Monthly report December 2019

With a return of 14.42%, December showed the best monthly return over the past 35 months. It was also the best December month since 2008. The annual return for the whole of 2019 thus came to +9.73%. Somewhat disappointingly, since the gold price rose by 18% in 2019 and the silver price rose by 15%. But the broader Bloomberg Commodity index increased by 6% and our main benchmark (TSX-V) finished just 3% higher. It marked the contrast last year. While the prices of precious metal producers (HUI +50%) rose sharply, the index of exploration-related companies recorded a new low at the end of November. The TSX-V showed a serious recovery only in the last seven trading days of the year, as tax-loss-selling continued to cause a lot of selling pressure up until Christmas. We expect the recovery to continue in the coming period. Precious metal prices may rise further in 2020 due to the crisis in the Middle East and the return of QE. The broader commodity index (CRB) also seems to have finally bottomed out. The copper price in particular may show a recovery this year.

Investments

The recovery in the raw materials sector in 2019 was particularly visible in the precious metals. Platinum showed the best year since 2009, gold and silver since 2010, and the price of palladium rose for the fourth year in a row (+50%). But for many other raw materials, such as zinc and copper, prices are still at a low level. In our previous monthly report, we expressed the expectation that the time was ripe for many of our core positions to recover, almost all of which had fallen sharply over the past 18 months. Four of our largest seven positions showed a double-digit monthly return. Tinka rose 29% on news that Peruvian producer Buenaventura has taken a first stake for its zinc discovery. Sama Resources, working on a major nickel discovery in Ivory Coast, also received an additional investment from HPX, the exploration company of billionaire Robert Friedland. Trilogy Metals rose +41% after the joint venture agreement with South32 was sealed on their project in Alaska. This is indicative of the upside potential of our portfolio.

Please read the latest Monthly Report here (PDF).