development. Yet it’s substantially more difficult to get noticed when another copper exploration play in Chile dominates like market darling Filo Mining Corp. (FLMMF:OTCMKTS).
Filo topped the list of experts’ best drill holes in 2021 with one hole hitting 858 meters grading 1.8% Cu eq at its Filo del Sol project high in the Andes in San Juan province, straddling the border with Argentina. The junior explorer trades at close to CA$26 but the timeline to development remains distant.
“In the mining industry you have a handful of show ponies and then a whole bunch of workhorses, and we’re looking for the workhorse-type deposit that’s got enough benefits, like being close to infrastructure, close to power and close to people, so that there aren’t any huge hurdles to overcome to develop it,” Jeffs explained.
She added that Carrizal could be in production inside three years.
The junior recently raised CA$500,000, but the next round of drilling will require an even larger raise, perhaps as much as CA$3 million.
“I think we can raise the money. We have a lot of blue-sky potential,” Jeffs told Streetwise Reports.
Carrizal is about 23 kilometers from the Pacific Ocean, which is handy if a desalinization plant is ever required. There are about a dozen desalinization plants in Chile and most of them are operated by miners. Many of the other copper explorers are farther up in the mountains where labor and water are more difficult to source.
Copper Plays Having Success
Closer to the coast, some other relatively small copper plays are also having success.
Altiplano Metals Inc. (APN) is producing from the nearby Farellon mine, an iron-oxide-copper-gold (IOCG) deposit. In Q1/22 the mine generated about $857,000 from 282,000 lb copper. In 2018, the head grade at Farellon was 1.54%. Shares in Altiplano closed at CA$0.25 on June 1.
Torq Resources Inc. (TORQ) recently made a discovery at its Margarita IOCG deposit in the Coastal Cordillera Belt, the same belt that hosts Carrizal. It has two other projects on the go and closed at CA$0.68 on June 1.
Red Metal has yet to find an IOCG deposit but as the drills go deeper the core is revealing relevant alteration that typically points toward an IOCG deposit — Red Metal’s ultimate goal.
“People love to say you can’t mine alteration. And that’s true. But the reason we look for it is because it shows you a wider halo that points you toward what you need to find,” Jeffs said.
Jeffs and her family, own more than 21% of Red Metal. Toronto-based AlphaNorth Asset Management owns 2 million shares. Fully diluted, there are 69 million shares outstanding, including warrants priced at CA$0.20, CA$0.25, and CA$0.30.
Red Metal trades in a 52-week range of CA$0.56 and CA$0.11.
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Disclosures:
1) Brian Sylvester compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He and members of his household are paid by the following companies mentioned in this article: None. His company has a financial relationship with the following companies referred to in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Red Metal Resources Ltd. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
4) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Red Metal Resources Ltd., a company mentioned in this article.
( Companies Mentioned: RMES:CSE; RMESF:OTCBB,
)
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