Mining Experts Bullish on Uranium, Gold, and Copper After PDAC 2024
Mar 16, 2024
Recording date: 14th March 2024Picture 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.
Merlin's 7 PDAC 2024 takeaways:
1) The market is beaten up but at least we know where we are…rock-bottom. Valuations are crushed, capital is hard to raise, life is tough. And yet out of adversity comes opportunity. “When you have hit rock bottom, the only way is up”. Last year there was uncertainty. This year I sensed fatalism co-mingled with an optimism that things have to change.
2) The gold price jump of ~$150/oz sparked PDAC into life. John Maynard Keynes noted that “markets can remain irrational longer than you can remain solvent”. Last year it was uranium, and this year it seems that gold is finally responding.
3) Not all commodities are equal. Most uranium companies I met seemed to be well-funded for 2024. Most gold and copper companies I met seemed to be doing a $1-5 million capital raise, especially those with a sub-$50 million market cap. Most lithium and nickel CEOs that I met seemed to be staggering around like in the scenes in the movies, after the blast, when the soundtrack drops away to leave just a high-pitched ringing.
4) Nobody cares about your ESG program and Sustainability. Of course everyone cares about the hard social licence to get work done on a project and for progress to be made. But in this market all of the fluffy stuff goes out the window. Your ESG should be in the DNA of how you operate responsibly and evident in your results. Show us the geology, the scale and the grade, the engineering and the infrastructure. Spare us the soft, cuddly, and often meaningless photo-shoots and reviews.
5) Are markets efficient? I spoke with one CEO who noted that of all the many copper juniors with resources, only a few were unproblematic at the asset level … but that this select bunch had punchy valuations. With M&A in mind this means that the Company either has to compromise on quality (never a good idea) OR compromise on de-risking. Which means that it was spending time assessing exploration-stage projects (because they trust their own technical team).
6) The most interesting booth I saw was Lavras Gold’s core shack. The great Joao Moller showed me granodiorites transformed by intense metasomatism into completely different rocks (epi-syenites if you must). Quartz almostly totally removed, gold associated with pyrite. An Intrusion Related Gold deposit. Great stuff. Go Explorers!
7) People beat AI. Yes, computing power has transformed much of the workstream in our sector, such as the way we look at mineral resources, and geophysical and geochemical datasets. Yes, Starlink (thank you Elon) has transformed exploration camps around the world. But the real discoveries are being made by hard work, luck, and the Mark 1 eyeball. It is really enjoyable spending time with the resourceful, independent, dynamic peers, colleagues and friends that make such a great contribution to our industry. I salute you, even if it does take a few days to recover from PDAC.
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