CHF WEEKLY ROUND-UP: February 4-9, 2024

The Canadian Market appears to have hit the “Pause” button, dipping on Monday, flatlining the rest of the week, and looking up this morning, ideally ending the week on an uptick. In Canada, the economy has managed to barely avoid a recession, but it’s seeing only very modest growth, which will likely continue before some improvement by late 2024. BMO expects the Canadian economy to trail behind the U.S. during the next 18 months. The Bank of Canada isn’t sure when to start cutting interest rates as it continues to contend with sticky inflation that’s still too high and broad-based. Canada has been particularly good at growing its economy by adding workers, but productivity growth has disappointed. This is a problem because higher productivity pays for higher wages and underpins a rising standard of living. The Bank of Canada Governor warned politicians this week that monetary policy cannot solve problems such as housing affordability with adjustments in interest rates.

Expect the Bank of Canada and the U.S. Federal Reserve to keep interest rates near current levels until the second half of 2024. Even then, interest rates will likely come down the staircase very slowly, rather than on an elevator ride like they took on the way up. Rate cuts will come, doesn’t really matter if it’s May or June. It could be that the longer rates stay at these levels the better the chances of a “Soft Landing”.

U.S. Markets paused as well but were still up on the week. The S&P reached 5000.9 yesterday and closed at 4997. The dream of punching through 5k came today by reaching 5023 by 2:30 pm, looking for a high close. Is it time to take some money off the table? The U.S. economy had a quite impressive 353,000 jobs added in January, far surpassing the expected 180,000, which has injected notable strength into the U.S. dollar, up 2.7 % on the year to date. Moreover, the Federal Reserve’s cautionary stance, with the indication that there will likely be no interest rate cuts in March, further supports the bullish outlook for the dollar headed higher.

There was a surprisingly deflationary report coming out of China overnight Wednesday. China, the world’s second-largest economy, reported its consumer price index fell a sharper-than-expected 0.8%, year-on-year, in January. That is the fourth consecutive month of declines and the biggest contraction since 2009. The deflationary trend in China could also weigh heavily on commodities and industries dependent on natural resources.

Precious metals remain under pressure today, Gold is at $2,023/oz this morning on the stronger dollar and downbeat report from China. Gold is holding above the support level at $2,000 and taking runs at the resistance at $2,100. Silver is in a two-month-old downtrend trading at $22.50 today. A recently completed analysis of mining company trading during the period of increasing gold prices in the last 6 months shows that only about 5% of junior golds have seen price appreciation. Even the producers lost value, both the big and medium-sized. There are significant opportunities in the beaten-down shares of gold companies. Warren Buffet always liked to buy when others were selling. Watch this sector; it’s time to buy gold stocks.

Base Metals are all weaker this week due to a stronger U.S. dollar and perceived lower demand from China. Copper prices fell to $ 3.70/lb, and Nickel is down 40% in the last year to $ 7.15/lb. Yet Copper mine production is not keeping pace with demand growth forecast over the next two years. Prices are expected to rise as mining supply disruptions coincide with higher demand for the metal. Nickel output is forecast to grow very slowly leaving a million tonne per year shortfall to demand. Prices should not remain at these levels. In January, Sumitomo Metal Mining acquired a 10% interest in nickel junior FPX Nickel Corp. for $14M, or $0.48/share, reflecting a 45% premium over FPX’s last closing price. Big money continues to move into securing Copper and Nickel supplies. Follow the money.

Battery Materials remain in the red, despite a tiny uptick in Lithium to $13.55/kg. Cobalt is at a long-term bottom of $13.22/lb. There was more negative news on the EV front as Volvo moved away from Polestar EVs and refocused on their Hybrid vehicles. Their share price rose on the news, much like GM and Ford as they deprioritized Battery Electric Vehicles (BEVs) in their earnings forecasts. The sales projections for BEVs have been found to be greatly overstated, and demand has not accelerated as expected. The EV revolution goes on, but it is a long-term race against China, which currently controls the production and demand for Critical Minerals and uses that muscle to hold its competitive position. Just having the raw materials in the ground differs greatly from producing them. Canada is struggling to do the latter. Pushing the production of batteries without any domestic supply chains in place only favours China. New mines and the supporting processing capacity usually take more than a decade to design and build and requires billions of dollars of upfront capital investment. A shakeout occurring in Critical Mineral companies is a natural market correction, where supply and demand are finding their equilibrium, and should provide entry points for investors as we look to 2025 for improving demand. The investment opportunities will be coming.

