By Bruce Downing, M.Sc., P.Geo

There have recently been numerous articles and webinars on the state of critical mineral resource investment in British Columbia and Canada. Lots of words but no action. My suggestion is to create a critical mineral – metal processing investment tax credit similar to the exploration critical mineral tax credit.

This would be applicable to an investment for mining to processing of viable battery product(s). There would be a Canadian federal tax credit together with a provincial tax credit. This would also include research and development leading to Canadian intellectual property which would also be included in the critical mineral to metal processing investment tax credit.

Each applicant would have a 10-year tax credit period. This tax credit would start with the issued critical mineral – metal mine – processing permit. The incentivized critical mineral – metal mining permit would come with a caveat that the permit must include a critical mineral to metal to product processing section.

The Canadian government has spent a few billion dollars on initiating EV battery manufacturing plants but no money for processing of the critical minerals to get the critical metals for the batteries. This EV battery manufacturing event has been greenwashed as a job creation policy. The critical mineral to critical metal processing supply chain would create more jobs, more Indigenous benefits and more revenues to many stakeholders than the battery manufacturing companies.

Our politicians need to know about the exploration to mining to mineral processing industry. What is missing is action by our elected Members of Parliament and MLA’s. Where are their voices in getting things done? Many critical mineral deposits can occur within their ridings and on Indigenous territory but we do not hear from them. If also parts of the critical mineral – metal supply chain occur within any of their ridings, then these politicians will also be responsible for integrating the supply chain permits. In regard to permitting, this is a provincial and federal problem, and it would appear that the various mine permits are only issued after all opportunities to reject them have failed. We need to be more proactive and productive in our permitting process.

Remember … No permits lead to no Investment which leads to no jobs, no Indigenous benefits and no government revenues (i.e. health care, education).

Caveats: Any problems are easy to identify; however, solutions are easy to suggest but can be hard to implement. Financings are hard to complete (need some innovative, inventive and incentive ideas as money moves quickly where there is some certainty of profit with low risk).

Despite a near-record high bullion price, global gold-backed exchange-traded funds (ETFs) saw further outflows in November, 2023. However, the pace of redemptions slowed sharply from the previous month supported by net inflows into North American funds, according to a World Gold Council (WGC) report.

Global physically-backed gold ETFs saw a small net outflow of US$920 million in November, 2023, significantly narrower than the previous month, while physical holdings dropped to 3,236 tonnes, a decrease of 9.4 tonnes from October, 2023.

However, the value assets under management (AUMs) rose 2.0% month on month to US$212 billion as gold prices rallied back through the US$2,000 an ounce marker.

The price of the yellow metal continued to shine at the start of December, 2023 amid hopes of U.S. Federal Reserve rate cuts in the spring, and as hostilities resumed between Israel and Hamas. On November 4, 2023, gold hit fresh record highs of around US$2,148 an ounce.

During November, the US Federal Reserve kept rates unchanged for the second consecutive meeting, fuelling investor hopes for the tightening cycle ending. Such anticipation was intensified by decelerations in inflation and the cooling job market, weighing further on US Treasury yields and the dollar.

The WGC noted that “geopolitical risk and investor positioning helped push gold higher in November, a move that contributed to the change in trend in the U.S.

North American funds enjoyed net inflows of US$658.9 million, or 10.4 tonnes in November. This marked a reversal from five straight months of redemptions and drove total holdings and AUMs to 1,631 tonnes and US$106.8 billion respectively.

In Canada, AUMs stood at US$4.2 billion or 64.7 tonnes, marking a decrease of 0.6%

However, European funds saw withdrawals for the sixth successive month, according to the WGC. Redemptions amounted to US$1.6 billion or 20 tonnes, pushing AUMs to US$92.4 billion and physical holdings to 1,411 tonnes.

The WGC said “opportunity costs continued to weigh on European investors’ appetite for gold ETFs” as yields remained around 10-year highs. It said rising local currencies weighed on investors’ appetite for the precious metal.

However, on the bright side, FX-hedged products – mainly from Switzerland – brought inflows, partially offsetting November’s losses. Funds listed in German saw the region’s largest outflows in the month.

In Asia, net inflows of 0.6 tonnes pushed total holdings to around 135 tonnes. Asia remains the only region experiencing year to date inflows, thanks to China, Japan and India. Meanwhile, AUMs increased by 47 million pounds sterling to 9.3 billion pounds.

November’s net redemptions mean that global ETFs endured outflows of 235 tonnes in the first 11 months of 2023. Total holdings of 3,236 tonnes at month’s end was down 17% from the all-time high of 3,916 tonnes recorded in October, 2020.

AUMs, meanwhile, dropped by $13.7 billion between January and November due to heavy outflows in Europe. The WGC noted that withdrawals of US$9.4 billion during the first 11 months of 2023 represented “the region’s second worst year-to-date performance in history.”

In November, low-cost gold ETFs registered their sixth consecutive monthly outflow, collectively shedding US$1.0 billion or 15 tonnes.

The WGC said gold market trading volumes averaged US$174 billion per day, marking an increase of 3.0% month over month. While trading activity of gold ETFs dropped significantly (-26%), the OTC market was barely changed, and volumes of other exchange-traded products rose by 10% -contributed mainly by COMEX.

The WGC defines gold ETFs as regulated securities that hold gold in physical form. These include open-ended funds traded on regulated exchanges and other regulated products such as closed-end funds and mutual funds. It tracks gold ETF assets in two ways: the quantity of gold they hold, generally measured in tonnes, and the equivalent value of those holdings in US dollars (AUM).

Rare earth metals are perhaps the most poorly named of any material. Despite their name, they are not rare at all with some, like cerium, more plentiful than copper. The 17 elements that comprise the group are also all around us everyday in the products we use. Familiarity can breed disinterest, and so it is with rare earths. However, we ignore their importance at our peril. Covid-19 related supply chain shocks and a changing geopolitical world have revealed key vulnerabilities for North America and Europe related to rare earth metals. This realization presents an opportunity of governments to adjust course and for investors to enter a growing materials space.

Currently China produces over 60% of the rare earths that are used in the products we consume. Indeed, the United States accounts for only 15% of world production, despite the seemingly endless uses for these materials. The reader can take a moment to look up from this article and note the myriad objects around them which contain rare earths: phones, tablets, TVs, cars and lightbulbs to name a few of the most common. Further applications include healthcare and defence. To recognize this is to recognize that the West is highly reliant on other – potentially unfriendly – countries for many products we take for granted as well as our critical infrastructure.

