By: Bruce Tatters, CEO
2023 can best be characterized by the saying ‘are we there yet?’. Most market participants have endured prolonged, steadfast tightening campaigns from many central banks around the world. The U.S. Federal Reserve led this campaign globally in Q1 2022 and has not yet officially stood down from its tightening posture. Along with these restrictive monetary policies weighing on most major economies, other issues have emerged globally that have added to the challenges facing junior mining markets. The most significant is China’s economic issues surrounding its domestic real estate markets and overall anticapitalistic moves recently by the country’s governing group (Chinese Communist Party). Much concern has arisen globally about China’s forward growth potential.
I mentioned in my last letter: we see a pullback and headwinds to last into mid-year, followed by the inevitable rally once the U.S. Federal Reserve finally ends is tightening cycle. We are more confident than ever that we are at the end of North American central bank tightening for this cycle. When that officially occurs, we expect strength to return in precious metals markets coinciding with a peak in U.S. dollar strength. There has been a tremendous divergence in critical metals commodity markets in 2023. We have been highlighting over the last couple of years the overall improvement in sentiment regarding the use of nuclear power. This sentiment shift has been so pervasive, that our uranium industry has seen a massive resurgence. We expect this resurgence to be long-lasting and formidable. The lithium market which experienced an explosive run in 2022, cooled off in 2023. We believe this is providing investors with an entry opportunity into the sector. Many of the historical critical metals tied to old world use (copper, nickel, cobalt, pgm’s, etc.) have seen significant weakness this year correlated strongly with weakness in China (largest consumer of many of these metals). It should be noted that the commodity prices themselves have held up dramatically better than the junior mining stocks. Bearish overall sentiment has overwhelmed the equities vs. commodities themselves. Continued underinvestment in exploration and development corresponds to a dearth of new available supply. This physical tightness in many of these metal commodity markets has left pricing near cycle highs rather than down at cycle lows. The commodity price set up for the coming new cycle should be dramatic. Particularly when one properly considers the inevitable consumption growth surge from the de-carbonization revolution that lies before us.
Despite the recent near-term gloom on junior mining markets, the outlook remains blindingly bright. As I mentioned previously, it has been decades since the mid-term and longer-term outlook looked this bright. We continue to anticipate that within 1-2 years, we will find ourselves in a metal constrained market for decades.
At Red Cloud, we remain unrelentingly focused in the mining commodity sectors. We, above all others, believe in the essential need toward growth in supply to these markets. Moreover, we strongly believe the entrepreneurial spirit of the junior explorer, developer, and producer remain the key focus to achieving this goal. We continue to innovate our products and services to better assist this core group. Red Cloud continues to enhance our efforts to build our team, expand our distribution, grow our research presence, and add new services.
Please enjoy the conference – the entire Red Cloud team works exceptionally hard to make each new conference the best we have ever hosted. As always, the Red Cloud team members are here for your assistance.