The Big Payday: Chasing Profits in Risky Places | Australian Markets

As you recognize, our core theme at Mining Memo follows developments that inform us the place we’re in the commodity cycle.

Boom, bust or someplace in between.

Historically, commodities and mining stocks have pivoted from excessive costs to depressed situations. That’s the cycle.

And understanding the place we’re ‘in real time’ is way more troublesome than wanting back at these cycles in hindsight.

That’s why we should fastidiously monitor and revisit indicators that may level to our place.

An apparent one is a surge in M&A exercise, which tends to correlate with the upward leg of a cycle… As costs rise, confidence builds, and more offers happen.

However, M&A exercise tends to lag greater costs, which means it doesn’t offer early clues about what may occur in the months forward.

That’s why I keep returning to the theme of useful resource nationalisation and international hostilities, placing commodities entrance and centre.

Who would have thought 5 years in the past that minerals would turn into the front-line battlefield in geopolitical wrangling?

But that’s what now we have immediately.

From the US’s attempt to secure mineral offers in small backwater areas throughout Africa to the massive trade battle with China, placing the highlight on uncommon earths.

Now, you don’t need to have a look at every development in minute element; simply recognise that collectively, they level to the upward turning of a multi-year cycle.

Which is why this latest ‘mineral dilemma’ popping out of Guinea caught my consideration final week.

“Exclusive: Guinea moves to cancel EGA’s mining licence, sources say”

Here’s the transient should you can’t get behind the Reuters paywall:

A sovereign wealth fund between Abu Dhabi and Dubai known as Emirates Global Aluminium (EGA) has been caught up in a dispute with officers from Guinea.

Authorities in this mineral-rich West African nation have suspended EGA’s bauxite exports and mining operations.

So what’s the explanation for EGA’s cancelled mining license?

Apparently, its considerations about its ‘customs duties.’

Mining Memo’s Take

Of course, we all know the true purpose right here isn’t customs duties in any respect…

This is all about resource-rich nations taking back control of their mineral wealth in an period of greater costs and stronger demand.

Nations that maintain mineral-rich ground recognise that they now have the higher hand in bargaining energy, even when they lack the capital to develop new mining tasks.

This guarantees to be a difficult surroundings for the US and different mineral-dependent international locations in search of to secure provide chains for uncooked supplies.

Minerals crucial for tech, medication, power utilities, and defence.

So, whereas offers would possibly get signed, there’s no assured safety for worldwide miners developing tasks in these risky locations.

Paper contracts are meaningless in the age of shortage, when international locations with mineral wealth have all of the negotiating energy.

And that’s one thing abroad miners are inclined to overlook on the daybreak of a new commodity cycle.

This is shaping to be a historic turning level, however as I’ve detailed, location is essential if you wish to benefit as an investor.

EGA shareholders are undoubtedly studying that important lesson proper now, and lots more will in the long run, too.

Until subsequent time,

Regards,

James Cooper,
Editor, Mining: Phase One and Diggers and Drillers

All advice is normal advice and has not taken into consideration your personal circumstances.

Please search impartial financial advice relating to your own state of affairs, or if in doubt concerning the suitability of an investment.

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