Russia’s invasion of Ukraine has awoken even the most somnambulant governments and citizens to some harsh realities about the world and where key commodities come from. Germany is in many ways impotent against Russian aggression because 50% of their gas flows via the Nordstream pipeline under the Baltic from Russia. To push back too assertively risks the gas being cut resulting in a societal shut down and Germany homes plunged into darkness and cold. The geopolitical implications are now impossible to ignore.

Also increasingly difficult to ignore is what Jeff Currie, Global Head of Commodities Research at Goldman Sachs, calls our “molecule crisis.” Years of structural underinvestment in everything from oil and gas, to mining and other extraction industries has resulted in simple lack of supply. “Name the commodity, we’re out,” is the thrust of his message.

Alarms bells should be sounding in every western government about our need to develop locally sourced critical commodities like rare earths. This is a geopolitical as well as environmental imperative according to Drew Horn, CEO of Greenmet, a finance and development company focused on rare earths in the United States. Mr. Horn highlights the danger of US military currently relying on China for metals to build the new F-35 fighter jets and the paucity of controls on how these minerals are extracted. “Buyers need reliability, transparency and accountability in the source of their materials nowadays,” he says. Continuing, he adds “The US and Canada have the highest ESG standards and best practices for responsible extraction of materials like rare earths. We need to support homegrown projects that will benefit our strategic position and are developed in an environmentally responsible manner.”

Though prices for most commodities are rising, government support for rare earths mining will likely be crucial in their early development. Dysprosium and cerium don’t carry the cache of gold for most investors and profit margins tend to be lower. As a result, economies of scale are essential for the economic viability of rare earth mines. Historically, these high initial capital requirements – a difficulty for all mines – combined with an unsupportive regulatory environment and cheap supply from abroad were the reasons for the lack of rare earth mines in US and Canada. New consumer awareness is leading to demand for more sustainably mined products and resulting in the huge opportunity that Mr. Horn and others see in the market.

Governments too, are changing their approach. The United States’ decision to build and maintain a strategic pile of dysprosium may not have been front page news but marks a seismic shift in how governments understand the strategic imperative of rare earths, according to Mr. Horn.

We in Canada should be looking to this opportunity as well. Our natural resource wealth, combined with our stringent environmental standards make Canada a very attractive jurisdiction in which to mine. In the years to come and as the world moves towards a bi- or tri-polar geopolitical model, reliable supply of materials from allies will become ever more important. Further, consumers demand for responsibly extracted resources will only rise. It is into this context that pioneers and champions of rare earth mining like Drew Horn are stepping. The stars are aligned for a marriage of politics, environmental stewardship and investor return in a new a burgeoning mining space.

Russia is vast. It spans eastern Europe and Northern Asia and is the largest country in the world by area, covering over 17,125,191 square kilometres (6,612,073├é sq├é mi), and encompassing one-eighth of Earth’s inhabitable landmass with a population of 145.5 million. It is one of the largest mineral producers in the world and mining is one of the country’s most important industries. Most Russian metal production is however exported – Russia is the world’s biggest supplier of palladium and third largest producer of nickel and aluminum. It is also a major exporter of coal and steel. That may change – Russia’s war with Ukraine could have severe impacts on supplies of commodities as western imposed sanctions in reaction to the invasion begin to bite. In retaliation, Russia may yet launch countersanctions and shut off energy supplies to the west. While the US has imposed a ban on Russian oil, the EU, heavily reliant on Russia for its energy needs, is still debating joining the embargo. The EU gets about 40% of its gas and 30% of its oil from Russia, and has no easy substitutes if supplies are disrupted. Russia has now threatened to turn off gas supplies to Europe in the case of an EU oil embargo and has demanded payments in rubles.

Commodity prices jumped immediately following the invasion. Russia supplies about 10% of the world’s nickel, which is used in lithium-ion batteries├é and to produce stainless steel. On March 8, and nickel prices more than doubled to over $100,000 a ton. ├é LME nickel prices have since dropped to about $30,000 per ton but remain well above pre-invasion levels. High nickel prices have added to the troubles of electric-car makers who were already struggling with rising costs of raw materials such as lithium and cobalt over the past few months.

Western companies, including energy producers BP and Shell have been severing ties with Russia, abandoning or exiting their operations and investments there. Glencore, which has a 10.5% stake in the Russian EN+ Group, the parent company of Russian aluminium producer Rusal, said recently on that it is reviewing its stakes in Russian entities, including a 0.57% stake in oil giant Rosneft. Rio Tinto has also said it is closely monitoring the situation in Ukraine and related sanctions. It, too, has an alumina refinery joint venture with Rusal in Australia. Canadian miner Kinross Gold has suspended operations in Russia, where the company has more than 2,000 employees at two mining properties and its Moscow office. Kinross also donated $1 million to the Red Cross’s Ukraine humanitarian appeal.

After several weeks of fighting, there is no clear understanding of how this war will end and much depends on President Putin and his goals in orchestrating the invasion. Against the backdrop of Russia’s market-rate GDP losing a third of its value between 2013 and 2020, some see it as a doubling down of his ultimate strategy to seek legitimacy from restoring Russia to a “superpower status,” as existed during the communist era.

After the collapse of the Soviet Union in the early 90’s, then President Mikhail Gorbachev introduced reforms known as Glasnost and Perestroika that allowed for more freedom of speech and government transparency, a somewhat drastic change from the policies of his predecessors. Anti-Soviet dissenters and nationalist parties in the republics seized this opportunity to protest and gather support for their independence movements. involved restructuring and modernizing the Soviet economy, reducing government control of industries and allowing some privatization. The Communist Party had voted to end one-party rule, opening the government to direct political opposition, and the newly created legislative body, the Russian Soviet Federated Socialist Republic (RFSR) voted to officially leave the Communist Party of the Soviet Union (CPSU) and declare Russian sovereignty.├é The independent RSFSR held elections, and├é Boris Yeltsin├é became the first popularly elected president. Gorbachev resigned his leadership to Yeltsin who eliminated the CPSU, and officially dissolved the Soviet Union on December 24, 1991.

For a time, there was hope for a new East-West relationship replacing the gloom and depression of the Cold war years. The Soviet Republics used their new freedom to feed growing independence movements and the former superpower was then replaced by 15 independent countries including Ukraine the others being Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Russia, Tajikistan, Turkmenistan, and Uzbekistan.  There are now concerns that the war may extend the into some if not all these former Soviet states.

