2020 Ginger Group Forecasts

With our key Grasberg-Saville Gold Rating still languishing below 50 at 43, our near-term expectations for gold remain tempered. With that in mind, here are the levels we are watching:

We expect sellers to remain active at ~1530 and congestion from 1611-1530, with a break above 1611 clearing a path to 1738, then 1806 and perhaps higher. Any failure at 1530 will send gold back to 1390, then 1311, a clear break of which takes us back under 1200.

Silver

More selling expected at ~18.30, congestion from 19.81-18.30, with a clear break of 19.81 sending us higher to 22.16, then 23.64 and perhaps higher. Any failure at ~18.30 will send silver back to 15.78, then 14.33, a clear break of which will take us back under 12.

Platinum

Selling expected at ~946 with additional congestion above from 1004-946. A clear break of 1004 opens the door to 1097, 1145 and perhaps higher. A failure at 842 makes price vulnerable to a quick move down to 784, 689 and a total wreck in the 640s.

Copper

We expect Copper to open up in 2020 the way it closed 2019 — in price-neutral territory. If sellers can be overcome at 2.78, and congestion from 2.92-2.78 pierced, the door to 3.21 and higher opens. But weakness below 2.54 puts Copper at risk of selling off to 2.40, then 2.18 and lower.

Our primary exposure to copper is through Taseko Mines, whose Florence Copper Project will be profitable at today’s Cu price and will prove a veritable cash cow at the long-term price case and above.

Our estimated Total All-in Costs (TAIC) of $1.98/lb. is stellar and will result in a healthy Net Profit Margin of 34%.

Florence is a well-timed Project with a bright future that will generate the cash required to self-fund the advancement of Yellowhead, Aley and Harmony.

Crude

Like Copper, we think Light Sweet Crude will open 2020 in neutral territory. We are very bearish energy and believe much lower prices are in store. We think a failure to find bids at 50.17 will force a test of 44.3, another failure and a quick plunge to 34.79, then 27.62 and possibly lower. On the flip-side, if Crude manages to overwhelm sellers at 60.67, the price per barrel could rise quickly to 66.65, 76.05, and then perhaps as high as the low 80s. This isn’t the scenario we think is likely, but it’s certainly possible.

We have our sights trained on XOM and are willing to pay up to 52.30, but no higher.

The Dollar Index

We think the Dollar is vulnerable and that weakness will persist with anemic buying at 97.3, a bit more at 96.11 and finally a break of that level which ushers in a tumble to 94 and below. On the flip-side, a break of 100.7 opens the door to 102.7, 103 and perhaps higher.

USD/ZAR

It’s no secret we are bullish the RAND. We think we’ll visit the 14.19 level in 2020, which opens the door to 13.59, 12.63 and points lower.

What the hell is the Ginger Group?

I could tell you, but, well, you know…

Random Thoughts

The PHLX KBW Bank Index broke out of the key 104.43 level this month, and that is not a good harbinger for gold. I wish it weren’t so, but it’s a fact.

The Dow Transportation Index, on the other hand, hasn’t confirmed breakouts in the Dow, S&P and NASDAQ, though it is floating above the key 10,663 level.

The NASDAQ is approaching resistance at 8,718.13, as are the Dow at 28,185,07. and S&P at 3,141.77.

PHLX Housing is making a mad dash for resistance at 374.12, Healthcare (IXHC) and Biotech (NBI) are cracking through key levels at 847.32 and 3,575.99 respectively, and the SOX is on fire a la March 2000.

Something positive, and one other thing: the TIPS trend remains unshaken, which is, in my opinion, a crucial piece of the gold fundamental picture. The HUI also has broken through and based above a level that we identified as important: 199.7. In 2020, were the HUI to resist selling pressure at 231.2, and continue to rise through 255.18, it would be safe to acknowledge that a new bull market is underway.

