Source: Kitco News
By: Neils Christensen
Date: March 10, 2023
Gold exploration continues to attract the most capital within the mining sector; however, its dominance is beginning to weaken as investors focus on the growing demand for critical metals and industrial metals like copper.
The need for critical metals was the catchphrase at the 2023 Prospectors & Developers Association of Canada. The common theme during the week, from analysts on the floor to keynote speakers, was the growing demand for commodities needed to drive the global green energy transition and meet the needs of consumers wanting new technology like the latest smartphone and electric vehicles.
Many keynote speakers said that meeting global net-zero emissions has become a global priority. “The stakes couldn’t be higher when it comes to dealing with climate change,” said Sinead Kaufman, Chief Executive of Rio Tinto’s minerals portfolio
Kevin Murphy, principal analyst for metals and mining research at S&P Global Commodity Insights, said that currently, gold exploration accounts for about $9 billion in all exploration spending, representing about 69% of global exploration spending. He added that gold‘s share of the global marketplace has dropped significantly in the last few years.
Murphy added that he wouldn’t be surprised to see a further shift in the marketplace.
“Gold is still the focus in the mining sector,” he told Kitco News. “But maybe it should be less. If you cut gold exploration by 50%, the world will keep going. Yes, gold would be more expensive and you would see maybe lower jewelry demand. But you cut copper exploration by 50% and the world would shut down.”
Matt Geiger, managing partner at MJG Capital, said in his presentation that his firm’s mining portfolio has a 50/50 split between precious metals companies and critical metals companies.
In an interview with Kitco News, Geiger said when he first entered the space, he was most interested in the commodities that help make our lives easier.
“Gold doesn’t really help us live our 21st-century life,” he said. “Critical metals demand is bringing investors — new investors — to the mining space.”
Although Geiger said he is long-term bullish on critical metals, he did warn investors that the market, particularly lithium, is looking a little oversold in the near term.
Trevor Hall, CEO of Clear Commodity Network and creator of Mining Stock Daily, said that he is not surprised that critical metals are garnering a lot of investor attention because that is what governments are focused on.
He explained that there is a generational shift building in the mining sector and investors just need to “follow the government subsidies.”
“I think it’s pretty obvious, given the agenda of politicians, that they are going to be more supportive of a batter metal project than they will be for a precious metals project,” he said. “I think precious metals will have its time, especially if monetary and fiscal spending gets out of hand; but, as for building mines, there are lot more incentives for governments to support batter and base metal projects.”
Randy Smallwood, President and CEO of Wheaton Precious Metals, was even jumping on the critical metals bandwagon. In his presentation at PDAC, he described gold and silver as the original critical metals because they were the only metals to measure wealth.
“Society has needed and will continue to need gold,” he said.
Along with its role as a monetary metal, Smallwood said that silver also plays an important industrial role in the green energy transition as it is a major component in solar panels.
“Just a little bit of silver makes the world better,” he said.
In a comment to Kitco News, Smallwood added that he is happy to see the growing focus on critical metals, because it brings new investors to the mining sector.
He explained that consumers are starting to realize that if they want electric cars or the latest smartphone, they need to support the mining.
“I have never felt more embraced by society than right now,” he said.
He added that he would expect some of that interest to filter down to precious metals.
But it’s not just PDAC that is seeing a shift to critical metals; in one discussion, Jackie Przybylowski, mining analyst at BMO Nesbitt Burns, said that the BMO conference the week prior saw record attendance as it added a critical metals component to the show.
While critical metals may be garnering all the attention now, some investors remain firmly focused on gold.
Luc Ten Have, creator of GoldDiscovery.com, said he remains focused on gold and silver. He explained that while critical metals may be exciting, there are factors that make them challenging to invest in.
He explained that production of many types of minerals can be hard to produce and the markets are small that supply and demand fundamentals can be challenging to measure.