At the time of collapse of the Soviet regime, the rapid institution of Yeltsin’s reforms came as a shock to most Soviet citizens who were unsure of how to act without strict government regulations and oversight, leading to even more social unrest. The 90’s were characterised by the chaotic disintegration of the Soviet Union and the advent of the so-called oligarchs. Because the Union was founded on communist principles, all means of production from oil to electricity to farming was state-owned. When the Soviet Union fell, a corrupt, sometimes violent scramble ensued to take ownership of the country’s industrial infrastructure. Some of those who were vying for control took it by any means necessary. As a result of their new business ownership, these individuals amassed significant wealth and ended up with the power necessary to manipulate the government alongside Boris Yeltsin. They constituted an oligarchy, a system of government in which a small group of people is in charge – the oligarchs.

By the time Vladimir Vladimirovich Putin began his first term as president in 2000, the government – run in part by the oligarchs – was highly dysfunctional and he went to work centralizing his authority and moving the oligarchs out of politics. Some of them fled the country. Others were exiled, imprisoned or had their property seized. Those who remained largely agreed to stay out of politics and leave that to Putin. But under his leadership, Russia has gradually experienced a democratic backslide and a shift to authoritarianism with his rule characterised by endemic corruption, the jailing and repression of political opponents, the intimidation and suppression of independent media and a lack of free and fair elections.

Putin’s war thus provides a distraction for a Russian society that is fragmented, primarily due to economic inequality, making antagonism between the rich and poor a significant problem. This antagonism counterpose the “haves” (Putin’s political elite and closely associated oligarchs) against the “have-nots” (most of the population) in a battle of interests in which the former has the overwhelming advantage. Establishing a more equitable balance will be critical for the future of the Russian economy and ultimately for global stability. But in April 2021, following a referendum, Putin signed into law constitutional amendments including one that would allow him to run for re-election twice more, potentially extending his presidency to 2036.

This war could have many years left to run.

The electric car revolution will stall in the West if supplies of crucial battery elements like lithium fail to keep up with the forecast huge increase in demand. The International Energy Agency (IEA) has estimated that the growth in EVs could see lithium demand increase by over 40 times by 2030-last year, lithium demand was about 320,000 tonnes and is expected to hit one million by 2025 and three million by 2030, which explains the potential bonanza for companies like ACME Lithium Ltd [ACME-CSE] when they discover new lithium resources.

“I don’t think we can ignore the billion-ton elephant in the room. A carbon-free future can’t exist without securing a large amount of lithium which is currently mined and produced by only a handful of foreign countries. Right now, global production is not keeping up. We simply aren’t extracting and producing enough lithium to match the projected demand. In fact, there’s only ├é a couple of operating commercial mines currently in North America.” says Steve Hanson, President and CEO of ACME Lithium Ltd.

Hanson says he’s never seen anything like the tsunami that is coming for lithium over his 30 years working in the alternative energy, oil and gas and mining financial markets, still the demand wave was only part of the reason he formed ACME Lithium Ltd.├é The other is that North America is a small player in the global battery industry. China dominates both battery manufacturing and lithium supply chains. On its current trajectory, North America is expected to supply less than half the projected demand for lithium-ion batteries for electric vehicles on its roads by 2028, and without a larger and reliable domestic supply could see the green energy transition stall.

“We have the makings of what will be a great market over the next decade, so that’s why I started evaluating and purchasing North American-based lithium projects that have the near-term potential to support the domestic supply chains,” says Hanson.

The best lithium real estate in Nevada

Early to the game, Hanson successfully cherry picked a couple of lithium projects in Nevada located square in the middle of what many are calling the great white gold rush. In May 2021 ACME entered into an option agreement with GeoXplor Corporation for 100 percent of the first 1,280 acres of the Clayton Valley Project considered by many as some of the best real estate in the neighbourhood, because like in real-estate, if you can’t buy the biggest house, then being next door is the next best thing.

The Clayton Valley Project, which now includes 2,440 acres, is located just north west and contiguous with the Silver Peak mine run by Albemarle Corporation since 1966 and is currently the only lithium brine operation in North America. And on the north east, the Clayton Valley project claims are contiguous with Pure Energy Minerals’ joint venture with Schlumberger Technology Corporation.

With proximity of the Clayton Project so close to a producing mine and along trend, and after a couple of successful geophysical surveys, that based on the resistivities values showed multiple areas and zones that look like lithium brine occurrences in saline rich aquifers or brine saturated pebble gravel, Hanson and his team had reason to be excited. The size of the anomalies over the 9.5-kilometre survey were impressive and now Hanson and his geological team are eager to find out what they’ve got here, especially in the east and southeast portions of the claim area where it appears lithium brine starts at the surface to around 340 meters below the ground, while the same resistivities are present to 740 meters.

A couple of weeks ago (February 7, 2022-NR), ACME Lithium received its notice of intent for drilling from the U.S. Bureau of Land Management (BLM), and if all goes well, the drills should be turning on the first of three 500-metre holes by late-March or early April. And unlike hard-rock mining, where you need to drill sometimes hundreds of holes to define a target, Hanson explains drilling for lithium is more like drilling water wells.

“We can drill a handful of holes and with success, come up with a resource estimate, and that’s one of the advantages of brine, there’s lower Capex necessary to reach a preliminary economic resource,” says Hanson.

Hitting the geological jackpot

If Hanson’s bet is right and he hits the geological jackpot, the rewards for making an important discovery can be very lucrative. In fact, lithium is fast becoming more lustrous to investors than gold. So much so that it’s even been hailed “the new gasoline” by Wall Street’s most powerful and influential investment bank, Goldman Sachs.

But Hanson has been around the business long enough to know not to put your eggs in one basket, and that’s one of the reasons he’s accumulated a pipeline of projects, including the Fish Valley Claims that are over the foothills 25 miles away from the Clayton Valley project and previous exploration has identified anomalous lithium values ( up to 600 ppm) in Tertiary claystone. Some more mapping is being done on this project, and a geophysics survey is expected later in 2022.

Hanson and his team have also staked a couple of projects in an up and coming area in Southern Manitoba. The 2,930- acre Cat-Euclid property straddles the Cat-Euclid Lake shear zone and extends along the southeasterly trend of known pegmatite occurrences just to the west of to where Australia’s Mineral Resources Limited (MRL), one of the world’s leading lithium producers with a market capitalization of over AUD$8 billion recently signed a joint venture agreement with Lithium Canada Development (New Age Metals Inc.).

Next steps, include focusing exploration efforts in on the spodumene-bearing LCT pegmatites that can be a source for lithium carbonate deposits, remote sensing, structural geology, ground-based geological mapping, and geochemical sampling to localize targets for drilling.

