King Dollar is Crushing World Currencies. What Does this Mean for U.S. Exports and Gold?

Deepest Yield Inversion Since 2000

I’ve shared with you a couple of times that we may very well be in a recession already, based on the Atlanta Federal Reserve’s GDPNow real-time forecast. The latest forecast, as of Friday, is that the U.S. economy contracted 1.5% in the second quarter, following an annual decrease of 1.6% in the first quarter.

Even if that ends up not being the case, the bond market is telling us that a pullback may be imminent.

A yield inversion occurs when the shorter-term Treasury bond trades with a higher yield than the longer-term Treasury. Remember, bond yields go up when prices go down, so when yields invert, it suggests that investors find shorter government notes riskier to hold than longer-dated ones.

Inversions have been extraordinarily accurate at predicting recessions. Going back at least 40 years, every recession has been preceded by an inverted yield curve, using the two-year and 10-year Treasuries.

Not only is the yield curve inverted right now, but it’s inverted at the biggest point since the year 2000, soon before the dotcom bubble burst.

So what does this mean? Past performance is no guarantee of future results, but we could be looking at a pullback, if not this year then the next. More specifically, stocks and other risk assets may not have found a bottom yet. From its all-time high in early January, the S&P 500 has fallen 20%, but historically it’s dropped as much as 35% on average when a bear market coincides with a recession.

Do with that information as you wish, but I believe it’s wise and prudent to have exposure to gold at this time, between 5% and 10% of your portfolio.

Index Summary

• The major market indices finished down this week. The Dow Jones Industrial Average lost 0.16%. The S&P 500 Stock Index fell 0.93%, while the Nasdaq Composite fell 1.57%. The Russell 2000 small capitalization index lost 1.41% this week.
• The Hang Seng Composite lost 6.51% this week; while Taiwan was down 20.13% and the KOSPI fell 21.72%.
• The 10-year Treasury bond yield fell 15 basis points to 2.93%.

Airline Sector

Strengths

• The best performing airline stock for the week was SAS, up 23.6%. Two Russian airlines, S7 Airlines and Air Bridge Cargo (ABC, owned by Volga-Dnepr) have reportedly requested permission from the Russian government to return some of their fleet to lessors. S7 plans to return two Boeing 737-8 MAX aircraft and ABC plans to return 14 of its 16 Boeing 747 freighters. ABC could reportedly transfer the fleet to Etihad Cargo through the open airspace across the Middle East. The MAX request for return could be unrelated to the conflict in Ukraine and instead driven by the fact the MAX never got the type certification in Russia after the crashes.
• The IATA reports that local revenue passenger kilometers (RPKs) were up 83.1% in May of this year compared to the same period in 2021. Tracked as a proxy for total airline capacity, total available seat kilometers (ASKs) were up 52.8% in the month of May, suggesting that airlines remain focused on capacity growth.
• Over the course of the second quarter, large corporate bookings showed a sizable improvement and averaged 75% of 2019 levels compared to 54% of 2019 levels in the first quarter of 2022. On the other hand, leisure volumes accelerated more modestly in the second quarter, averaging 86% of 2019 levels compared to 82% in the first quarter of the year.

Weaknesses

• The worst performing airline stock for the week was Bangkok Airways, down -10.0%. Delta Air Lines reported second quarter earnings per share (EPS) of $1.44, below expectations, and issued guidance for the September quarter. Capacity will be down 16%, the company announced, as it works to restore its operational reliability. Revenue is forecast to be up 3% and unit costs are forecast to be 22%, which is expected, given the reduction in capacity.
• Wizz Air reported an operating loss of EUR-285M for the first quarter, below Bloomberg consensus. The airline was impacted by the rise in fuel costs, increased non-fuel costs (on disruption and ramp-up activity), plus weak ticket fares versus 2019 (total RASK was down 10%, impacted by the lower load factor of 85%).
• According to CNBC, a glitch in American Airlines’ scheduling platform caused pilots to drop 12,000 flights from their schedules last week. American stated that most trips were restored and that they do not expect the error to impact its operations, however the airline and its pilots’ union agreed to triple pay for those who were affected by the glitch. In addition, the two parties agreed to double pay for peak holiday periods.

