Mining Stocks Outlook

Never before has there been such a broad based and rising demand for minerals.

By Rod Blake

I’ve been exposed the mining industry for most of my life – from being the stepson of a very successful Vancouver Stock Exchange financier/promoter, to working in the mining industry, and then with over 30 years an investment advisor. From these perspectives I cannot remember when the overall outlook for the mining stocks was much better – if ever.

Sure, there were times when the markets were higher and more exciting as were times when they were very depressed. But as a whole, I think the broad based outlook for the mineral industry and mineral stocks has never been better.

Traditionally, mining companies – especially junior mining companies – would migrate their efforts to the hot or rising commodity of the time. This was a natural occurrence as it was much easier to raise capital for a project that had a mineral that was in an uptrend or even better if it was in the vogue or being covered by the media.

I can remember the copper markets of the 1960s and 70s, the crazy gold and silver markets of the early 1980s, the wonder of world class diamonds being discovered in Canada’s north in the 1990s, the exciting uranium markets earlier this decade and finally the recent gold markets once again as gold bullion reached a new record high of over US$2,000 an ounce.

Scattered in this time frame were periods when lesser known metals such as nickel or platinum were in vogue due to a jump in their price or a new product demand, Often these mining stocks would benefit from an area play that would develop around a discovery.

As good as these markets were, the drawback was that there was usually only one or two minerals that were in vogue at any one time. A housing boom helped copper prices, record high inflation fueled the rise in gold, the Hunt brothers tried to corner the silver market, and an energy shortage fuelled the rise in demand for uranium.

When copper was trading at record highs of US$1.50 a pound in the early 1970s, no one really cared about a gold project with gold locked at US$35 an ounce. But when the price fix came off gold and it rose to US$850 it captured most of the mining and stock activity.

Conversely, when most minerals were at depressed prices in the late 1990s, diamond fever fueled the industry and investor interest. Usually, each of these bull markets would run their course over a few months or years and then give way for the next mineral to lead the industry.

For the most part, those were simpler times. The world was a far less complicated place that moved at a much slower and predictable pace leaving governments, companies and investors to focus on fewer issues such as the economic cycle, inflation, expansion, recession, earnings or growth etc. Metals and mining stocks generally reacted according to this input.

But then everything changed with the financial meltdown 2008/09 that caused the world’s central banks to inject trillions of dollars into their economies. Suddenly, instead of a predictable economic cycle, corporations and investors became prime watchers of central banks controlling the money supply and short term interest rates.

Then, a short decade later, the world experienced its worst pandemic of the last century. Covid-19 once again forced central banks to spend even more trillions of dollars to keep their economies from collapsing. Add to this the realization that the planet has embraced the theory that mankind has to quickly reduce the amount of carbon in the atmosphere and you now have a world that is changing faster than in any time in history.

Mining companies and their investors will be great beneficiaries of these new realities and resulting actions. Nothing in the modern world is accomplished without mining. Mainstay minerals such as copper, aluminium and iron will be in increased demand for massive clean energy and infrastructure projects. And now, mostly overlooked minerals such as lithium, cobalt and other rare earth metals are suddenly in great demand for batteries, electronics and computer chips. Uranium will play a larger role as more nuclear reactors are built to replace coal-fired electrical power plants. Finally, the trillions of excess dollars just injected into the system during the past year should benefit gold and silver just as it did in 2011 when the precious metals soared to record highs.

We are living in unprecedented times. The world is changing at an ever accelerating rate. Never before has there been such a broad based and rising demand for minerals. Never has the overall outlook for mining stocks been better. In the game of Craps there are times when one bets on just one number and times when one covers the board. For mining stocks, this is the time to cover the board.