Joe Biden’s Looming Metal Melt-Up

President Joe Biden is about to help a lot of people make money in the mining business.

I’ll explain why below.

But first, I have to mention that I recently participated in several discussion panels on mining and metals.

Along the way, in both recorded talks and offline, I heard some fascinating things that are both public knowledge (i.e., legal to tell you) and entirely investable. In a moment, I’ll share them.

These panels were pre-recording sessions for an upcoming mining conference that’s usually held annually in Toronto, called PDAC — the Prospectors and Developers Association of Canada.

PDAC is the world’s largest mining conference. Traditionally, it occurs in early March because the weather in Toronto is always so nice at that time (just kidding).

But this year due to COVID, PDAC will be online. So most PDAC players are pre-recording presentations and panels.

A few groups asked me to moderate or contribute. I’m happy to do so.

And here’s some of what I’ve learned…

As 2021 unfolds, expect a “slow explosion of good news” according to one mining CEO. This is particularly the case for a select number of small and modest-sized exploration companies.

The main reason for this is that, in general, operations in 2020 were mauled by COVID. Much work simply bogged down. Finally, though, results are trickling out.

Looking back on 2020, it was difficult to travel as you certainly know. Airline travel contracted. Borders were closed. And even internal borders were restricted, such as in Canada.

Even when people could cross borders, it was tough to get things done considering mandatory isolation periods and quarantines such as two-week shut-ins in Quebec or Yukon, for example.

Much field work was delayed or canceled, especially last spring and early summer. If personnel were available, work was restricted to small teams in place. Many jurisdictions limited numbers of people in any given field camp.

At the industrial level, it was difficult to stage drilling rigs. In many instances it was difficult to move critical items like diesel fuel, parts, hardware, chemicals and even food for the workforce.

Still, as 2020 unfolded, nimbler companies put the right people in the right places and got to work.

Meanwhile, we had a run-up in metal prices through the summer — gold, silver, copper and more — and many companies raised significant amounts of new cash.

Bottom line is that many programs were delayed, but still began to unfold in late summer and into the fall of 2020. Currently, there’s winter activity in many places.

Now, though, there’s another problem.

Due to COVID, lab assays and analyses are backed-up for pretty much everyone. It’s a mix of medical prudence and government oversight of facilities. Most labs have issues with staffing and workflow, such as how many people can be in the same room.

The impact is significant. What used to be a 3- or 4-week turnaround for lab results has turned into 3 or 4 months.

I spoke with one geologist who runs an exploration program in Canada, a joint venture between a relatively small junior player and a household name major company. He told me that his teams had “drilled through exactly what we expected, exactly where the models predicted.”

He said that there’s no question about what he saw when the drillers pulled core out of the pipes. “This is everything we need to prove up the mining idea.”

But he’s waiting for lab results. “We don’t want to be one of those companies that releases partial news, like we’re just waving our arms. We’ll let the lab results speak for themselves. But it’s taking forever to get them back.”

Here’s the takeaway…

In the weeks and months to come, quite a few mining plays will release a stream of delayed good news. We’ll see strong news about grades, tonnages, extent, depth, structure, mineability, mineral mix, metallurgy, recovery and more.

We’ll see strong economic cases for many projects. Many companies will be re-rated by major investment funds. We’ll see strong buying on real news.

It all makes for a superb investment landscape.

Meanwhile, we have President Climate Change in the White House. And he’s going to help us make some money!

Say what you want about Joe Biden — and I have, such as here —but his policies will be good for the mining industry. (Shh… Don’t tell him.)

Indeed, Biden wants America (if not the world) to go green.

Well, okay Mr. President. If you insist.

But brown is the new green.

Because, hey… Good luck with green, absent much more brown mining.

Don’t take my word for it. No less than Ivan Glasenberg, CEO of mining giant Glencore, recently gushed about future demand for what are called energy metals. Demand “will be massive,” he said.1

For example, solar panels require exotic and/or valuable materials, ranging from polycrystalline silicon to silver. Windmills also require exotic metals, such as magnets made of rare earth elements (REEs).

But right now, most of the world’s polycrystalline silicon comes from… China!

And most of the world’s supply of REEs come from… China!

And as for silver? Well, the good news is that it comes from uncontroversial places like Canada, Mexico, Peru and many other locales.

In fact, much of the world’s silver actually comes as a byproduct of copper mining, with a good bit from lead smelting too. Yukon’s Alexco, for example, produces a silver-rich concentrate from what’s basically lead-zinc ore.

But humble silver is truly a critical metal for so-called “green” energy.

Along these lines, these two charts lay it out, courtesy of our friends at Metallic Minerals, a silver exploration company in the Yukon that’s working right next to Alexco. I showed these charts in a recent article.

ALTTAG

Diminishing supply, rising demand. Courtesy Metallic Minerals2

You can see that over 50% of global silver demand goes for industrial use, with increasing amounts going into solar panels, per that growing purple-shaded wedge at the top on the right. It’s big and getting bigger.

Meanwhile, silver demand is butting up against a shrinking global supply. Physical silver is getting scarcer and long-term more expensive as I discussed recently.

