Mike Fagan,
Editor
July 8, 2022
We’re entering an historic global energy transition that’s going to require vast amounts of specialty “green metals” to fill the supply chain as the world moves away from fossil fuels.
There are tons of relatively small deposits of these critical metals popping up in various mining jurisdictions around the world.
Yet, one thing to keep in mind is that these “short mine life” deposits won’t have any sort of meaningful impact on supply — nor will they do much to aid in the transition away from fossil fuels to cleaner energy sources.
That’s because even these smallish deposits require an enormous amount of capex and, perhaps more importantly, have a very long time horizon to go from discovery to development to production.
I grew up in a mining family and I’ve been around geologists my entire life.
They’ll all tell you the exact same thing: It’s 100% about grade and tonnage… but grade without tonnage is essentially worthless rock!
Sure it’s great to drill into a potential mineral deposit and come up with some really high-grade material.
Oftentimes, that’s enough to get the market excited and the share price moving in the right direction — at least initially.
But in the end, if the bulk tonnage isn’t there, you’re most likely looking at a scenario where the share price comes all the way back down… potentially to zero. And that’s because the mine was never going to be built in the first place.
And that’s why it pays to pay attention to tonnage.
It is these larger deposit types that truly create long-term value for stakeholders. And it is these larger deposits — with extended mine lifes — that have a profound impact on the metals supply chain.
Take for example the Voisey’s Bay nickel deposit in Labrador, Canada, which is considered one of the most substantial mineral discoveries in Canadian history.
Mining commenced there in 2005 and will continue until at least 2032.
And speaking of supply chain woes, we all saw what happened to the nickel price in March on Russia supply concerns.
Another relevant example is Albemarle’s Silver Peak Lithium Mine in Clayton Valley, Nevada. The Silver Peak Mine is recognized as the only producing lithium mine in North America.
Silver Peak has been in production for more than five decades and likely has decades left to go.
The sheer size of that mine alone shows the very real potential for other large-scale lithium operations in the United States.
Yet, even with these giant mineral deposits, the bottom line is that the fossil fuels industry dwarfs all other mining sectors combined.
The world is so completely addicted to oil and gas that it is going to take decades upon decades to wean the world off of crude — particularly Saudi Arabian crude.
That’s our unfortunate reality for an ever-warming planet.
Hence, the race is on to secure the raw materials needed not only for America’s energy security but also for our national security.
And we’re seeing signs of that more and more with unprecedented supply chain issues related to a lengthy global pandemic.
As supply becomes further constrained, countries begin taking drastic measures to secure “their own supply” of raw materials.
China is a perfect example. Their government has allocated billions of dollars over the last couple of decades toward gaining control of the rare earths and lithium markets — both of which play a critical role in defense, technology, and EVs.
Conversely, the United States has been burying its head in the sand when it comes to mining and has instead focused on the internet, broadband, and the cloud with almost ZERO attention to the basic productive capacity of critical metals.
Exacerbating things is the fact that people all over the world are using more energy than ever before.
Plus, a lot of the things we think of as “green” like cell phones and laptops, in reality, aren’t green at all since most of the energy consumed is still powered by fossil fuels.
The mining of Bitcoin and other cryptocurrencies is yet another poignant example of something seemingly green that in actuality requires vast amounts of energy primarily fueled by oil and coal.
So… we find ourselves at a proverbial crossroads when it comes to the electrification-of-everything as we weigh the benefits of technology versus the release of greenhouse gas emissions into our atmosphere.
With $100-plus per barrel oil and gasoline prices at record highs across the US already… we simply cannot afford to make a mistake when it comes to our energy future.
Billions upon billions of people using more and more energy at a time of dwindling commodities capacity is a scary premise indeed… but it’s a hard truth we need to prepare for in an ever-connected world.
Renewables — such as wind, solar, geothermal, and hydro — are an important first step.
But we also need to think about the fact that solar fields require vast amounts of land. Wind turbines also take up a ton of real estate and make an audible “whirring” sound that most of us don’t want to live within earshot of.
Not to mention the fact that the sun isn’t always shining and the wind isn’t always blowing.
There are also storage concerns for the energy that’s produced but isn’t used up in real time. And we have an aging energy grid that’s antiquated, vulnerable, and unreliable; think of the recent brownout headlines across much of Texas!
The bottom line is that the green energy transition is neither going to be as quick nor as easy as the pundits on TV have been telling us.
And that brings us to uranium.
What the world needs is clean, carbon-emission-free “baseload” power. And nuclear energy, powered by uranium — or “yellowcake” as it is commonly referred — will continue to play an ever-increasing role.
Nuclear power currently provides about 20% of US electricity — enough to power one-in-five American homes.
Yet, more importantly… nuclear power provides almost 50% of America’s clean, carbon-free electricity.
To that end, the US government is redoubling its efforts to revitalize America’s once-dominant uranium sector.
The Biden administration is currently seeking congressional approval for $4.3 billion to buy domestically sourced uranium.
And while most commodities are down, uranium is holding up exceptionally well near the $50 per pound mark — a huge jump from where it was just a couple of years ago.
Our own Gerardo Del Real of Junior Resource Monthly knows this.
And as a mining stock expert with a lengthy track record of success, he also understands the importance of grade and tonnage when it comes to mineral exploration projects — whether that’s base metals, precious metals, or green energy metals like lithium and uranium.
He currently has his eye on a little-known uranium miner that has amassed an industry-leading portfolio of uranium exploration and development-stage projects across the western United States.
Few people know about this stock… so the timing, really, could not be any better.
Gerardo also has a keen understanding of the intricacies of the global supply chain and the race among nations to secure the specialty metals required for the green energy transition; he shares his Top-Picks right here.
Mike Fagan
Editor, Daily Profit Cycle