March 19th, 2024 - The Mine Wire

METALS MARKET

Gold retreated a bit this week as US inflation data came out stronger than expected, making interest rate cuts more likely later in the year. Iron ore continued its descent as a Chinese construction rebound is more dream than reality based on data. The metal is down 19.92% just this past month.

Meanwhile, Copper had a strong week due to concerns about tightening supply. The shutdown of the Cobre Panama mine has had an impact, but now there is also concern about output from Zambia, Africa’s 2nd largest producer of Copper, as they experience severe damage from El Nino.

^{**For our chart above we are taking prices from Tuesday 4pm EST to Monday 4pm EST, so not the typical week of Monday through Friday.}

KEEPING AN EYE ON GOVERNMENT DECISIONS

With many forecasting significant demand for metals into the foreseeable future, governments are all over the place with their policies. Here are some of the notable moves this week:

• 🇨🇦 Saskatchewan unveiled its Investment Attraction Strategy. This includes a generous 25% tax credit for commercialization projects involving critical minerals, with a 15% tax credit for new investments in critical minerals processing.

• 🇺🇸 The Department of Defense announced an award of $7 million to The Doe Run Resources Corporation (Doe Run) via the Defense Production Act Investment (DPAI) Program to complete a demonstration-scale hydrometallurgical plant for separation of cobalt and nickel at their facility in Viburnum, Missouri. They’ve made 12 awards for a total of $307 million so far in fiscal 2024.

• 🇺🇸 House Republicans introduced legislation this week that calls on the federal government to study and provide diplomatic and financial support for seabed mining. They argue that this will help avoid an over reliance on China.

• 🇺🇸 The State of Alaska along with impacted mining firms are suing the Federal government due to an EPA decision to block a controversial pebble mine. They are suing for a whopping $700bn!

• 🇨🇳 🇨🇦 China’s Ambassador to Canada says the country will continue to invest in Canada’s domestic mining sector, despite stricter rules by the Canadian government on foreign investment and ownership.

• 🇦🇺 The Prime Minister of Australia makes his case in an op-ed about his government’s work to diversify its economy while leveraging the critical minerals opportunity.

• 🇰🇿 🇬🇧 Kazakh Vice Minister of Industry and Construction Iran Sharkhan and the United Kingdom’s (UK) Minister of Industry and Economic Security Nusrat Ghani signed a roadmap for strategic cooperation in critical minerals.

• 🇺🇿 🇨🇳 A state-owned uranium producer in Uzbekistan is in talks with China Nuclear Uranium, also state-run, on the possibility of working together to develop a pair of mines.

• 🇳🇪🇳🇪 Niger ended its counterterrorism pact with the US over claims of secret talks to grant Iran access to its uranium.

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MINING MATTERS FROM AROUND THE WORLD 🌎

• Wesdome (WDO) announced its fourth quarter and full year 2023 financial results. Cash margins for the fourth quarter and full year 2023 was $47.6 million and $132.9 million, representing a 80% and 39% increase relative to corresponding periods in 2022. Wesdome’s stock didn’t move much on the news, but is up 11.02% this past month and 35.32% this past year - keep this in mind when reading our guest column.

• Li-Cycle (LICY) announced a $75M strategic investment from Glencore (GLEN), rocketing the stock up 114.26% to 1.10 USD since the news. The stock is still well below its 6 dollar mark last summer and was even as high as $13.85 back in 2021.

• At the same time, Teck Resources (TECK) CEO, Jonathan Price, said the company is considering building a lithium-ion battery recycling facility in British Columbia that could recycle up to 35,000 metric tons of Lithium per year.

• Korea Zinc, the leading global zinc and lead smelter, and LG Chem, South Korea’s top petrochemical producer, are joining forces for a plastic waste recycling business in the US.

• KPMG came out with their results on the critical minerals mining industry in Canada. It is probably no surprise that 98% of respondents say their companies require more investment, government commitment, and favorable tax policies to support its growth. Check out the full results here.

• Japan’s Marubeni had a few notable moves this week. First the conglomerate said it would invest C$12 million in Hudbay Minerals to support exploration activities for three projects.

• On a much larger scale, the Centinela mine operated by Antofagasta (70%) and Marubeni (30%) in Chile, secured a $2.5bn loan for an expansion project. The Japan Bank for International Cooperation is leading the way with $950 million.

• The United States agreed to a massive $2.26bn loan to Lithium Americas (LAC) to develop the largest lithium deposit in the country. The stock surged nearly 20% on the news, but has fallen back to where it was, but is still up 33.28% this past month.

