Latest Bull Run or the Next Super Cycle?
With the exception of gold and silver, the prices for most metals rallied during February. Copper rose above $4/lb. Cobalt prices also surged. What miners need to determine is whether this is the beginning of another super cycle or just another upswing of the boom-andbust cycles that commodities endure. If it is the beginning of another super cycle as some suspect, then now is the time to make the investment in new projects and production capacity. If they are wrong, then they will just be committing to a raw materials overhang when demand cycles downward. The fortunes of mining companies have been won and lost on these gambles.
From where it stands now at the beginning of 2021, the mining industry is facing a glass full or half-full future. Half-empty should be in the rearview mirror for a while. Economists and analysts are now coming to grips with the amount of metal the green revolution will require. The question is whether today’s prices are sustainable, meaning they reflect this future demand, or are they the result of pentup demand from the COVID recovery.
China’s quick recovery has some economists forecasting the country’s economy overtaking the U.S. Other forecasts are saying the $1.9 trillion COVID relief package could spur as much as 6% GDP growth in the U.S. And, that is above and beyond the recovery the country would have experienced from herd immunity and increased vaccinations as a locked-down economy reopens. All of this bodes well for the companies that provide natural resources.
Then, there is the shift toward battery-electric vehicles. Former Xstrata CEO Sir Mick Davis recently created Vision Blue Resources to acquire a portfolio of strategically significant investments in battery mineral assets (See Leading Developments, p. 6). His vision for the future is remarkable. “The impact of rapidly growing demand for battery minerals is likely to lead to a surge in demand for specific commodities that will dwarf anything the mining industry has ever seen before, including the commodity impact of China’s industrialization in the last 20 years,” Davis said. “In combination with this surge in demand, a failure to develop new sources of supply highlights the need to ensure that critical mining assets are immediately financed and brought to production.” Vision Blue said it is positioned to provide an alternative source of capital to rapidly advance projects using the experienced technical and financial team it has available and leveraging its credentials and industry relationships.
One thing is for certain. A major infrastructure investment is needed to support this transition. Whether the electricity is generated by fossil fuels or other sources, demand is already testing the limits of the grid. One has to look no further than what happened in Texas, the energy capital of the world, during February or the rolling blackouts in Europe and California last summer, to see an electrically powered future without an investment. The materials that will be required to improve and power the grid will come from mining. Enjoy this edition.
Steve Fiscor, Publisher & Editor-in-Chief, E&MJ