‘Uncharted waters’ is perhaps the best characterization of the environment we’re currently in as the biggest bank failure in nearly 15 years rattles the global economic landscape. Markets are now sizing up the potential fallout from the collapse of Silicon Valley Bank (and Signature Bank). To help settle rattled nerves, and to prevent an all-out run on the global banking system, U.S. officials are offering reassurance that additional shocks to the system will be mitigated (the Biden administration is now guaranteeing the deposits that were hanging in the balance). It’s a tough sell as this is a very fluid situation.
This collapse is a case of simply too many depositors demanding their cash all at once and the bank’s inability to keep pace with sufficient liquidity—the failure to convert loans and securities to cash fast enough.
To better understand this debacle, this recent tweet from Bianco Research offers some compelling insight—Lots of really bad takes about SVB. Let’s try and correct.
Initially as rates passed 2%, 3% and 4%, the public did not notice. So bankers thought deposits were well anchored at their bank and not moving regardless of the interest rate paid.
But at 5% the public finally noticed, and millions reached for the phone at once and transferred to a money market account or Treasury direct to buy T-bills. Banks were squeezed to convert loans and securities to cash instantly so depositors could leave for better rates.
Meanwhile, in a flight to safety, investors piled into gov’t bonds and precious metals.
Gold futures (April contract) are currently testing the $1900 level as I edit this piece.
(Silver is also proving its value as a safe-haven asset, pushing >6% higher in early-session trade)
The underlying equities, as measured by the GDX, after doing the square root of dick on Friday, are beginning to catch a bid on the heels of this recent strength in the metal.
After the Fed recently warned that they might revert back to 50-basis-point hikes, the current thinking is that there’ll be no rate hike when they next meet (Mar. 21 – 22).
These are in interesting times we live in.
A few brief updates on the companies we follow at Highballer
Forum Energy Metals (FMC.V)
While waiting for lab results to flow in from their Wollaston Uranium Project in the northeastern Athabasca Basin, Forum dropped the following headline concerning its Janice Lake Copper Project in north-central Saskatchewan:
Forum management reached an agreement with Rio Tinto (RTEC) to acquire the senior company’s interest in Janice Lake, giving Forum 100% control of this 39,943-hectare chunk of highly prospective terra firma.
In consideration for this deal, Forum has granted RTEC a 20% back-in right and a 2% NSR (capped at $50,000,000).
RTEC may exercise the Back-in Right at any time up until 180 days following completion of a feasibility study or commencement of commercial production by paying Forum an amount equal to all the expenditures incurred by Forum on the Project up to the exercise of the Back-in Right. On exercise of the Back-in Right Forum and RTEC will form an 80/20 joint venture for further development of the Project.
Forum is also to pay RTEC $500,000 upon the earlier of completion of a PEA, completion of a feasibility study and commencement of commercial production and a further $2,000,000 upon the earlier of completion of a feasibility study or commencement of commercial production. RTEC’s sale of the Acquired Interest to Forum is subject to the Project’s camp being removed from the site or sold. In satisfaction of this condition, the parties have agreed to extend the First Option Period in the current option agreement between Forum and RTEC to November 30, 2023.
In this YouTube interview, Forum’s CEO, Rick Mazur, sheds additional light on this recent deal with the mining behemoth…
Forum is currently reviewing its options concerning this largely unexplored copper property—one option may include bringing on a JV partner to do most of the heavy lifting. Stay tuned.
Apollo Gold (APGO.V)
Apollo recently dropped a new set of resource numbers from its pure-play Calico Silver Project in San Bernardino County, California:
This updated resource represents a substantial upgrade, pushing the Inferred ounces into the higher confidence Measured and Indicated categories.
Highlights as per the guts of this Mar. 6 press release:
Highlights of the Calico Project 2023 MRE:
- 110 million ounces silver classified as Measured and Indicated declared at Waterloo with an average grade of 100 grams per tonne silver:
- 81% (90 Moz) classified as Measured at 103 g/t silver.
- 95% of Inferred2 silver ounces have been converted to M&I.
- 51 Moz silver classified as Inferred:
- 720,000 oz silver at Waterloo Property
- 50 Moz silver at Langtry Property
- 70,000 oz Inferred oxide gold (“Au”) ounces added to metal inventory at Waterloo.
- Robust silver resource: conservative base-case estimate uses 50 g/t silver cutoff grade (“COG”).
- Low strip ratio of 1.1:1 for Waterloo silver resource.
- Significant growth opportunities remain.
This very recent YouTube interview features Apollo’s CEO, Tom Peregoodoff, reviewing Calico’s fundamentals…
i-80 Gold (IAU.TO) and Paycore Minerals (CORE.V)
We’ve been following i-80 Gold and its neighbor Paycore Minerals on these pages for a number of months. Our main speculation concerning Paycore was its potential as a takeover candidate, believing i-80 would begin consolidating the region on the heels of notable exploration success at its 100%-owned Ruby Hill Property in Eureka County, Nevada.
Paycore has encountered considerable exploration success in its own right, drilling off a high-grade carbonate replacement (CRD) deposit at its flagship FAD Property along the same geological structure as Ruby Hill.
Regarding my belief that Paycore had a target on its back, the following is an excerpt from a report I published on Jan. 10:
This might be one of the more obvious takeover targets in the junior arena. Its flagship project—the FAD Property located on the Battle Mountain-Eureka Gold Belt in Nevada—lies along the same structural corridor as i-80. In fact, both companies are helmed by common management.
i-80 Gold’s acquisition of Paycore Minerals was telegraphed via the following recent headline…
If I were a Paycore shareholder, I wouldn’t object to this all-paper deal as i-80 is on a roll at Ruby Hill, where recent drill results returned the following values:
Upper Hilltop Zone:
- 1.7 g/t Gold, 421.3 g/t Silver, 6.9 % Zinc, & 19.8 % Lead over 15.2 meters
- 25.3 g/t Gold, 848.0 g/t Silver, & 7.9 % Lead over 7.6 meters
Lower Hilltop Zone:
- 4.2 g/t Gold, 433.6 g/t Silver, 20.7 % Zinc & 12.4 % Lead over 3.1 meters
Taking a peek at the regional map, Timberline Resources and Golden Lake, should they continue to encounter success with the biz end of the drill bit, may also end up in the crosshairs of i-80.
Full disclosure: Form Energy Metals is a Highballer client.Disclaimer - Legal Notice
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