The sexy mineral of the year

In sentiment analysis, there’s a concept in the junior resource sector which merits a mention today — the ‘sexy’ mineral of the year. 

I know, I felt just as sick typing that as you did reading it. But there’s no other way to phrase it.

Each year, the wider market picks one commodity, which for whatever reason, decides is going to go on an insane run. And any company which is lucky enough to have assets in that commodity is going to see a share price explosion — but it tends to be a relatively short-lived 12 months or so before being replaced by the next mineral in the queue. 

There's a shelf life — and a limited amount of time to make a profit.

In 2024, the sexy mineral is arguably uranium. It’s not just about the price increase, because if it were, gold would arguably take the crown. It’s about which commodity is driving the small cap valuations — the record gold price is not helping small cap gold explorers rise higher — but all the uranium plays are red hot. Yes, the price has come down somewhat, but the impact on small caps remains obvious.

Gold may be the metal of 2025, though I would argue this is likely to be copper as the supply gap comes to the fore. I’d potentially say that silver could do very well given the valuation gap with gold that has always historically closed, but this is unlikely to support small caps. 

2023 also saw decent years for gold and copper, but I would actually say that oil took the top spot — because while it rose from circa $60 per barrel to $120 in the immediate aftermath of Russia’s invasion of Ukraine, it then settled at around the $80 mark, massively improving project economics the world over.

2022 was lithium’s year — with lithium carbonate rising to >600,000CNY/t in November of the year, and all the usual suspects lining up including PREM, KOD and ALL. 

But the important takeaway is that you do not want to be investing in sexy companies when everybody loves them — you want to be buying shares when the mineral (and therefore sentiment) is on the floor. A really good example would be nickel juniors; nickel sentiment has been bashed by Indonesian ‘dirty’ offerings,’ but the metal rocketed in 2022 during supply concerns espoused by the Ukraine conflict. 

At some point, unloved Nickel explorers - Metals One and Kendrick spring to mind, though there are many others, will re-rate.

2018 was cobalt’s year as the general population started to realise how much will be needed in the rEVolution, 2019 was the year of palladium as improved Chinese emissions standards massively increased demand for catalytic converters. 2020 was actually the year of gold — explorers were hugely boosted as investors fled to the safe haven asset when the pandemic hit.

And companies should also be taking this to heart. If you’re looking to buy copper assets as copper prices are rocketing and the metal becomes the sexy mineral of 2025, then you’ve lost your mind. You should have been buying copper assets when the supply gap was obvious but sentiment not there yet — and those which managed to do so — the Asiamet’s, African Pioneer’s and Arc Minerals’ of the world will see a superlative rise.

But for investors, the key thing to remember is not to swallow the Kool-Aid. Yes the fundamentals behind gold, copper, uranium and lithium all point to massive gaps between supply and demand over the longer term - but market sexiness works on a rotation schedule. Don't think that just because copper might explode well above $10,000 next year means it will stay there forever. 

It will dip again before roaring back.

But if you're producing, it's a great time to make money. If you're exploring it's a wonderful time to hit the jackpot. And if you're after an ever-elusive project financing deal? 

Good news. 

It's much easier to get over the line.

Charles Archer, 28/7/24