Recording date: 14th March 2024
Picture a gold rush, except the treasure is not just in gold, but also in uranium and copper. That's the opportunity on the horizon for mining investors, according to industry veterans Merlin and Matt, who shared their insights from the 2024 PDAC mining conference.
While the overall mood at PDAC was undeniably more subdued than the peaks of recent years, with many mining companies trading at depressed valuations, the pair see this as a golden opportunity for investors who can spot the hidden gems. As Merlin colorfully put it, many companies have hit "rock bottom," meaning the only direction from here is up.
So what will light the spark for mining stocks to soar again? Merlin and Matt point to the strong supply-demand fundamentals for key commodities like uranium, gold, and copper. The uranium price has already shot up from $30/lb to over $100/lb in the last year, proving that the market rewards structural supply deficits. Gold, too, has shown its lustre, spiking $150/oz during PDAC as investors seek a safe haven from currency devaluation.
But perhaps the most electrifying opportunity lies in copper. With the global energy transition in full swing, copper demand is surging for electric vehicles and renewable energy infrastructure. At the same time, supplies are constrained, setting the stage for a price breakthrough. As Merlin explained, "You've got this kind of new sources of demand, which is kind of an additional 20% on that demand load, and you've got that structural supply constraint...copper is probably next."
Of course, not all mining companies will be winners in this new bull market. Merlin and Matt stress that investors need to focus on a few key attributes: high-grade deposits that can be mined economically, experienced management teams with a track record of execution, and smart marketing strategies that communicate the company's story efficiently.
Some of the specific companies that caught their eye at PDAC include G2 Goldfields and Omai Gold Mines for their impressive gold projects and leadership, Collective Mining as a promising newer gold explorer, Erdene Resource Development for its strategic joint venture in Mongolia, and Energy Fuels for its well-positioned uranium assets.
While every investment carries risk, the pair argue that the potential rewards in mining stocks are worth it for investors who do their homework. "If you can take a copper asset and it's good, then it's going to be valuable," Merlin noted. "It makes me think about market efficiency - if it's good, it's expensive, if it's not good, it's cheap." The key is having the knowledge to tell the difference.
So could 2024 be the year of the new mining rush? The insights from Merlin and Matt suggest that the treasure map is there for investors ready to seize the opportunity. With the right strategy and a keen eye for quality, the beaten-down mining sector could be hiding some of the stock market's biggest future winners. After all, from a rock bottom foundation, there's nowhere to build but up.
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