Beaver Creek: Critical minerals shine at precious metals summit

The mining sector, a longstanding pillar of the global economy and even more important now with rising attention to critical metals and secure supply in Western nations, is facing emerging challenges on multiple fronts — including access to finance. This means that despite the hype surrounding the industry, it has not translated into tangible investments or capital inflows, an industry conference heard Tuesday.

During the first day of the Precious Metals Summit (Sept. 12-15) at Beaver Creek, Colo., industry observers highlighted the urgent need for fresh perspectives, technological innovations, and substantial capital investments to bridge the existing disconnect and allow the sector to fulfill its important role.

One of the perplexing trends experts pointed out is a surprising regression in industry valuations.

“A lot of the companies we own today, in terms of valuations, are back to levels prior to discovery holes,” said Otavio ‘Tavi’ Costa, a partner and portfolio manager at Crescat Capital. This necessitates a reassessment of their investment strategies and a stronger focus on innovation, Costa said.

For their part, investors need to consider a holistic view of the market trends.

Vrify CEO Steve de Jong suggested that companies should think about how to create an emotional connection “with what we do in the sector,” adding: “Addressing this can forge deeper connections and foster growth.”

The discussion also touched upon the closely tied relationship between the gold cycle and the broader commodity cycle, with Craig Parry, co-founder and partner at Inventa Capital noting: “I’ve never seen a gold cycle develop without a commodity bull-cycle developing.”

While the conference is traditionally focused on gold, panellists and speakers didn’t limit their comments to the precious metals.

Mining trends

The first day’s morning sessions heard that the mineral discovery sector and oil industry stand out in the current market. “I’m bullish — the whole discovery thing is really getting exciting for me,” said recognized stock picker Tony Greer, founder of investment firm TG Macro.

On the flip side, the oil sector is carving its distinct space, separating itself from the commodity pack, said Greer, who describes himself as an “oil ranger at heart.” The oil sector presents “trackable, trending, evidence-based bull market investing right now,” hinting at the potential for lucrative profits.

Furthermore, Greer hinted at a potential turnaround in the metals and mining space, emphasizing that rejuvenation is possible if “we start making people money.” The industry might be on the cusp of witnessing the “biggest mining boom the world has ever seen,” opening doors to monumental growth and investment opportunities.

Despite concerns from some observers about the mining industry’s apparent inconsistency in providing value to generalist investors, it is currently experiencing growth, especially in the uranium and battery materials sectors.

Metals in short supply

John Feneck, president of Feneck Consulting, argued copper is set up for one of the biggest rallies in history, citing a mid-year Goldman Sachs report anticipating a dramatic 80% increase in copper demand by 2025.

Despite copper’s vital role in the energy transition, its price has been down recently, which the speakers interpret as a buying opportunity. They also anticipate a growing interest in investments in physical copper holdings, similar to the uranium, gold, and silver sectors.

Feneck pointed to the unstoppable demand for power grid expansion across the world as another factor that will propel the red metal. Perhaps the posterchild for how critical power grid infrastructure investment is for governments is the critical state of South Africa’s power grid, which is experiencing “more than double the amount of blackouts in any year in history,” Feneck said, emphasizing the urgent need for innovative and green power generation and distribution solutions.

He also suggests monitoring the ‘CPER’ and ‘COPX’ for meaningful insight that could guide investors’ investment decisions. These ticker symbols represent two exchange-traded funds with CPER tracking the performance of copper. The COPX provide investment results that correspond generally to the price and yield performance of the Solactive Global Copper Miners Total Return Index. This index is designed to reflect the performance of the copper mining sector.

Meanwhile, Michael Konnert, the co-founder and managing partner of Inventa Capital, holds a bullish view on another critical metal — nickel — likening its potential growth trajectory to the one previously seen in the lithium market over the past decade or so.

Nickel, a significant component in batteries, appears to be undervalued, according to Konnert, who noted several potential near-term challenges for the metal.

These include an upcoming election next year in Indonesia, a significant contributor to global nickel production. He sees current pricing levels of nickel juniors as a buying opportunity, and believes some could see significant investment from larger companies in the sector following on Glencore’s (LSE: GLEN) recent purchase of equity positions in Stillwater Critical Metals (TSXV: PGE; US-OTC: PGEZF) and Palladium One Mining (TSXV: PDM; US-OTC: NKORF).

Konnert is also bullish on silver, pointing to the critical role the metal plays in the energy transition, especially its use in solar panels and electric vehicles, and highlighted the growing deficit in silver supply.

In recent times, the price of silver has experienced significant fluctuations due to decreasing supply. “Mining in prominent areas like South America is becoming more challenging and costly as mines deepen,” he says. “Even a minor disruption can significantly increase the prices of such commodities. We are nearing a point where we might witness a sharp increase in prices, again, similar to trends observed in the lithium market.”

Meanwhile, Red Cloud mining analyst David Talbot is spearheading initiatives in this sector, noting a “massive increase in the number of uranium and battery materials companies that we focus on.” Their dedication to the sector is evident as they have led or co-led the “highest number of mining deals after one other firm” since the start of 2020.