More broadly, I’ve discussed so-called “renewable” energy issues here, here and here.

And these are just the supply-side issues of renewable energy, the upstream issues of power generation.

What about downstream issues, or what the utility company people call “the load?”

It’s a story of metals, metals and more metals…

Look at another policy priority of Biden and his handlers, namely the electrification of transportation. Or put another way, the decarbonization of motor transport.

Last fall I discussed a new mandate in California to phase out almost all internal combustion vehicles by the year 2035 (and remember that date).

More recently, I discussed Biden’s executive edict to replace the federal fleet of cars, trucks, vans, etc. by 2035 (that date, again).

My esteemed colleague Jim Amrhein has written eloquently on the matter as well. He has framed the inherent tyranny of top-down transportation policy here with more perspective here and here.

If you follow automotive news, you’ve likely seen that many companies already have bold ambitions for electric vehicles (EVs).2

These industrial transformations have been in the pipeline for many years, long predating Biden. And to be sure, this effort is not just the Tesla-thing.

German companies like Volkswagen and BMW are already heavily into EVs, while Daimler is splitting off its EV business.

Closer to home, General Motors just announced an ambitious goal to be all-electric by 2035 (there’s that number!). Ford too, by… 2035.

From across the Pacific Ocean, Forbes predicts a “Chinese EV Invasion” much sooner, in 2021.3

But what are the keys to transforming the auto industry from internal combustion to EV?

Metals, of course.

Lots of copper, for example. There’s something like 5- to 7-times more copper in an EV than currently in an internal combustion vehicle. This certainly bodes well for copper miners.

Meanwhile, EVs require significant amounts of REEs for the traction motors, as well as inside much of the electronics and lighting systems.

Now add other battery-related metals.

Certain kinds of batteries require REEs, and/or other metals like lithium, nickel and cobalt. And depending on the chemistry of the battery, you’ll see exotic names like vanadium, niobium, antimony and more.

Where will these metals come from?

Hint: Very few of these important metals are mined, smelted or refined here in the U.S.

For example, the U.S. imports about half of the copper it uses, most of the nickel and virtually all of its cobalt, antimony, vanadium, niobium and REEs.

China too imports metals, and indeed there’s no shame to any nation in foreign trade. But China has also made strong provision to secure long-term future supplies of metals, such as copper from places like Peru, which I’ve discussed here.

And as EVs become more common, China is tightening the screws on exporting REEs, which I discussed here.

Without large and secure supplies of REEs, the U.S. boom in EVs (let alone solar) will fizzle quickly. The country will just import things made elsewhere, using our endless supply of Fed-bucks.

Now, and for many years to come, the mining industry will be under intense pressure to meet global demand for metals, whether for green power or anything else.

Along those lines, it will be large names that do most of the supplying. It means big-name Western firms like Freeport, BHP, Rio Tinto, Glencore, Teck and others. Plus some names you may not know, like Russian mining giant Norilsk.

These companies have large mining and refining operations. They’ll feed metal to metal-bending industries across the world.

At the same time, large mining companies must work with small and intermediate-sized explorers and developers to replace reserves.

We already see that, for example, with BHP which has teamed with much smaller Riverside Resources to explore for copper in Mexico. That is, BHP has farmed out Mexico exploration to one small firm.

Or look at Australian mining giant South 32, which has teamed with much smaller Trilogy Metals to work in the magnificent Ambler copper district of central Alaska.

There are many other smaller mining plays at work with larger companies. Western Copper & Gold, for example, has a massive copper (and more) deposit in the Yukon, with “confidentiality agreements” in place with a number of large miners which are following the progress.

There are many other examples of these kinds of partnerships too, with solid upside.

If you’re interested in learning more, I’m participating in a no-cost, 2-day investor event on Feb. 17-18, sponsored by a group of Canadian firms.

It’s a series of company presentations on Day 1, and I’m part of a discussion panel on Day 2. Details here. Feel free to sign up.

Bottom line is that Biden’s green hopes can only come to fruition with a lot more metals from brown mining. And along the way, prices and investment opportunities will melt up.

And on that note, I rest my case.

That’s all for now… Thank you for subscribing and reading.

Best wishes,

Byron King

Byron King
Managing Editor, Whiskey & Gunpowder
WhiskeyAndGunpowderFeedback@StPaulResearch.com

P.S. – Feel free to forward Whiskey & Gunpowder to friends, family and colleagues. If you received this article from someone and would like to subscribe, click here. Thank you.

1 Glasenberg, Northern Miner, Jan 4-17, 2021.

2 All the things carmakers say they’ll accomplish with their future electric vehicles between now and 2030, Business Insider

3 Chinese EV Invasion! The Electric Cars To Look Out For In 2021, Forbes

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Byron King

A Harvard-trained geologist and former aide to the United States Chief of Naval Operations, Byron King is our resident gold and mining expert, and we are proud to have him on board as the managing editor of Whiskey & Gunpowder.

This “old rock hound” uses his expertise and connections in global resource industries to bring...

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