Uranium prices have surged by 90% in the last six months, sliding slightly this week and currently standing at $100/lb. While 75% of global demand is met by production from mines, the remaining 25% is drawn from stockpiles and recycled uranium. Supply deficits are expected to widen significantly in the long term, potentially further impacting uranium prices. Kazakhstan’s Kazatomprom, the world’s largest producer, has forecast a production shortfall for the next two years. Additionally, recent geopolitical events, including the coup in Niger, have added supply disruptions. With Russia contributing 35% to global enriched Uranium production, concerns about the vulnerability of the Uranium supply chain have emerged. There are over 430 nuclear reactors currently operational and 170 more are in the pipeline, a 30% increase in Uranium demand is anticipated this decade and a doubling by 2040.

Oil prices gained ground on Friday, 5% gains week-on-week, as investors considered the impact of Israel’s rejection of a ceasefire offer from Hamas and reports of unexpected drops in U.S. fuel stocks. West Texas Intermediate (WTI) crude is trading at $77.15 this morning.

Put the money to work, a cycle change is in progress. Be invested.

It has been a productive week for our clients, and we are pleased to present to you our round-up of their news released between February 4-9, 2024.

On February Sokoman Minerals Corp. (TSXV: SIC) (OTCQB: SICNF) shared some recent drone footage made of the extensive logging roads, and cleared areas being created by a local timber harvester that just so happens to forge out access to the Golden Bull prospect on our Fleur de Lys Gold project. The rugged nature of the terrain can be seen and highlights the access and safety benefits offered by having forestry operations in advance of ground-based exploration.

Thank you to Sokoman Senior Technician, Brian Bursey Jr., for the inspiring scenery of this logging operation. Recently a very angular, visible gold-bearing float was discovered at the property and additional discoveries of new gold occurrences could very well be exposed for the benefit of Sokoman!

Watch the Video HERE

On February 8, 2024, Visionstate Corp. (TSXV: VIS) announced that it has received conditional approval from the TSX Venture Exchange for the Company’s current non-brokered financing of up to $400,000 announced November 23, 2023. The Company would also like to announce the Exchange has granted an extension to the financing which is now expected to close on or before March 7, 2024.

The Company is undertaking a CAD$400,000 financing for the issuance of 20,000,000 units at CAD$0.02 per unit, with each unit consisting of one common share and one full warrant exercisable at CAD$0.05 for two years.

The funds raised will primarily be allocated to expand the Company’s product marketing efforts in the United States, where Visionstate IoT Inc., the Company’s main operating division, has already established a strong presence with several prominent customers. A focus will be on resellers of the WANDA™ product.

“Entering our ninth year as ambassadors for Visionstate, I’m filled with pride reflecting on our journey with a trailblazing technology firm. Our partnership is rooted in a shared dedication to revolutionizing facilities management—a sector that’s gradually embracing this innovation called “WANDA™”. The pandemic highlighted the critical nature of cleanliness in communal environments, amplifying the need for efficient and cost-effective solutions. It’s gratifying to witness an expanding roster of clients, notably universities, who are integrating the WANDA™ system to manage their labour costs, supplies, and maintenance in these large facilities.

This adoption marks a significant stride in Visionstate’s mission to redefine facility management standards across the board. We hope to soon see Visionstate’s accomplishments reflected in a higher share price.”

On February 2, 2024, Tenet Fintech Group Inc. (CSE: PKK) (OTC Pink: PKKFF) announced that it has completed the first tranche closing of its offering of the sale of securities of the Company for gross proceeds of up to $10,000,000, on a private placement basis. The Company has sold a total of 1,610 convertible debenture units of the Company at a price of $1,000 per Unit, for aggregate gross proceeds in the First Tranche Closing of $1,610,000.

Each Unit is comprised of:

1. one 10.0% unsecured convertible debenture of the Company in the principal amount of $1,000, and

2. 6,666 Common Share purchase warrants.
   

The Convertible Debentures sold in the First Tranche Closing will mature on February 2, 2027, subject to prior conversion in accordance with their terms, will be repaid in cash at the Maturity Date. Each Warrant sold in the First Tranche Closing is exercisable to acquire one Common Share at an exercise price of $0.25 until February 2, 2026.

Convertible Debenture holders may elect to convert, in whole or in part, the face value of the Convertible Debentures into Common Shares at a conversion price of $0.15 per Common Share. At any time prior to the Maturity Date, if the volume weighted average price of the Common Shares on the Canadian Securities Exchange (or such other Canadian stock exchange on which the greatest volume of Common Shares is traded) meets or exceeds $2.50 for three consecutive trading days, any non-converted and remaining face value of the Convertible Debentures will be automatically converted into Common Shares at a conversion price of $0.15 per Common Share.

The Company may complete additional closings on sales of Units pursuant to the Offering on or before March 15, 2024. The Company intends to close a second and third tranche of the Offering for additional gross proceeds of a minimum of $6,000,000.

The PDAC Convention is just around the corner, March 3-6, 2024, and the CHF Capital Markets team is excited to be participating in this year’s lineup of activities. Hope to meet you there.