Opportunities

• According to Bank of America, Ryanair’s first quarter load factor of 93% exceeded consensus of 90%, with loads reaching 95% in the month of June. The bank raised its 2023 fiscal year net income estimate by 20%. Bank of America now expects Ryanair to maintain a load factor of 95% over the summer, with fares at high single-digits above 2019 levels. Ryanair has avoided the same level of disruption as other European airlines so far. Although the company has faced more delays, flight cancellations have been minimal, (although there maintains a risk of increased disruption through the end of summer). The airline is the most well-hedged of its European peers this year with 80% jet fuel hedging.
• Regarding Mexican airline operations, total traffic for the three local leaders was up 9% in June of this year versus June of 2019. International traffic posted a stronger recovery compared to 2019 levels, up 19%, while domestic traffic was up 4%. In terms of mix, leisure routes continue to outperform metropolitan and regional destinations, both domestically and internationally.
• Morgan Stanley expects the catalyst of a return to profitability in the second quarter at both Japan Airlines and ANA Holdings on factors including: 1) higher yields owing to pent-up business demand on international routes, 2) recovery in tourism demand on domestic routes, and 3) lowering of the breakeven point via cost cuts.

Threats

• Lufthansa is currently in negotiations with pilots and ground staff over new agreements involving productivity improvements and pay. Its ground staff union, Verdi, is demanding a 9.5% pay increase, and the airline will need to compromise on higher pay given a steep rise in the German minimum wage. Staff cost savings represent EUR1.8 billion of Lufthansa’s EUR3.5 billion planned measures, and it will only be able to achieve around half of these by 2024 given rising wage inflation. Continued operational challenges are likely to lead to compensation charges and lower capacity over the summer.
• The Australian Licensed Aircraft Engineers Association (ALAEA) has voted against Qantas’ offer of a one-off A$5,000 bonus and has now received permission from the Fair Work Commission to ask members if they are prepared to take industrial action in the battle for higher pay. Any potential strike action could affect Qantas, particularly if it was to happen during a busy school holiday period, but Qantas says it has contingency plans. Qantas has always taken a very firm stance in negotiations with employees on wages as keeping wages down will be key to it meeting its fiscal year 2024 domestic EBIT margin targets.

• Deutsche Lufthansa AG is preparing another wave of flight cancellations due to staff shortages, adding to Europe’s travel chaos as the crucial summer vacation season kicks off. Europe’s biggest airline is preparing to eliminate about one fifth of departures from its Frankfurt and Munich hubs on select days next week, according to a spokesman.

Emerging Markets

Strengths

• The best-performing country in emerging Europe for the week was Serbia, gaining 1.44%. The best-performing country in Asia this week was Taiwan, gaining 0.60%.
• The Kazakhstani tenge was the best-performing currency in emerging Europe this week, gaining 1.84%. The Indian rupee was the best-performing currency in Asia this week, despite falling 0.55%.
• China’s exports for June were reported at 17.9% vs. a consensus of 12.5%. This represents an increase of 1% from the previous month, which was reported at 16.9%, and its producer price index (PPI) decreased by 6.1% from 6.4% on an annual basis.

Weaknesses

• The worst-performing country in emerging Europe for the week was Poland, losing 5.45%. The worst performing country in Asia this week was China, losing 3.81%.
• The Russian ruble was the worst-performing currency in emerging Europe this week, losing 9.03%. The South Korean won was the worst-performing currency in Asia this week, losing 1.91%.
• Annual inflation in China has increased. For June, it was reported at 2.5% vs. consensus at 2.4% and 2.1% in the prior month.

Opportunities

• According to Bloomberg, India has over 100 “unicorns” (startup companies with a value of over $1 billion), and this year has produced more than 20 of them focused mainly on the fintech industry. India is quickly being considered as a new technological powerhouse besides China in the region. That’s why Temasek Holdings, one of the most prominent investors in the area and worldwide from Singapore, is bullish on this country. The firm doubled its Indian portfolio to $16 million, according to a declaration of its managing director Vishesh Shrivastav. It is an excellent opportunity for the region and the global technology sector because it promotes more diversification and would mean better prices for consumers.
• According to Bloomberg, this week, Turkey, the United Nations, Ukraine and Russia, started conversations in Istanbul looking for alternatives to resume grain exports from Black Sea ports. Russian troops block these ports. Their goal is to relieve the stress on the global food market because of the high food prices worldwide and the shortage of supply because of the war. It could mean a worldwide relief knowing that Ukraine is one of the major cereal and grains exports.
• This week, President Joe Biden visited Israel and Saudi Arabia in a global context of high inflation levels, potential recession and an energy crisis worldwide because of the Russian shortage of its supplies. This trip could be an opportunity if the meeting with King Salman and Prince Mohammed ends in an agreement by Saudi Arabia to boost oil production, which will help the normalization of fuel prices worldwide due to higher supply.