$GLATF : Global Atomic — Independent Economic Assessment

Long-Term Price Case$65/lb. U308
Flagship ProjectDASA
Mineral Resources82M lbs. (1,200 ppm)
Ownership100%
Shares Outstanding144,200,000
Market Cap$53,930,800
Average Annual Production4,864,437
Recovery84.3%
Payable Product69,075,000
LoM14.2 Years
True All-in Costs (TAIC)$48.54/lb.
Gross Revenue$4,489,875,000
Total Operating Costs ($24.96/lb.)($1,724,112,000)
Operating Profit (EBITDA)$2,765,763,000
Niger Royalty (12%)($331,891,560)
Income Taxes (30%)($829,728,900)
Total Capital Costs($467,100,000)
Net Income$1,137,042,540
Net Profit Margin25%
Absolute Cost Structure (ACS)75%
MTQ Score (Higher is Better)0.3
True Value$7.89/sh.
True Value Discount (TVD)88%
Cash Flow Multiple5x
Net Annual Cash Flow (Including Avg. BST, Iskenderun, Turkey Net Annual Cashflow)$86,568,633
Future Market Cap$432,843,165
Future Market Cap Growth703%
Target$3/sh.

Statistical Bias of Common Uranium Stocks

Benchmark World Uranium Index, 22 November 2019 = NEUTRAL (-0.3194)

GoviEx Uranium, 22 November 2019 = NEUTRAL (-0.2679)

Denison Mines, 22 November 2019 = NEUTRAL (-0.0665)

Forsys Metals, 22 November 2019 = BEARISH (-0.6338)

Deep Yellow Ltd., 22 November 2019 = BEARISH (-0.5356)

Fission Uranium, 22 November 2019 = BEARISH (-0.7586)

NexGen Energy, 22 November 2019 = NEUTRAL (-0.3502)

Save for NexGen Energy and Deep Yellow (Sept. ’18), most of the uranium stocks under study have not enjoyed a significant statistical bull run over the last decade. We will be waiting for sustained readings above 0.5 for confirmation of statistically significant bull moves.

An Addition to our Proprietary Weekly Gold Rating

As of 22 November 2019, we will be adding a Statistical Bias reading (BULLISH, BEARISH, NEUTRAL) to our Grasberg-Saville Gold Rating. The simple math on which it is based is inspired by the work of William Feller. The visual display of our quantitative data will look like this:

As usual, our Weekly rating will be released at 4:00 P.M. EST. (HERE)

Note: Our measure of Statistical Bias driven by Feller Data works for all stocks. You are welcome to request a reading from us at any time at no cost. For stocks, we prefer the use of the reading on Monthly* data.

*Weekly data generates actionable intelligence for our actively traded accounts.

Key Gold Indicator Still Mired in Bear Country

The Grasberg-Saville Gold Rating (GSGR) spent its 10th week in bearish territory below 50 with little indication of respite (Actual Reading = 40).

The Grasberg-Saville Weekly Gold Rating measures the following fundamental drivers:

  1. Treasury Inflation-Protected Securities (TIPS)
  2. KBW Bank Index Inverse Change Ratio
  3. 30-Year/Dollar Ratio
  4. 30s/5s Yield Curve Change Ratio

$TGB : Florence Copper Project Low Level Analysis

Long-Term Price Case$3/lb. Cu
ProjectFlorence Copper Project
Ownership100%
Estimated Indicated Resources2.8B lbs.
Average Annual Production96.8M lbs.
Recovery99.9%
Payable Product2,517,480,000 lbs.
LoM26 Years
True All-in Costs (TAIC)$1.98/lb.
Gross Revenue$7,552,440,000
State Royalty (~5%)($377,622,000)
Net Revenue$7,174,818,000
Total Operating Costs ($2,265,732,000)
EBITDA$4,909,086,000
Income Taxes (Effective Rate 24%)($1,178,180,640)
Conoco Inc. Net Returns Royalty (~3%)($147,272,580)
BHP Copper Inc. Royalty (2.5%)($93,272,634)
Total Capital Costs($917,000,000)
Net Income$2,573,360,144
Net Profit Margin34%
Absolute Cost Structure (ACS)66%
MTQ Score (Higher is Better)0.5
Estimated Average Net Annual Cash Flow Contribution at the Long-term Price Case$98,736,000

The Florence Copper Project will be profitable at today’s Cu price and will prove a veritable cash cow at the long-term price case and above.

Our estimated Total All-in Costs (TAIC) of $1.98/lb. is stellar and will result in a healthy Net Profit Margin of 34%.

Florence is a well-timed Project with a bright future that will generate the cash required to self-fund the advancement of Yellowhead, Aley and Harmony.

Fahy Capital Management initiated a stake in Taseko Mines on 12 November 2019.