A second property, the 8,883-acre Shatford Lake Project, is in the southern limb of the Bird River Greenstone Belt in southeastern Manitoba and straddles a 15-kilometer-long structural trend of the Greer-Shatford Shear Zone with numerous pegmatite dykes and favourable host rocks. The northeast corner of the claims neighbours the Mineral Lease of the Tanco Mine, and the south shore of Bernic Lake with the Buck, Pelgi, and Dibs pegmatites nearby.

“We’re really excited about Manitoba. In fact, and we have a large program planned for 2022. We’ll begin a sampling and trenching program, mapping and some additional groundwork starting in May, and based on results, that could lead to a full-scale drill program shin early fall of 2022,” says Hanson.

All the right stuff

There’s a lot of activity in ACME Lithium for investors. The stock is well distributed, with 10 percent held by institutional investors, 10 percent by management and 80 percent, retail investors. The drill program on the Clayton Valley Project could be a catalyst, as might any of the other three exploration projects planned for 2022.

ACME lithium is a company with the the right fundamentals and is worth keeping an eye on.

Global demand for uranium to fuel nuclear reactors is shown in the table below from the World Nuclear Association. As can be seen, the world requires 62,496 tonnes of uranium per year for electricity generation. Nuclear power accounts for an essential part of the grid in the Western World. France generates 70% of its electricity and the US just under 20% of electric generation from nuclear power. Importantly, this is stable base load energy which is online 24/7.

The World Nuclear Association’s Country Profiles, linked to below, provide more detail of what is tabulated here.

Source: World Nuclear Association

The source of uranium supply in the world has shifted dramatically in the last twenty years. Part of the shift has been due to economics. In Situ leaching extraction has proven to be a lower cost source of uranium and it has displaced conventional uranium mining over the last twenty years, going from 16% of global supply in 2000 to 58% of global supply in 2020. But this supply is not secure. Most of it comes from Kazakhstan, a former Soviet republic which is presently in political turmoil to the point where Russia deployed troops to help the Putin allied Kazakhstan government suppress public protests about energy prices

The major Kazakhstan uranium mining company is Kazatomprom a state-controlled entity. Another significant producer is Uranium One. This was a Canadian public company launched on the TSX and a major uranium producer in Kazakhstan through joint venture with Kazatomprom and a direct producer of uranium from Africa. Who owns Uranium One? It was taken over by Russia’s state atomic energy company Rosatom in 2009-2010. In summary, directly and indirectly Russia has control or significant influence of over half of the world’s uranium supply.

Uranium requires enrichment to be used in most nuclear reactors (but not Canada’s CANDU reactors which do not require enriched uranium). Where does the uranium from Kazakhstan get enriched? In part, Russia through Rosatom provides this service. ├é The United States gets 17% of its refined uranium from Russia.

Source: World Nuclear News

This may have seemed like a good idea when the West was trying to accommodate Russia in the world economy but given the invasion of Ukraine this now now puts the West in a position that its supply of this vital energy source is controlled by Russia.

Uranium Producers of America President and Executive Vice President of Uranium Energy Corp Scott Melbye issued the following statement on Russia’s invasion of Ukraine: “Russia’s aggression in Ukraine highlights the danger of relying on the Kremlin and its allies for strategically critical energy supplies and minerals. Nearly half of the uranium needed to fuel U.S. reactors is purchased from Russia, Kazakhstan, and Uzbekistan. Despite ample U.S. uranium resources and the capacity to produce them at the highest environmental, safety, and health standards, U.S. production has almost completely halted. The Uranium Producers of America have repeatedly warned policymakers of the consequences of this overreliance as the predatory market tactics of these state-owned competitors have eroded the domestic uranium supply chain.”

Because of this issue, Western uranium suppliers such as Cameco, and uranium ETFs such as the Sprott Physical Uranium Trust have “caught a bid’ and the spot uranium price is trending higher.

With 50-some years in and around the mineral industry; most of my career, the only energy metal that received much attention was uranium and its main use was to produce electricity by way of nuclear reaction. Nuclear reactors started to appear mostly in affluent nations post World War II as mankind unleashed the power of the atom. Because of size and scale, most of these reactors were large and very specialized plants. They worked very efficiently day in and day out, but when things went wrong such as in the 2011 tsunami in Japan, things could go very wrong. Uranium is one of the world’s most common minerals but economic deposits have proven to be few and far between. Because of the strategic nature of the product, the production and price of uranium yellow cake or U₃O₈ was a relatively stable market that was controlled by governments and a few large producers. Prices were generally in the US$60-a-pound range and then moved up with increasing demand and reached a record high of US$105 in early 2011 just as a massive tsunami hit Japan. The resulting catastrophic damage to three coastline reactors caused that country to immediately shut down all of its nuclear facilities. Japan had the world’s largest number of nuclear reactors so with their closure the price of U₃O₈ collapsed to US$20. The sudden shutdown of reactors created a large surplus of uranium and for most of the last 10-years the price of uranium had mainly traded in a range of US$25 – $30.

But the world advances and times change and just as steam energy gave way to petroleum energy, now rising carbon levels in the atmosphere are forcing fossil fuels to give way to electric energy. Other than hydro electric production, nuclear is one of the most carbon neutral and greenest forms of producing electricity. Japan and other countries have started to reactivate shuttered reactors as well as starting to build new, smaller but safer nuclear facilities. This new demand filtered down to the metal and the price of uranium started to rise and tested US$40 last year before finishing  2021 near the US$30 level.

Intangibles can come into play and effect the price in any market. A great example on a large intangible is the ‘Baby Boomers’ who were born in the 1950’s and have effected every market they were exposed to for the past 70-years. An recent intangible of the uranium market has been the entrance of private or publicly funded Exchange Traded Funds (ETFs) into the spot uranium market. These funds saw the surplus in uranium market start to tighten and purchased surplus inventory that they are storing to be resold later at hopefully higher prices. Their continued purchases could affect the price of uranium going forward. It is generally agreed that the cost for a producer to produce a pound of uranium is about US$45 so these funds are thinking that will eventually be the base price to come. Uranium reached US$40 last year. With the increased demand of restarting and opening of new reactors, I can see the price of U₃O₈ migrating up to that level again in 2022. Now add to this the intangibles of ETF investment purchases and a case could be made for the price of uranium to achieve the breakeven price of US$45 once again.