• Meanwhile down under, Arafura Rare Earths (ARU.AX) will receive A$840 million ($556 million) in funding from the Australian government to create the nation’s first combined mine and refinery for minerals that are crucial to the clean-energy and defense industries. The stock shot up 80% on the news but has come down the past few days. It is still trading 32.41% higher than before the news.

• Shots fired as Australian mining magnate Andrew Forrest (owner of Wyloo), said that if the London Metal Exchange (LME) doesn't launch a green nickel contract, the industry will have to look for another trading venue.

• Russian coal exports to Asia are struggling amid lower prices. With stiffer competition from Indonesia, Australia and South Africa, some shipments of coal from Russia are break even or even loss-making given higher shipping fees. Luckily for Russia, Turkey is importing more coal than ever as it picks up a cheap product due to western sanctions.

GOLD VERSUS GOLD STOCKS: Which One Shines Brighter?

The spot price of gold has “skyrocketed” the last few weeks. I put skyrocketed in quotations because gold is “only” up ~8% since mid-February. For gold, that’s significant, and puts the precious metal at an all-time (non-inflation adjusted) high. Gold’s performance, however, shines bright compared to large-cap gold stocks, including Newmont (NGT), Barrick (ABX), and Agnico Eagle Mines (AEM). Let’s take a look at gold’s performance, as tracked by Gold Shares (GLD), compared to these three companies in 1, 2, and 5-year increments (as of March 15th).

With one exception (AEM over the last year), we see that GLD outperforms each stock in each timeframe. Even examining short-term returns, GLD beats each stock over the last three months. It’s a stark showing and begs the question: if a historic increase in underlying gold prices cannot be leveraged by the world’s largest gold companies to benefit their shareholders, is there a point to invest in large-cap gold stocks? One may respond that these percentages don’t account for dividend payments, but on average the yield for each company is slightly less than three per cent and hardly compensates investors for the significant underperformance.

Should investors who want exposure to gold companies explore small- and mid-cap gold stocks instead? While they present a different risk-reward profile compared to established firms in the sector, small- and mid-cap stocks also offer the possibility of significant upside if new mines are discovered and/or yields are better than expected; as well, there’s always potential upside through merger and acquisition activities. Regardless of approach, the key takeaway is the price of gold and the performance of gold stocks don’t always shine equally bright. 

By Evan Sotiropoulos, publisher of My Two Cents – Fun. Actionable. Insights. Trading + Investing

MINING BITS

• 🐈 Please don’t touch the toxic cat! Residents of a city in Japan were looking for a cat that fell into a vat of toxic chemicals (hexavalent chromium). We love our fur companions, so a reminder to make sure toxic materials are properly stored out of harms way.

• 🇬🇧 Dentists in Northern Ireland are warning against an EU metal ban. The ban would prohibit the use of silver fillings or dental amalgam, with a move to mercury-free fillings.

• 💍 A manufacturing supervisor for a luxury jewelry company in Rhode Island was charged with stealing and selling millions of dollars' worth of gold, silver and platinum over more than three years.

• 🗡️ Scientists unearth 'lost metal of Atlantis' off the coast of Sicily. This metal of Atlantis, called Orichalcum, was the 2nd most sought after, after gold. With a yellowish-gold colour, but with a red tinge mentioned by Plato, this alloy was comprised of around 80 per cent copper and 20 per cent zinc, with small amounts of lead and other metals mixed in.

• 🏴󠁧󠁢󠁥󠁮󠁧󠁿 A study in England focused on data from February 2020 to February 2023 showed that thefts of historic stone & metal were up across the country. During the pandemic, thefts were up as much as 41% as gangsters took advantage. We say lock’em up and throw away the key.

• 🇨🇦 An excellent column explains why British Columbia attracts so many mining head offices. It argues that, “Vancouver is the global capital for junior mining and mid-tier mining, exploration and development companies due to the eco-system its built with mining finance and geotechnical expertise.”

• 🔥 Check out this interview with Byron King where he speaks of the “absolute fire sale” that is happening in the industry right now. If miners are going to steal attention away from AI, crypto and tech, governments are going to need to do more to reward the risk in this investment class, but that is just our two cents.

• 💲 Corporate dividends hit an all time high last year with $1.66 trillion paid out. The largest payors were Microsoft, followed by Apple and then Exxon Mobil. 86% of listed companies either increased or maintained their dividend payment.

• 🇨🇻 Check out this coverage by the BBC of Cape Verde and their beautiful salt mines.

• 🥬 Want to increase your brain power & health? Thanks to Harvard University we know that the holy trinity of leafy greens helps brain health. So what are they? Swiss Chard, Kale and Spinach. We had wondered why we often see these three mixed together at the local supermarket.

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