By: Bruce Tatters, CEO, Red Cloud Securities.
Early 2024 capital markets have continued the narrow focus on a few mega cap technology companies while most public companies are simply avoided. Junior resource markets have felt the intense pressure of this avoidance in the form of liquidation.
Distressed valuation levels are rampant across most commodities. The combination of highly restrictive central bank policies, led by the federal reserve in the US, the significant weakness in China’s domestic real estate market, and overall poor economic outlook are a lethal 1-2 punch. This reality continues to starve the resource development in most commodities to which Red Cloud focuses.
Despite this macro sentiment, physical tightness continues in many commodities markets. This is easily witness by the current pricing environment on many commodities: +US$2000 Gold, $US3.75/lb. Copper, US$7.33/lb. Nickel, US$1.06/lb. Zinc.
This physical tightness has left pricing near cycle highs rather than down at cycle lows. A decade long dearth of investment in resource and development in most commodities has set the stage for a powerful new cycle as we march toward the end of the decade.
When one properly considers the inevitable consumption growth surge from the de-carbonization revolution that lies before us, this combination of lack of investment and new consumption driver, the outlook remains very bright.
Speaking of bright outlooks, uranium is the standout commodity leading the way for others. We have repeatedly highlighted 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.
This, along with significant supply challenges has pushed the uranium price dramatically in recent months — +US$100/lb. pricing has not been seen in almost 20 years. The last time it reached these levels it was short-lived, whereas this time around we believe pricing can remain elevated for an extended period. One just simply has to look at the coming lack supply response to these elevated prices as a barometer.
We believe we the markets will finally experience a bottoming of lithium pricing in early 2024. The lithium market which experienced an explosive run in 2022, completely reversed to pre-2022 levels by end of 2023. We believe this is providing investors with an entry opportunity into the sector, beginning with the larger, most economic, and furthest developed projects. We also stay very alert to the technological revolutions with DLE taking place within lithium. Advancements could unlock tremendous resources in the future beyond ‘hard rock’ deposits.
Many of the historical critical metals tied to old world use (copper, nickel, cobalt, pgm’s, etc.) have seen significant weakness continue into 2024. Bearish overall sentiment continues to depress the equities and restrain the commodities themselves. Several of these old-world commodities, such as copper, are essential for many of the trends occurring in the world today. Trends like digitization, electrification, renewable energy, decarbonization, etc. Many of these same commodities have significant supply challenges from structural underinvestment without factoring in these new crucial uses. The fundamental mid-term and long-term outlook continues brighten at the very time when near term markets look despondent.
At Red Cloud, we remain unrelentingly focused in the mining commodity sectors. We, above all others, believe in the essential need to drive supply growth in these markets. Moreover, we strongly believe in the entrepreneurial spirit of junior explorers, developers, and producers, as they remain a 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.