And while there will be an acceleration in the greening of electrical production away from coal to nuclear, wind & solar, an even greater change in electrification will be seen in the automotive industry. Since the invention of the wheel, mankind has taken to being in motion. From what started as a few gasoline powered cars scaring horses has advanced to automotive ├é gridlock throughout the world with billions of people driving millions of vehicles to get themselves or their goods from A to B and back. The electrifying of the automotive industry is the greatest change in the transportation industry since Henry Ford started running Model T’s off an assembly line. The assembly line enabled vehicle production accelerate like never before. The electrification of the automobile will be like the assembly line on steroids. Every major auto manufacturer now has, or will soon have, electric vehicles (EVs). The International Energy Agency (IEA) sees the current count of about 10-million EVs rising to about 125-million in 2030 and on to about 200-million units before the world reaches net-zero emissions some years later. And to achieve this, the IEA also estimates the mineral industry will need to produce 40-times more lithium along with 20 – 25^% more cobalt and nickel and twice as much copper.

Lithium will be the biggest beneficiary of this transition, but will the industry be able to keep up with the anticipated accelerating demand. Lithium has traditionally been produced from underground lakes of liquefied lithium salt brines. These brines are brought to surface and placed in large evaporation ponds that evaporate away the water and leave behind a lithium concentrate that is collected for production. This is a passive process that takes large acreages of ponds, constant warm sunlight and most important of all, many months of time. Until recently, lithium production was able to keep up to and even exceeded demand, but I think this may change with the accelerated EV production. The sun can only evaporate so much water and these ponds can only be built to workable sizes. Just like environmentalist don’t like acres of oilsands mines I doubt they will readily agree to more acres of lithium evaporation ponds. There are other hard rock and clay based lithium deposits that can be mined by more conventional mining methods. Unfortunately, none of these deposits are being developed for immediate production. And in this modern, not in my backyard world, any newly permitted lithium deposit will take years to get into production. So production may soon lag the demand for lithium and other energy metals. According to Bank of America Global Research – the global mining industry will have to more than double its annual capital expenditures to US$180-billion in order to meet the world’s net-zero carbon emission target.

Last year was a banner year for lithium. Lithium metal rose by 142^% to US$77 while the more stable lithium carbonate soared up by over 393^% to US$16.67. To see these gains again in 2022 would be amazing and too large to predict. But large gains in the price of lithium could be in the cards because – as of mid-January, the price of lithium metal has already gained another 31.5^% to US$101.

Due to current political unrests in Kazakhstan, the uranium market prices have risen sharply while the battery metals will likely be breaking new ground. More players, more products and a motivated consumer base should produce record demand for these metals. All in all – 2022 is shaping up to be a year of accelerated advances for the greening of the planet and by extension – an amazing year for Energy Metals.

At the forefront of energy metals exploration are Blue Sky Uranium Corp. and Cypress Development Corp.

Blue Sky Uranium Corp. [BSK-TSXV; BKUCF-OTCQB; MAL2-FSE], a member of the Grosso Group of companies, aims to capitalize on a rising uranium price by developing what is considered to be a unique project in Argentina.

The company’s flagship 100%-owned Amarillo Grande Project (AGP) is considered unique in Argentina because it offers the potential for the discovery of multiple uranium deposits.

One of the company’s key objectives is to deliver exceptional returns to shareholders by rapidly advancing a portfolio of surficial uranium deposits into low-cost producers, while respecting the environment, the communities and cultures in all the areas in which it works.

It is a strategy led by a highly experienced management team, including Chairman Joseph Grosso, a pioneer of mining exploration in Argentina. His involvement in that country dates back to 1993.

Blue Sky President and CEO Nikolaos Cacos says it’s a good time to be in the uranium sector. “What we are finding is that around the world, people are becoming more accepting of nuclear energy as a safe, secure, reliable and carbon free way of generating electricity,” he said.

Cacos said global supply of uranium has not been keeping up with demand, a scenario that has helped to drive the price of the nuclear fuel up to US$45.75 a pound (January 12, 2022) from a low of US$18.50 in late 2016,

A further increase would likely be positive for Blue Sky shares which were trading on January 12, 2022 at 23.5 cents, in a 52-week range of 36.5 cents and 15.5 cents, leaving the company with a market cap of just under $45.3 million, based on roughly 185.4 million shares outstanding.

The Amarillo Grande Project (AGP) covers 300,000 hectares, and contains the Ivana near-surface deposit, which hosts the largest NI 43-101 compliant uranium resource in Argentina. However, Ivana covers only a small fraction of the property and the company aims identify multiple new zones of uranium-vanadium mineralization within the project area.

Cypress Development Corp. [CYP-TSXV, CYDVF-OTCQX, C1Z1-Frankfurt] is an advanced-stage lithium exploration company focused on developing its 100%-owned Clayton Valley Lithium project in Nevada.

Led by a highly experienced management team, Cypress offers investors a window on growing demand for lithium, a key ingredient in the production of lithium-ion batteries used to power mobile devices, tablet computers and electric vehicles.

The Clayton Valley Project has the potential to be a sustainable long-term low-cost producer of lithium in the form of battery-grade lithium hydroxide. It lies adjacent to the Albemarle Corp.’s [ALB-NYSE] Silver Peak lithium mine, North America’s only lithium brine operation.

A June, 2020 pre-feasibility study (PFS) envisages the development of an operation capable of producing an average of 27,000 tonnes per year of lithium carbonate equivalent (LCE) at a cash operating cost of $3,387 per tonne. The nominal production schedule uses the material from the first eight pit phases, resulting in a 40-year mine life and 213 million tonnes of mill feed at an average grade of 1,129 ppm Li. The capital expenditure is forecast at $493 million.

In December, Cypress Development completed the purchase of Permit for Water Rights in Clayton Valley, Nevada. The Permit is an essential piece of Cypress’ strategy to develop its Clayton Valley Lithium Project, by securing the majority of the Project’s future water requirements.

The company has commissioned a pilot plant located about 150 kilometres south of the project. It is designed to operate at a rate of one/tonne per day, utilizing chloride-based leaching combined with the Chemionex-Lionex process for direct lithium extraction (DLE). The testing ahead will be one of the larger piloting efforts to extract lithium from clay in the world, and the only one based on a chloride approach to leaching. In an update in December, 2022, the company said it has completed a 7-day successful continuous run and is gearing up for more testing early this year.

In a bid to fund that work, Cypress has raised $16 million from a bought deal private placement of units priced at $2.00 per unit. On January 17, Cypress shares were trading at $2.05 in a 52-week range of $2.61 and 83 cents.

