The Deceptive Silence of the Energy Transition Metals and Junior Mining Industry
Since approximately five years ago, the precious and base metals and mining industry has been depressing, with activity being minimal and uncertainty remaining high. 2024 metals market projections published months ago indicated a significant and revolutionary boom would occur. Gold prices indicated the opposite, reaching an all-time high of US$2203.00 at 12:19pm EST on March 8th, 2024. Generally, higher gold prices result from increasing inflation and geopolitical uncertainty. Such periods drive people towards gold which creates a strong storage of value and a hedge against inflation. That being said, there is still reason for optimism. Many executives working for issuers, banks, and service providers have the following 12-18 months to have the most significant effects on trajectory.
More specifically, energy transition metals have been increasing in demand due to rising ESG trends and awareness worldwide. The term ‘energy transition metals’ was coined to account for conductor metals and radioactive substances that yield and secure reliable renewable energy sources. The most significant transition metals include Copper, Nickel, Lithium, Graphite, and Cobalt.
Robert Friedland, founder of Ivanhoe Mines has forecasted that copper prices will surge to $9,500 per metric ton. Copper supply is critical for the future of energy, as even in 2022, he stated that “more than 700 million mt of copper will need to be mined in the next 22 years to maintain 3.5% GDP growth, without taking into account the electrification of the global economy, which is the same volume of copper ever mine”. And the urgency for supply has shown, as to finish 2023, the 50-day moving average surged above the 200-day moving average, while prices are presently holding steady within the range of $8,400 to $8,600 per metric ton.
Similar to many other metals involved in the energy transition, extravagant amounts of copper are required to secure stable renewable energy in the future. This year, Friedland anticipates that lower interest rates and an increase in demand from China will support a bullish call. Despite China’s weak real estate market, the country has not slowed in its metal consumption and bought 27.54 million tons of copper in 2023, the most of any year on record. Friedland believes that copper’s allure will help to show signs of recovery in the country’s property sector.
Silver is also predicted to have a successful year ahead. Gold and silver prices traditionally show a positive correlation, although silver rarely emerges from gold’s shadow. This year, however, the Silver Institute reported that global demand for the metal was expected to reach 1.2 billion ounces in 2024, its second-highest on record. Randy Smallwood, CEO of Wheaton Precious Metals, believes that silver will outperform gold, but later in the year. In 2023 for example, charts showed that silver was up 35% in the last four months of the year compared to gold’s return of around 10%. As of April 1st of this year, silver futures began to increase significantly, jumping from a high of US$25.345 to its peak over the past 5+ years at US$28.810 on April 19th, indicating that demand for renewable technologies powered by silver has starkly risen.
These increases in demand have led to the US Government engaging with the market. This past March, the United States Department of Energy announced that they plan to lend Lithium America up to $2.26 billion to build Nevada’s Thacker Pass lithium project. This loan is one of the Government’s biggest investments to date in the mining industry, and it is a major part of President Biden’s efforts to reduce dependence on lithium from China and boost domestic production of minerals for the energy transition. The loan from the Government, alongside a $650 million investment from General Motors has provided the mine with funds to begin its first phase of operations. The mine is projected to run at full capacity in 2028 and produce 80,000 metric tonnes per year, with the loan from the Department of Energy expecting to accrue $290 million of interest over the course of the project’s first phase. Even though Lithium America is not classified as a junior mining issuer, many mines, particularly in North America, have followed suit.
Not just federal, but provincial governmental entities have also heavily invested in junior mining to spike the energy transition charge. In Northern Ontario, the government is investing over $4 million through the Ontario Junior Exploration Program (OJEP) to support junior mining companies in their quest for mines essential to the electric vehicle (EV) revolution, aligned with Ontario's Critical Minerals Strategy. This investment aims to stimulate economic growth, job creation, and prosperity, particularly in northern and Indigenous communities. Thunder Bay is emerging as a lithium hub crucial for Ontario's EV supply chain. Last year, Ontario led Canada in mineral exploration investment with $952 million. OJEP's latest funding round supports projects targeting various minerals, including gold, base metals, nickel, copper, zinc, cobalt, and lithium. Launched in 2021, OJEP has committed $4.4 million to fund 35 projects, with approximately $10 million in additional industry investment, emphasizing the province's commitment to mineral exploration and development. Many of these issuers who received hefty funding from legislative bodies currently lack Measured, Indicated, and Inferred mineral resource estimates, but many have been prompted due to the social landscape changing to requiring more stable energy.
With all this to say – why are metals, especially gold, doing particularly well this year? The answer is precarity. Historically, gold has been a safe haven for investors during uncertain political times or inflation. 2024 is no exception to these circumstances, given the ongoing conflicts in the Middle East and Ukraine. In Asia, consumers have been loading up on gold amid uncertainty in China’s economy. Furthermore, the expectation of the Federal Reserve cutting interest rates in June has led to Gold reaching record-breaking prices on the NYSE as of April 1. The metal is being heavily endorsed by the Bulge Bracket, with JP Morgan listing gold as their number one commodity pick for this year. The deceptive silence lies beneath the surface of gold breaking records. Gold futures, especially with unsustainable highs show a sense of volatility within the market that can paint the picture as to why other futures prices have remained stagnant over the past few years. However, as shown with certain commodities such as silver, many investors, issuers, and service providers are hopeful, and are expecting increased action in the markets with more discoveries hopefully on the way.