MAG Silver Corp. (MAG:TSX; MAG:NYSE American) and its joint venture partner Fresnillo achieved commercial production at their Juanicipio project in Mexico on June 1, 2023, and the new mill has been operating at 85% of its 4,000 tons per day capacity, reported Atrium Research analyst Ben Pirie in a July 4 research note.
Healthy consolidation
During the month, the gold and silver markets were down a bit, Pirie reported. The gold price dropped 2.2% to $1,919.10 per ounce, and the silver price decreased even more, 3.1%, to $22.80 per ounce. Mining equities fell some, too. The GDX declined 2.9% and underperformed broader markets. For instance, in comparison, during June the S&P 500 rose 6.3% and the Toronto Stock Exchange increased 3%.
As for some other commodities, the copper price rose 2.8% to $3.70 per pound. The battery metals space mostly stayed flat. Lithium maintained its 68% gain in May and went up another 3%.
"We believe the last two months of consolidation for precious metals and other commodities is healthy considering the significant increase in prices since November 2022," Pirie wrote.
Decline in M&A
The analyst also pointed out that mergers and acquisitions activity in the metals space slowed during June, likely due to the uncertainty around interest rates. In June the Bank of Canada raised the interest rate 25 basis points to 4.75% whereas in the U.S., the Federal Open Market Committee let the existing rate stand.
Economics were strong in both countries during the month, but despite lower inflation numbers being reported, inflation stayed high.
Precious metals attractive
As such, Echelon expects the Bank of Canada will again boost the interest rate another 25 basis points in July.
Given the economic backdrop, "gold and silver continue to look highly attractive," Pirie wrote. "We believe the stickiness of inflation and continued rate hikes will increasingly push investors to gold as a safe-haven asset in 2023."
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Disclosures for Atrium Research, Mining Monthly, June Edition. July 4, 2023
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