“Inflation is the decline of purchasing power of a given currency over time. A quantitative estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of an average price level of a basket of selected goods and services in an economy over some period of time. The rise in the general level of prices, often expressed as a percentage, means that a unit of currency effectively buys less than it did in prior periods.” – Investopedia.com

Rising inflation, mainly nonexistent for the past 30-some years, recently became a hot topic after the U.S annual inflation rate broke a multi-year trend of about 2^% and rose in November to 39-year high of 6.8^%. Think about that for a moment. In North America – anyone under the age of 40, or two generations of businesses, consumers, families and workers, until this year, have not experienced prices rising by much more than 2^% in any given year. Now 6.8^% taken by itself may not seem like a big number, except that for last 40-years, inflation has been controlled by central bankers at rate of about 2^%. I say controlled because that is just what they did. Government central bankers such as The United States Federal Reserve (Fed), The Bank of Canada, The Bank of England and others would raise or lower short-term interest rates to speed up or slow their economies in order to keep the average rate of inflation steady at about 2^%. This 2^% rate was considered optimum as it would allow the economy to grow at a rate that let businesses, workers, consumers and families to keep up with the cost of living without any untoward hardship. As a matter of fact, it became so systematic that the phrase “Cost of Living Adjustment” was written in to or was expected in many price or employment discussions. This controlled inflation also negated many costly work stoppages and supply disruptions. When you think about it – over the past 30-some years, (except for the recent covid induced supply problems), there have been very few major workers’ strikes or supply disruptions. Most strikes or labour issues have been over work conditions or benefits as employees and employers generally agree on something near an annual 2^% cost of living adjustment. Meanwhile, retailers and suppliers found that price increases could be kept to a minimum if inventories were kept small and goods arrived on time as needed. Meanwhile consumers and families could budget with some confidence for the year ahead.

This controlled cost of living worked very well, even in the financial crisis of 2008-09 Here, the central bankers quickly dropped interest rates to zero and injected great amounts of money into the system to spur their economies forward in a time of great economic uncertainty. The lower interest rates and cash worked as anticipated and by 2010 most economies were growing and inflation was once again tracking the desired rate of 2^%. All was going well economically until March 2020 when Covid-19 became a world-wide pandemic that ground economies to a virtual halt. Central bankers, working off of the their success in 2008-09, once again dropped interest rates to zero and injected even more cash into the system. And this time economies came back even quicker as vaccines allowed businesses to reopen, employees to work and consumers to spend sooner than expected. For the most part the recovery mirrored that of 2010 except that this year inflation started to rise above the desired 2^% level. The Fed and other central bankers├é assured us this bump in inflation was transitory or temporary and that it would drift back down to the optimum 2^% range sometime in 2022. Those assurances were all good until the above mentioned jump in annual inflation to 6.8^%. In a few short months those assurances of a return to 2^% inflation by next year now seem somewhat suspect. Why is this important and what if inflation doesn’t drift lower? Higher inflation by itself is not that terrible as long as the rate is stable. As a matter of interest, many countries are handling inflation rates that are above 2^%. The problems begin when inflation rates persist on climbing higher. The Fed and other central bankers have seen this situation before and certainly do not want to see it happen again.

To really speak of rising inflation one has to go back a few more years in time to the early 1970s. You see, while those under 40 have never experienced rising inflation, those of us over 40 can remember it well. This recent bump up in inflation seems eerily familiar to what began somewhat unnoticed back then but persisted unchecked for about 10-years through to the early 1980s. Up to the early 1970s, the post World War Two cost of living was much like we’ve experienced for the past 3-decades before covid. That is, inflation was tracking at a year over year rate of about 1^% – 2^% while the economy grew and there were few labour or supply disruptions. Then in about 1972 there was a bump in inflation up to about 5^% and a year later up again to 8^%.

Now the thing about major changes in economic trends is that they tend to last longer and go further than most expect. The Fed and other central banks were slow to recognise the dynamics of this rising inflation trend and were behind the curve in trying to slow it down. The net result was that this rising trend persisted until inflation peaked in 1981 at about 13^%. This spiraling rise in inflation was only stopped and reversed when central banks finally brought the economies of the world to a virtual halt by raising interest rates up to about 20^%. Yes – the interest rate on mortgages in 1981 were at or near 20^%. But mortgages were only part of the problem. During this time, workers fell noticeably behind in their standard of living, which├é resulted in prolonged strikes and supply disruptions as they demanded cost of living increases of 12^% or more. Not surprisingly, benefits and working conditions weren’t the primary employment issues anymore. It was all about the cost of living or as according to Investopedia above – “the decline in the purchasing power of a given currency over time.” ├é Which brings me to gold & silver.

That amazing 1972 – 1981 period of rising inflation, saw the price of gold surge up from about US$150 an ounce before peaking out at about US$850, an increase of about 465^%.Meanwhile, silver rose by 900^% from about US$5 – US$50. To better understand why -├é refer once again to the decline in purchasing power above. In times of rising inflation hard assets come into favour as investors want to protect themselves against declines in the value of their currencies. Nothing focuses ones attention to the devaluation of their currency more than to seeing their mortgage rate jump up from 6^% to 20^%. Think of it – A mortgage rate in 1981 that was comparable to that of a credit card. So investors sought out gold and silver as the ultimate investments that increased in value in times of rising inflation. Gold is considered the one true non fiat currency of which all other currencies are compared. Silver has similar properties albeit with a greater industrial component. Gold and silver held their true value while the fiat currencies of the world declined. The other asset closely associated to gold & silver are the public companies that mine and produce those minerals . So while gold and silver rose by 465^% and 900^% respectively, many gold and silver stocks soared by many multiples higher than that of their underlying metal as investors factored future earnings and growth into the equation. Interestingly, the stock price to earnings multiples (PE) of gold and silver stocks in 1981 were extended to much the same levels as those of the tech sector today. A much different picture than what we see today.

The central bankers finally won and the price of gold & silver rolled over in 1981 along with a drop in interest rates and easing inflation. Gold worked its way all the way down to about US$275 in the late 1990s as inflation finally bottomed and stabilized at about 2^% and the current cycle began. From there gold climbed by over 650^% to the current 2020 all-time high of US$2,075. Silver came back down again to US$5 in the same period and then rose once again to US$50 in 2011 before settling out to today’s US$23 for a peak gain of 900^% and a net gain of some 360^%. So even in a times of low inflation gold and silver have still managed 20-year respective gains of some 650^% and 360^%. Unfortunately, gold and silver equities have not fared quite so well. Gold and silver securities ran up from with the price of the metals from 2000 to 2020 but for the most part, have not held the impressive gains of the minerals and some are trading back at multi-year lows or PE ratios. It would seem that that gold and silver stocks need rising metal prices to really capture investor interest.

