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Two Days Till FOMC Roulette


The rally that developed late on Friday was largely erased overnight, but after a weak opening the indices quickly turned slightly green, despite weakness in the bond market. I couldn't begin to tell you what made people anxious to want to buy stocks given the news backdrop. In any case, after the initial rally, there was a setback, but then another rally began, which stuck, as the market added 0.5% or so on the day.

Away from stocks, green paper was about flat while, as noted, fixed income was heavier, in particular at the short end. Silver and gold were both higher and lower overnight before closing roughly unchanged.

Go to the Head of the Class In company-specific news, I have a few brief updates. I spent some time with Ross Beaty over the weekend and he, too, expressed his frustration at the depressed price of mining entities, despite the fundamental backdrop that would argue for much higher valuations for metals and miners. In addition, I thought I would pass along the fact that he feels quite strongly that Equinox's Greenstone project is going to be a huge success and that the community relations problems at Los Filos are totally manageable.

Regarding Pan American, he didn't have a whole lot to say other than noting that Dolores has been a problem from day one, and obviously continues to be, given the shock the company had about the recent developments there requiring a large write-down. On a more pleasant note, he personally feels that the developments regarding restarting Escobal have progressed in a very productive manner and while no one can be sure how this will all turn out, he feels that the company has done everything to ensure a restart (which Tahoe did not do). So hopefully that augur's well as the formal consultation process moves ahead. We should know the answer by early to mid-2023.

Life of the Party As for the skarn, Ross feels it will have a mine life of 100 years, and thus it's going to be a massive project and a huge success. If Pan American is able to get Escobal on track, it could get back to being the high-quality success story that it's been until stubbing its toe so badly with COVID and the problems at Dolores.

In terms of Royal Road, there's been a lot of angst and handwringing about the recent developments following the election in Columbia, but over the weekend a new vice minister of mines was appointed, which should go a long way towards alleviating macro concerns about mining there. Royal Road's CEO released a snapshot of a drill sample, which hadn't come back from the assay labs yet, that looked quite promising. This little company is finding gold all over the place. Unfortunately, both countries it operates in are basket cases. That's often how it is, but that doesn't mean that things can't work out for investors over time.

Positions in stocks mentioned: long EQX, PAAS, PAASF, RYR.