Threats

• According to Bloomberg, the U.S. Department of Agriculture’s monthly global crop report reduced its outlook for Ukraine’s 2022 wheat harvest by 2 million tons. The department expects to reap about 40% fewer tons than last season due to the reduced harvested area. It could represent a new rise in food prices worldwide.
• Europe is now under pressure from the weak local currency and an energy crisis. This week for the first time in 20 years, the euro achieved parity with the American dollar (1 dollar = 1 euro). The weakness of this currency could mean deceleration of the European economy, higher inflation levels and a possible increase in the interest rates to fight it.
• The Nord Stream pipeline that carries Russian gas to Germany has been in maintenance since July 11 for 10 days, and European countries fear that Russia will decide not to reopen it as part of its strategy of showing its power. Additionally, the prices in Europe rose more than 60% since the Freeport plan in Texas shut down. Gas is now part of the transition of many countries to cleaner energy, and Russia’s fuel supply cuts could represent a recession and a more significant wave of inflation. Countries depending on imported gas will feel the most spiking gas prices.

Energy & Natural Resources

Strengths

• The best performing commodity for the week was Natural Gas, up 18.11%. Pump prices for regular gasoline have fallen for 22 days in a row, the longest losing streak since April 2020, according to auto club AAA.
• According to the Energy Information Administration (EIA), U.S. refineries operated at 94.5% of operable capacity at the beginning of July (92.2% a year prior), while U.S. Gulf Coast refineries were at 97.9% utilization, their highest level in over three years.
• New UBS Evidence Lab data and recent company comments point to further project delays at key refining projects, likely to keep the global refining market tight over the next few months. UBS now anticipates the 650kb/d Dangote refinery in Nigeria and the 230kb/d Duqm refinery in Oman to start up in the first quarter of 2023 and the second quarter of 2023, respectively. The group continues to see 2.7Mb/d of new capacity between May 2022 and mid-2023, although this is now more back-end loaded.

Weaknesses

• The worst performing commodity for the week was UK Gas, down -20.16%. Total oil consumption was down 5% year-over-year, with gasoline down 6% and jet fuel up 31% year-over-year, respectively. On a four-week average basis, total demand was down 4% year-over-year.
• Iron ore was down 8.6% last week, reversing the prior week’s gains and falling to $114.3 per ton. Iron ore is now down 22.4% over the past month and down 4% on the year. Iron ore retreated this week as fundamentals turned weaker with falling steel prices and low margins.
• Coal prices were down again this week with FOB Australia coal down 10.9% and CFR China coal faring a bit better only down 2.1% week-on-week. The FOB Australia coal price is now down 31.1% in the past four weeks and down 20.2% year-to-date. Met coal prices were down this week with material readily available and buyers resisting purchases under the expectation that prices could fall further.

Opportunities

• According to JPMorgan, in over 300 investor meetings since April the bank has met only a handful of long-term “structural buyers” overweight energy equities. In addition, the bank has noticed a strong investor bias toward short-term trading Russia risk premium and “renting” the space for cyclical preference and inflation hedging. This may help explain the more than 25% correction seen across energy equities as the market continues to focus on the risk of recession while failing to discount an adverse second order supply impact (i.e., supply capacity diminishes faster than demand). JPMorgan reiterated its long-term $80/bbl. Brent outlook and remains overweight global energy equities as the sector prices in closer to $60/bbl. long term.
• As per CNBC, India’s government is considering scrapping its 15% export duties on iron and steel products which was applied on May 21. The initial measure was intended to reduce steel prices and increase availability in the local market; removal might be actioned over the coming days, according to the article. The government has not commented.
• According to CLSA, India has seen a massive crash in the refining spreads of diesel over the last two weeks, with gasoline and aviation fuel coinciding with a cool-off in crude prices from their respective peaks seen in June. This questions the need for the continuation of the windfall tax imposed about two weeks back. Post windfall tax, the realized spread on diesel and gasoline has fallen to near loss-making levels while the realization on aviation fuel and crude have also gone below 15-year averages.

