Value Microcaps Junior Miners

[Bobwins]

SBGL +.77 to 12.77 SBGL riding another big day in PGM and precious metals pricing. Palladium is the rocket booster, soaring as much as $250/oz in early trading overseas but now a +$114/oz increase to $2612/oz. Platinum also up $11 to 1005. Gold slightly positive at +5.50 to 1609.

I would prefer slow and steady but palladium must be a case of an actual shortage AND a test of the fractional trading system used in metals futures trading. Gold and silver trade many times actual physical availability of the metals because most traders never expect to deliver the metal. Tin hatters always talk about the squeeze if the sellers ever had to deliver physical bullion.

In the case of palladium, we are seeing what happens when there is an actual shortage and sellers are having to pay up to deliver the metal they promised when they sold contracts. The sellers are having to pay more and more to deliver the actual metal.

The scary part is that eventually this merry go round is going to stop. Eventually the contract sellers will either close out all their contracts and swear off short selling OR the exchange may be forced to declare some kind of rule change or suspension of palladium trading. The China coronavirus situation plays into this because China has become the largest car market in the world. The main use for both palladium and platinum is in auto catalystic converters for emission reductions. If China's virus problems turns into an economic disaster, the demand for car exhaust catalysts is going to take a big hit and palladium demand will diminish. How far it falls depends on the severity of the economic contraction and the length of said contraction.

SBGL has reasonable costs on their pgm operations so could easily afford to have prices fall from current levels and stay in business but they just reached profitability in Q4 so you can't say they are flush and could handle any situation. But they were producing when platinum was $800 and palladium was $500 or less.

IF gold continues it's bullish run, that might provide a nice cushion for SBGL and their PGM operations. The gold operations is recovering from the multiyear strike and will reach full production by year end 2020. Full production is slighty above 1million oz/year.