Half a century of history shows that the price of gold and silver increases in value over time. It would seem that while their price goes up in times of low inflation they tend to increase at a greater rate in periods of rising inflation. The only time they saw a long-term drop in price was when interest rates dropped and inflation eased post 1981. Surprisingly – the price of gold and silver equities are not closely correlated with the price of their underlying resource. In a rising gold/silver market – the price of gold & silver equities greatly outperform the metals to the upside while in times of consolidation, such as the past year, the equities retreat to multiples that would suggest the mineral prices were about to collapse as they did post 1981. Historically however, this has proven to be one of the best times to buy gold and silver stocks. And if today’s central bankers are wrong or are slow to react and this current 6.8^% bump up in inflation proves to be less that transitory or a precursor of higher inflation to come, then this period of time could be looked upon as one of the best in the past 50-years to invest in gold & silver and to a greater extent – in gold & silver equities.

Russia eyes to become the leading global gold producer and overtake China by 2026, according to statements recently made by the chairman of the Union of Gold Producers of Russia, Sergei Kashuba, during the Eastern Economic Forum in Vladivostok as well as statements made by some leading local gold producers.

Kashuba commented: “If the current trend of China’s decline of gold production (for the last six years) continues, while Russia’s production continues to grow (at least at moderate but stable growth rate of 1-2%), then we believe that Russia may become the world’s largest producer of gold on the horizon of five years.”

According to the Russian Union of Gold Producers, gold production in Russia in 2020 was 363.3 tonnes and there is a possibility production increase this year as well.

In the meantime, as Russia hopes for leadership in the global gold mining sector, China has no plans to lose the ground. The country has been the world’s largest gold producer for 14 years and the largest consumer of├é gold for eight years. During 2020, gold production in China fell by 4.18% to 479.5 tonnes.

China also has plans to accelerate its gold mining activities overseas that will take place by establishing control over some leading gold miners in emerging nations, primarily in Africa.

Currently, Chinese investors already control about 70% of the mining sector in the Democratic Republic of Congo and is planning to expand to other countries on the continent which have substantial gold reserves.

Still, according to some analysts, more active expansion of Chinese in the African gold mining sector may be prevented by the strong positions of some of its major rivals. In addition to Russia, which recently announced its intention to restore its presence in Africa (including its gold mining sector), the region has been traditionally within the sphere of Western gold miners.

One of them is Kinross Gold, which has been successfully operating in Mauritania for the last decade by controlling the Tasiast gold mine. The mine, located 300 kilometres north of the capital of Nouakchott, is one of the largest gold producers in West Africa.

Australia – another major gold producer – is also planning to accelerate gold mining activities.

In fact, the last two years have been the best on record for Australian gold producers. In the 2019/20 financial year 328 tonnes of gold was produced in the country, being one of the record figures in the last several years.

One of the recipes of success for the Australian gold mining industry is the existence of a larger number of smaller mines compared to some other gold mining countries, which gives some flexibility to the country.

According to predictions of industry research company, IBISWorld, the $26 billion Australian sector will see revenue rise 11.6% this year “due to continued uncertainty about the effects of the COVID-19 pandemic on the global economy.” It says the growth is also due to an anticipated surge in industry output and higher gold prices.

In the meantime, as global gold prices remain relatively high, many global producers plan more active development in 2022 as many confirmed good results achieved this year despite the pandemic.

John Mann, an official spokesman of Petropavlovsk plc, a London-based gold mining company and one of the largest gold miners in Russia, in an exclusive interview, said that the company continued its expansion activities this year.

Mann commented: “This year, Petropavlovsk completed construction of the Pioneer flotation plant, a new processing facility at our Pioneer mine that allows us to better take advantage of our reserves of refractory gold ore and to produce flotation concentrate to feed our state-of-the-art Pokrovsky pressure oxidation (POX) plant. The Pioneer flotation plant doubled the company’s├é capacity to process refractory ore to 7.2 million tonnes per year, and we intend to further increase that capacity to 9 million tonnes/year by expanding our existing Malomir flotation plant. That project is in progress and scheduled for completion in Q3 2022.”

Mann added that the company hopes for high gold prices, as “a higher gold price obviously improves the economics of any project, so if there were to be sustained higher prices that could theoretically move more projects into the pipeline globally.”

Newcrest Mining Limited, one of Australia’s largest gold producers declined to comment.

Celina Watt, an official spokeswoman of the company, said it does not speculate on or forecast the gold price as the company focused on being a low cost producer.

Of note, Newcrest acquired a 70% interest and is operator (Imperial Mining 30%) of the producing Red Chris copper-gold mine in northwestern British Columbia.

Clearly, Eastern gold explorers and producers are enthusiastic participants in expansion activities within and outside of their home base countries.

Global powers may begin a fight for the development of the rich minerals base in Afghanistan in the future as the newly formed Taliban government has welcomed foreign investors to start working in the country’s exploration and mining sector.

According to various analysts’ estimates, the overall value of mineral reserves in the country is varied in the range US$1.5-2.5 trillion. And this is only a third of the Afghan territory that has been explored by the US Geological Survey. It contains iron ore, copper and gold, as well as rare earth metals as well as oil and gas fields. In addition, one of the world’s largest lithium fields, in terms of reserves, is also located in Afghanistan.

So far, only China, India and Pakistan have attempted to enter the Afghan mining sector; however, there is a possibility that the list of potential participants will be significantly expanded.

Due to the freeze of foreign financial support, which was equivalent to almost 40% of the Afghan GDP in 2020, the provision of the minerals’ base for foreigners could be almost the only option for the new Afghan government to attract the needed funds for further development of the country.

As the United States and some Western countries are leaving Afghanistan, a number of other countries, including China, Turkey and Russia are considering strengthening their presence in the Afghan mining sector. Some of them have seen progress in recent years, while China, for example, already controls Afghanistan’s largest copper deposit in Mes Ainak where reserves are estimated at 240 million tonnes of high-grade ore (which sometimes referred to as the largest in Eurasia).

Despite the fact that China won a US$3 billion tender for its development (for 30 years) several years ago, actual development has not yet begun. Still, there is a possibility that such a situation may change as, according to some Chinese and foreign media reports, Afghanistan and its minerals’ base is currently of interest to Chinese business.

As for India, the country is interested in the Haji-Gek iron ore deposit, characterized by large reserves and high metal content. The estimated volume of investments is about US$6 billion.

Russia might be interested in the development of oil and gas fields in Afghanistan although, according to some analysts, that could be associated with huge costs for producers as most of Afghan oil and gas reserves are located in hard-to-reach mountainous regions. In the case of oil, analysts estimate the overall Afghan reserves at some 1.9 billion barrels, and natural gas reserves at an estimated 165 million cubic meters. As for coal reserves, it has been estimated at 100-400 million tonnes, while rare earth elements (REEs) are estimated to be approximately 1.4 million tonnes.