Threats

• According to Morgan Stanley, steel equities have performed poorly during recessions, and spot margins continue to soften; however, shares have already de-rated substantially. Price lags are likely to support second quarter profits but expect a meaningful slowdown from next quarter onwards.
• According to UBS, there will be a time to buy copper again, but not yet. The electrification theme (e.g., EVs), while a more long-term material demand driver, has limited impact today. EVs account for less than 3% of global copper demand, while current auto production pressure will likely limit near-term growth from EVs. Importantly, China’s construction and appliances sectors, which account for over 25% of global demand, have been weak. Arguably, the risk-reward looks significantly more attractive following the recent price correction, but cost support doesn’t materialize until $3.00 per pound versus $3.40 per pound spot. In addition, the near-term new project pipeline is strong.
• According to JPMorgan, steel prices in the U.S. have continued to fall from their peak with steel prices now around $889 per ton versus $1,780 per ton at the end of September. Prices could continue to move slightly lower over the next several months.

Luxury Goods

Strengths

• Because of the semiconductor shortage worldwide, prices have increased, as well as the waiting periods for new cars; that’s why many people prefer pre-owned vehicles. According to Bloomberg, India’s pre-owned luxury car market is doing well, reporting annual growth between 15% and 20%, with more than 60,000 units sold.
• According to Bloomberg, Richemont, one of the leading Suisse luxury goods companies, expects good results for its first fiscal quarter. It hopes for a rise in revenue of about 10.7%, thanks to its strong sales of watches and Cartier jewelry. The company also estimates that Europe’s sales per region will increase by 31.4%, Americas by 13.8%, Japan by 24,6% and the Middle East and Africa by 8%.
• Hermes International was the best performing S&P Global Luxury stock for the week, gaining 4.95%. The company announced the opening of a new store in Wuhan’s recently inaugurated Heartland 66 Mall – a new shopping destination opened in 2021. The new address spreads across two expansive floors, reports Market Screener. Conceived by Parisian architecture agency RDAI, the project draws inspiration from the city as a place of cultural exchange between France and China, as well as the unique geographic nature of Wuhan, the article continues.

Weaknesses

• Annual inflation in the United States has increased. For June, it was reported at 9,1%, 0.5% higher than the previous month (8.6%) and 0.3% higher than consensus (8.8%). It directly impacts consumer spending habits because prices increase and the purchasing power decrease in the U.S., one of the leading luxury goods markets worldwide besides China.
• Sephora, which is LVMH’s retail beauty brand, is selling its Russian subsidiary to the local general manager of the chain, reports Reuters. The French company is joining a flood of Western businesses leaving the country. Although this could be a strain on the brand short-term, Sephora – which has 88 stores in Russia with 1,200 employees, will now operate under the “lle de Beaute” brand, a local chain it bought in 2016, a few years after an initial investment.
• RealReal Inc., a marketplace for luxury goods from San Francisco, California, was the worst-performing S&P Global Luxury stock for the week, losing 17.72%. According to Bloomberg, B. Riley lowered its price target from $5 to $3 due to high inflation numbers and the decrease in the consumer’s purchasing power.

Opportunities

• Over the next three years, Nashville, Tennessee, expects an influx of five-star hotel brands, including 1Hotel, Edition, Conrad and Ritz-Carlton. The tourist destination known for live country music is being transformed by “luxury tourism,” reports Bloomberg. In a sign of how quickly things are moving, the article continues, it cost $191 million to develop the W, in a mirror tower whose 346 hotel rooms are partially cantilevered over a 26,000-foot retail complex squares.
• Connections with clients nowadays need to be physical, digital and virtual. The metaverse is a reality. When it comes to luxury goods, it is an opportunity for brands to offer a different experience to their clients. According to Bloomberg, earlier this month in Paris was a metaverse symposium called “Luxury Brands Must Prepare for ‘New Era of Retail’ in Metaverse.” The director and global head of luxury at Meta (Facebook), Morin Oluwole, participated in talking about the changes in trading and communications for fashion and beauty companies in the metaverse. She said that over 3 billion people spend over $100 billion on virtual goods, and 20% of luxury shoppers have used virtual reality (VR) and augmented reality (AR) devices to purchase.

• This summer, as a new strategy for retention and attracting new clients, Dior launched its first floating luxury spa cruise on the Seine River in Paris. It is a new way luxury brands can offer different experiences to their clients and attract new ones by showing the brand from a different perspective. The historic Bains inspired the Spa from the 19th century, including a varied spa menu using items from Dior Beauty. According to Bloomberg, the booking for this experience has increased considerably, and its price ranges from $150 to $1500.

