Gold, Oil & War, ERKA, TALS, PZG
Struthers Report V29 # 10.6
Gold has reversed and I believe the bottom of this correction is in, but unfortunately for a not so good a reason. The unknown outcome of the attack on Israel to a full blown middle east war drove gold's turnaround and may provide further gains. Gold does well in time of uncertainty and we certainly have that ‘un’.
This terrorist attack caught everyone off guard and the weekend has been compared to 911 and certainly is the biggest assault on Israel going back 50 years and a day when Israel was caught off guard with the Yom Kippur War in 1973. I am not going to rehash details on the attack and the war, I am sure you heard many, but I have been commenting we are in a period like the 1970s and this echoes that some more!
What is very significant for energy and gold is there is speculation that Iran may get dragged into this war, with various pro-Israeli hawks claiming that the Hamas attack would have only occurred with explicit Iranian backing. If Israel does indeed attack Iran, as it has hinted it would do for years, energy prices could sky rocket. If Israel starts a ground war in Gaza to do so, Hezbollah in Lebanon says it will start an assault with its large stock of fighters and more dangerous missiles. This could end up like a similar situation to when Saddam Hussein invaded Kuwait in 1990.
I believe the attack was prompted by the 50 year anniversary of Yom Kippur and the fact that the U.S. and NATO have been weakened by the Ukraine war, especially ammunition supplies. The aid to Israel is far less limited now than what it would have been.
As you know, I have been critical of Biden for draining the Strategic Petroleum Reserves for political gain. This could turn out to be the worst policy decision in U.S history, should the U.S. get dragged into or decides to go to war. Many analysts will chime that the U.S. has lots of oil and this could be true in peace time, but not in war. A military machine gobbles up oil like nothing you can imagine, especially the U.S. war machine.
This clip below is from a fossilfuel.com article
A typical U.S. tank battalion of 348 tanks consumes 2.3 million litres of fuel per day, while an aircraft carrier battle divisions uses 1.6 million litres, like the USS Gerald R. Ford Carrier Strike Group sent closer to Israel in response to the weekend events. Oil was over sold and due for a bounce back, but given new events it is only a matter of when oil hits new highs.
On the inflation front the peak of driving season being over and high crude prices have brought US gasoline demand much lower than it seasonally should be, shedding some 1 million b/d in demand since the July peak. I believe this demand drop may also be early warnings of slower growth or recession. This combined with soaring gasoline stocks (up 6.5 million barrels last week, the highest week-on-week jump in 20 months) adds to the price pressure on light distillates.
Natural Gas is looking more bullish with a price increase on the first whiff of cold weather, as remnants of Phillipe brought heavy rain and a cold front to the Northeast. Also European gas prices moved above the €40 per MWh threshold after a subsea gas pipeline connecting Finland and Estonia experienced a sudden drop in pressure, with the operator saying it might take months or more to repair the leak. If prices can break with a higher high, we could be onto a good move to start the winter heating season.
In other bullish news, U.S. natural gas-directed rig count has declined 26% since start of 2023, in response to the low natural gas prices.
For some better news on a few of our stock picks
Eureka Lithium - - - CSE:ERKA - - - - OTC:SCM CF —- - - Recent Price C$0.57
Entry Price - $0.60 - - - - - - - - - - Opinion – strong buy
While it is not good news that the stock has come down, it moved up quickly when I first wrote about it back in April, so just a small chance to buy back then at a good price. We now have a 2nd chance here to buy at a good price. The stock has come all the way back to where it started from.
The down move was a combination of very crappy markets, lack of any substantial exploration news and raising funds in a private placement. Very hard in this market, unless at a discount. They are raising some funds at 50 cents with 1/2 warrant at $0.65. With the group behind this company this financing will close fairly quickly and the stock move back up. The other big catalysts will occur when they announce a drill program, likely later this month. 50 Cents was also the IPO finance level. You can see on the chart, the stock is back to where it first started to trade in April. There is a new September video that you can view on youtube, just over 3 minutes.
Talaris Therapeutics- - - - - - Nasdaq: TALS - - - — - Recent Price - $2.70
Entry Price - $2.20 - - - - - - - - - Opinion – hold for cash dividend
Last Friday Talaris announced that its Board of Directors has declared a special dividend in connection with the previously announced merger with Tourmaline Bio, pursuant to the Agreement and Plan of Merger, dated June 22, 2023.
The special dividend, which the Company estimates will be $1.5118 per share of Talaris common stock, will be payable in cash. The exact amount of the special dividend will be calculated after deducting certain cash amounts as set forth in the Merger Agreement. The ex-dividend date in respect of such special cash dividend will be before market open on October 20, 2023. As such, only the stockholders of record as of October 16, 2023, record date for the Special Dividend, that continue to hold their eligible shares of Talaris until market open on October 20, 2023 will be entitled to the dividend payment.
I will put out another update on October 21, in regards if we should hold the stock or just take the dividend and profits. Often a stock drops after and ex-dividend date like this, but TALS is not trading much volume and did not get that big of a reaction on the merger news and has been trading considerably below the merger $3.43 valuation. We also get shares in the new merged company, Tourmaline, but since it is private we don't know an exact valuation. That said, the market has been putting a valuation of the merged company at the current stock price. So if we have a $2.70 price and a $1.51 dividend we will have just over a $2 gain or almost 100%.
I have also come across another bio tech stock that looks like it could see huge gains. I have some more research to do, but might suggest putting TALS proceeds into this new one
Paramount Gold - - - - - NY:PZG - - - - - - - Recent Price - $0.32
Entry Price - $0.38 - - - - - - - - Opinion - buy
PZG'S Grassy Mountain has become first mining project in Oregon to receive a positive completeness determination. The State of Oregon’s Technical Review Team (“TRT”), which is comprised of the agencies involved in the Chemical Process Mining program has determined that Paramount’s Consolidated Permit Application (“CPA”) for its Grassy Mountain Project is complete. State agencies are now expected to start permit writing for the high-grade Grassy Mountain gold and silver mine. The decision was unanimously approved by the TRT at a public meeting on October 4, 2023.
With the completeness determination by the TRT, the next step is for The Oregon Department of Geology and Mineral Industries (the “DOGAMI”), the facilitating agency of the TRT, to issue the Notice to Proceed (the “Notice”). The DOGAMI expects to issue final consolidated permits for the Grassy Mountain Mine one year from the issuance of the Notice in concurrence with State laws.
It will be over a year before mine construction might start, but it certainly sounds like it will happen. The stock has put in a long term base and the next move should be up. The base has been put in mostly between 28 and 38 cents. The up move will likely come from a higher gold price before Grassy gets built.
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