What you need to know: • The metals and mining market took a breath after a strong January with gold and copper pulling back 5% and 3%, respectively • As full-year earnings roll in, the effects of inflation are taking hold with costs rising dramatically and earnings missing expectations • Despite the February slowdown, we anticipate 2023 to be a standout year for both precious metals and base metals and encourage investors to position themselves accordingly • PDAC starts this weekend – we expect a significant turnout as we continue through the early innings of a metals & mining bull market Sentiment Update The mining sector gave back most of its gains the month of February following a record start to the year in January. During February, gold fell 5% to $1,827/oz and copper declined 3% to $4.10/lb. Silver (-11%) and the group of battery metals (Lithium, Cobalt, Nickel) also struggled due to their higher relative volatility. Equities also settled down after large gains in January (as a reminder, the GDX and COPX were up 11.7% and 16.6% respectively last month), falling 14.1% and 8.3% in February. Mining equities underperformed broader markets with the TSX being down only 2.6% and S&P 500 being down 3.9%. Much of the market struggles this month were driven by higher-than-expected inflation and a hawkish fed outlook. As mentioned in our January Mining Monthly note, inflation is appearing to be stickier than the market expected as on February 14th, U.S. inflation came in at 6.4% YoY compared to consensus of 6.2% with core inflation at 5.6% YoY compared to consensus of 5.5%. MoM inflation came in at 0.5% compared to expectations of 0.5% and 0.1% last month. The inflation data increased the chances of a 50-bps hike at the next fed meeting on March 21-22 in comparison to the originally anticipated 25-bps. The probability of a 50-bps hike is estimated to be 25%. As a result, the S&P 500 had its worst day of 2023 on February 21st followed by a 5% decline from its peak in late January. We saw an even more pronounced effect in the gold price due to its inverse correlation with higher interest rates. With inflation declining at a measly pace, we think that in 2023, gold will increasingly be viewed as a safe-haven especially considering the deteriorating economic data, potential for lower interest rates in the back half of the year, and various central banks accumulating gold. Following a sizeable dip in the mining equity space in February, we believe there lies a buying opportunity as the bullish sentiment continues relative to 2022. With many producers missing cost expectations in Q4/22 (lower expectations and multiples) and the peak of inflation hopefully in the rear-view mirror, we believe there exists many opportunities with the heavily cash flowing producers that have been able to manage inflationary pressures on opex and capex. Additionally, the M&A space is heating up with B2Gold recently acquiring Sabina Gold & Silver in an all-share transaction equivalent to C$1.1B and back-and-forth M&A talks between Newcrest and Newmont. As developers continue to trade at trough multiples due to inflationary fears on project capex, we believe many developers are ripe for acquisition. We are also finding that explorers are continuing to wait for better market conditions before fundraising for 2023 exploration campaigns.