Threats

• For the year’s second half, Goldman Sachs analysts said the wealth and sentiment indicators would continue to deteriorate for the luxury goods stocks, especially for the global economy’s decelerations driven by the lockdowns in China. It could mean a decrease in sales in the luxury sector. For example, LMVH (Louis Vuitton) shares were down 17% year-to-date vs. a decline of the Stoxx 600 Consumer Products and Services Index (representing large, mid, and small-capitalization companies from 17 different countries in Europe).
• According to Reuters, China announced new lockdowns, now in Macau, one of the leading entertainment cities in Asia. It shut down all casinos, retail stores, local supermarkets, pharmacies and hotels based on its zero-Covid policy. As of Wednesday, the National Health Commission reported 336 new cases and said China had confirmed 227,030 with symptoms. China is one of the leading luxury goods markets worldwide; that’s why this local measure affects the global market.
• Nonfungible tokens (NFT) are a marketing alternative explored by automakers as a fresh way to connect with a new audience. However, luxury car companies such as Porshe and Bentley, which are planning to launch their own, are concerned about NFTs because of the high volatility of the crypto market. According to Bloomberg, on July 14, the sale price for an Ethereum NFT dropped 84% to $391.

Blockchain and Digital Currencies

Strengths

• Of the cryptocurrencies tracked by CoinMarketCap, the best performer for the week was Neoteric NTRC, rising 1278%.
• Bitcoin settled into a holding pattern on Wednesday ahead of U.S. inflation figures that could inject fresh volatility. The largest cryptocurrency held at about $19,500 in Asian trading, little changed on the day but nursing a drop of 11% since the end of last week. Global markets were also becalmed as investors took a deep collective breath in the countdown to the inflation data writes Bloomberg.

• French crypto lending protocol Morpho raised $18 million from investors including Andreessen Horowitz, defying the gloom surrounding the sector after companies like Celsius Network froze withdrawals. Around 100 backers invested in the decentralized autonomous organization called Morpho, including Variant, Coinbase Ventures and Spark Capital. The investors received a newly issued token tied to the project named MORPHO writes Bloomberg.

Weaknesses

• Of the cryptocurrencies tracked by CoinMarketCap, the worst performing for the week was NoblessCoin down 97.87%.
• Nearly all industrial scale Bitcoin miners in Texas have shut off their machines as the companies brace for a heat wave that is expected to push the state’s power grid near its breaking point. Miners such as Riot Blockchain, Argo Blockchain and Core Scientific are working with the Electric Reliability Council of Texas (ERCOT) to shut down their mining machines when the state faces energy shortages, writes Bloomberg.
• Stablecoins must “urgently” be brought under increased regulatory oversight before they can become a risk to financial stability, according to the European Central Bank (ECB). The institution said that with some stablecoins already playing critical roles in providing crypto markets with liquidity, there could be significant spillover should a large stablecoin fail, writes Bloomberg.

Opportunities

• Major League Baseball (MLB) All-Star and New York Yankees Pitcher Nestor Cortes, aka “Nasty” Nestor, announced on Tuesday that he will be releasing his exclusive non-fungible token (NFT) collection on the Reserve Foundations RBX Network protocol with a portion of his personal proceeds to benefit Sloan Kettering Memorial Hospital and Miami Children’s Hospital on Sunday evening July 17th, writes Bloomberg.
• Ethereum rose 11% on Thursday after the inflation data came out above expectations and the highest in 40 years. The market is believing they are well behind the curve and taming inflation will be harder than expected.
• Polygon’s MATIC token jumped after Walt Disney Co. chose it for a business-development accelerator program. MATIC was 1.3% higher Friday morning in Asia after surging 21% on Thursday in the wake of Disney’s announcement that polygon was one of six companies selected, writes Bloomberg.

Threats

• The founders of bankrupt crypto hedge fund Three Arrows Capital haven’t been cooperating in the firm’s liquidation process and their whereabouts were unknow as of Friday according to court papers. Representatives tapped to liquidate Three Arrows by a British Virgin Islands judge had “not yet received any meaningful cooperation” from Kyle Davies and Zhu Su, lawyers said in U.S. bankruptcy court filings. Advisory firm Teneo is attempting to round up and preserve the assets of the hedge fund according to an article written by Bloomberg.
• Cryptocurrency lender Celsius Networks filed for Chapter 11 bankruptcy, the latest casualty of a $2 trillion crash that has wiped out some of the industry’s biggest names and exposed hundreds of thousands of individual investors to steep losses. Celsius, which has more than 100,000 creditors said took the step to stabilize its business and work out a restructuring for all stakeholders, writes Bloomberg.
• OpenSea, the world’s largest marketplace for NFTs, is cutting about 20% of its staff, the latest in a series of layoffs that’s rocked the crypto industry as digital-asset prices continue to plummet. CEO Devin Finzer announced the job cuts in a tweet on Thursday, and warned of a prolonged downturn amid the collapse in crypto prices and broader economic stability writes Bloomberg.

