It was a volatile week that ended on a negative note for the precious metals and finished the week down 1.7%. US Nonfarm Payroll data came in slightly higher than expected, which put further downside pressure on the metals; they did find support around Wednesday’s low. Trading volume will likely begin to slow down coming into the holiday season, which actually creates more volatility in the markets because there are less participants to buy and sell. Any knee jerk reaction to economic data will likely be a larger move than normal.
Support levels: $1220, $1210, $1200, $1180
Resistance levels: $1230, $1250, $1255
Positive economic news out of the US this week helped push the major indices to new highs. The TSX-Venture had a tough week as weak metal prices pushed the index lower. Tax loss selling is a likely candidate to push the market lower over the short term. Investors should take a hard look at their portfolios for the all-in costs of any producers they own. Below $1200, a select handful will be able to generate positive returns.
This week we’re taking a look at Allied Nevada. Allied Nevada has been crushed this year moving from $30 a share all the way down into the $3 area. Rightfully so, ANV has had its share of problems, but after a 90% decline it warrants further investigation.
The Hycroft mine is a heap-leach operation in Nevada that produces both gold and silver. Allied Nevada has expanded their leach pad size significantly. They produced a record 52,000 ounces in the quarter and plan to produce between 200,000-250,000 ounces of gold next year. The average grade at Hycroft is very low at 0.019 g/t AuEq so that really hurts the profit margins at lower gold prices – the upside is that they were profitable this past quarter. Allied’s all-in costs are approximately $1300 per ounce.