Gold Market

This week gold futures closed at $1704.90, down $37.40 per ounce, or 2.15%. Gold stocks, as measured by the NYSE Arca Gold Miners Index, ended the week lower by 5.79%. The S&P/TSX Venture Index came in off 5.03%. The U.S. Trade-Weighted Dollar rose 91%.

Strengths

• The best performing precious metal for the week was Lithium, flat on the week 0.0%. Following the C$50 million of equity financing, K92 Mining has further strengthened its balance sheet in preparation for the Phase 3 expansion due to be fully underway within the next 12 months. Phase 3 will increase throughput to 1.2 million tons per year (currently expanding to 500,000 tons per year), enabling the company to take advantage of the growing, high-grade resource and increase production and cash flow per share.
• Yamana Gold recently reported its second quarter operating results. Second quarter production for 2022 came in at 261,000 ounces (up 7% versus consensus), at an estimated AISC of greater than $1,090 per ounce (up 1% versus consensus of $1,078 per ounce).
• Gold Fields announced that it intends to increase its dividend payout policy to 30%-45% of normalized earnings, from 25%-35% currently, upon the completion of the Yamana transaction. For 2023, the company intends to target its dividend at the high end of the range (i.e., 45%).

Weaknesses

• The worst performing precious metal for the week was, down 8.17%. Exchange-traded funds (ETFs) cut 342,688 troy ounces of gold from their holdings in the last trading session, bringing this year’s net purchases to 5.52 million ounces, according to data compiled by Bloomberg. This was the biggest one-day decrease since March 18, 2021, and the sixth straight day of declines (the longest losing streak since May 18). The sales were equivalent to $595.9 million at yesterday’s spot price. Total gold held by ETFs rose 5.6% this year to 103.4 million ounces, the lowest level since March 11.
• New Gold reported a significant operating miss in the second quarter and announced material negative guidance revisions. The production challenges and revised guidance has been attributed to excessive rainfall at Rainy River, which has also necessitated a re-sequencing of the 2022 mine plan, along with early closure of the recovery level zone at New Afton.

• K92 Mining reported second quarter 2022 production results from its Kainantu Mine in Papua New Guinea of 26,100 ounces of gold. This is 20% below consensus due to a lower gold grade.

Opportunities

• Gold Fields’ management highlighted that the previously announced $40 million of annual pre-tax synergies is based on reducing corporate overhead as well as procurement savings. This does not include potential operational synergies which could “significantly” exceed $40 million per year, though they are not quantified at this stage.
• Royal Gold has entered into an agreement with Great Bear Royalties (GBR) to acquire GBR for cash of about C$199.5 million. GBR’s sole material asset is a 2% NSR royalty that covers the entire Great Bear Project in Canada operated by Kinross.
• Gatos Silver announced higher-than-expected grade and production, even accounting for shutdowns. While still too early to read into 2023 grade/production (or beyond), near-term execution and FCF generation buys management time to deliver a more comprehensive long-term plan.

Threats

• According to RBC, regarding cost guidance industry-wide, consensus would be to expect changes, but investor feedback pointed to a combination of the following: 1) a strong U.S. dollar that could boost the revenue lines as a partial positive offset, given all commodities are priced in the dollar while costs are paid in a mix of USD/local currencies, and 2) many gold companies often wait until the third quarter to change guidance in any case.
• Argonaut Gold made multiple announcements at the end of June highlighted by the reaffirmation of the previously released C$920 million estimated cost to completion (“EAC”) for Magino. In addition, the company announced a new debt facility and equity funding package to finance the remainder of the build. Argonaut has made an application to the TSX for a “financial hardship” exemption for shareholder approval of the equity financing and expects that the TSX will commence a standard de-listing review because of the application.
• Triple Flag Precious Metals’ second quarter production of 19,500 ounces was 9% below RBC’s estimate. The company noted that production was partially impacted by deliveries that were dispatched but not yet included in sales. Annual guidance has been revised down 3% to 88-92,000 ounces, from 90-95,000 ounces, and is in line with RBC’s estimate of 90,000 ounces.

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