Probably the biggest hopes could be related with the development of the Afghan lithium. According to some estimates, Afghanistan’s lithium reserves are comparable to those in Bolivia, one of the world’s largest suppliers. The local rich lithium reserves were initially discovered by Soviet geologists; however, their actual development has never materialized.

Experts, however, believe that development of Afghan’s rich lithium reserves may also be associated with serious technical and geological difficulties for producers. This is mainly due to the fact development of lithium deposits takes about 16 years on average. A competent assessment of the fields needs to be carried out. The situation is also complicated by the lack of infrastructure in Afghanistan necessary for such development. As a result, the cost of production may increase several times.

There are also gemstone deposits, including emeralds, rubies and lapis lazuli which are located in Afghanistan although their reserves are rather limited. Most gemstone deposits have been developed by artisanal mining with most of output being supplied to Pakistan.

Among other problems which may prevent the development of the Afghan minerals’ base for foreigners is a threat of possible sanctions. The US has already said it can use sanctions against the Taliban that may potentially affect companies and countries that will cooperate with the new regime.

The increase of demand for clean energy sources and the ever growing popularity of electric vehicles and energy storage systems in the world may lead to a shortage of metals in the global market followed by a sharp increase in prices for them in years to come, according to recent statements, made by producers and analysts in the field of mining.

According to recent estimates of the International Energy Agency (IEA), the demand for lithium will grow more than 40 times by 2040, while for cobalt and nickel by 20 times within the next two decades. The same situation is expected to be observed in the case of other precious metals.

Igor Sechin, Chief Executive Officer of Rosneft, Russia’s largest state-owned oil producer, believes such as growth of demand may lead to the shortage of this and other metals in the global market, as the current investments in their exploration and development remains insufficient to ensure their stable supplies to global market.

Igor Sechin comments:

Under these conditions, we expect an explosive rise in prices for some metals. The increase of global prices for lithium and nickel will offset the expected decrease of the costs of battery production, which were initially expected by some analysts.

Sechin recalled that the production of almost 80% of ores, which are used for the production of high valued metals is monopolized or located in unstable regions. For example, according to Sechin and other sources, the Democratic Republic of the Congo accounted for about 70% of global cobalt production.

The situation is also complicated by concentration of processing capacities in a very limited number of countries, which also creates conditions for monopolization.

In this regard, analysts expect prices for some metals may set record highs already in the second half of the current year. One of such metals is palladium the main sphere of which is automobile production, such as the production of catalysts.

Additional pressure on palladium prices will be put by the current unexpected production issues, which are observed in the case of some of its major global producers. For example, Norilsk Nickel, the world’s largest palladium producer, had recently decided to flood two large mines due to production problems.

In addition to Russia’s Norilsk Nickel, serious problems are expected to be observed this year in South Africa, the world’s largest producer of platinum. Since 2016-2017 the cost of producing this metal in the republic is constantly growing. That leads to the decline of profitability of the local platinum mining industry and the drop of local production.

Still, despite the existing problems, analysts expect the appearance of new players in the global market of palladium, nickel and other noble metals and platinoids.

For instance, there is currently a nickel boom in Indonesia, where production in Q1 2021 increased by 1,5 times and which forced President of the country Joko Widodo to announce his plans to attract more foreign investors in the nickel sector of the country.

Lack of investments in geological exploration of non-ferrous metals, such as zinc, according to analysts, will not allow to increase the production of these metals to the extent that it is necessary to compensate the expected growth in their consumption.

According to analysts of Jefferies Group, only in the case of copper, global producers will need to invest an additional US$50 billion over the next 10 years to balance the market. The biggest concerns are for IT market, which remains heavily dependent on reliable supplies of non-ferrous metals.

The rise in prices for copper and metals is beneficial for major exporting countries, such as Indonesia and Chile, however it could drive up the prices of smartphones and many other products and may contribute to the growth of global inflation.

The ever growing importance of climate issues will also contribute to the growth in demand for some metals.

According to recent estimates reported by the UK Financial Times, the EU will need 18 times more lithium and 5 times more cobalt to achieve its climate targets by 2030. By 2050, the demand will be much greater: Â the demand for lithium will grow by 60 times and by 15 times for cobalt.

According to analysts, one of the first signals of the forthcoming shortage of metals, may be an interrupted long-term trend for a decrease in prices for solar modules, which in 2021 rose in price by 18%.

By Rod Blake

If you’re reading this, you are no doubt like me – an investor in resource stocks. And like me – if you hold a variety of resource holdings, you are undoubtedly amazed how the first half of 2021 has played out. If you held copper stocks – you were pleased to see the red metal surge up by over 35^% from about US$3.50 at the start of the year to a record high US$4.75 in early May, and no doubt your copper holdings responded accordingly. If you were lucky enough to hold crude oil companies – you were elated to watch West Texas Intermediate Light Crude (WTI) start the year at US$48.50 and then soar up by over 55^% to a recent├é 7-year high of US$75.25. All of which helped the petroleum sector to be the surprise winning sector of the financial markets in the first half of 2021. But then you scratched your head as you saw the gold sector, which lead the resource markets higher last year, – remain flat for the first 6-months of the year. Gold bullion – except for a noticeably short run-up early January – essentially traded in a high/low range from US$1,955 to US$1,680 and finished the 2nd-quarter down by some 7.0^% at US$1,765. And gold sector stocks responded in kind to be the worst performing resource sector of the 1st-half of the year. Whether the base metal and crude markets hold their gains in the second half remains to be seen, but from an ex-broker’s perspective, with gains like they’ve experienced, profits should be locked in accordingly. Gold investors shouldn’t lose heart as gold bullion has an historic characteristic about it that may make the 3rd-quarter one of the best ever. That characteristic is seasonality.

Seasonality of investing – just like the seasons of the year – is when something repeats itself again and again over long periods of time. From my perspective gold bullion – and gold stocks – have such a seasonality. I think gold traditionally has two positive seasons in a year. The first is leading up to and going into the first quarter and the second is leading up and going into the 3rd quarter of the year. There are probably many reasons for this seasonality, but there were two that I can relate to. The late summer rally was often attributed to Indian buying of gold for their especially important wedding season and the late year seasonal strength was attributed to the jewellery industry securing product for holiday gift giving. Like the markets themselves, these theories don’t always repeat in time and magnitude and can vary from year to year based on current economic and market conditions. That is, gold bullion buyers may hold back purchasers if the market is deemed to be too high or demand is low, or they may buy more if prices seem low or demand is high. No two years are the same, but for the most part, I always found that buying gold stocks ahead of these two periods often led to the best sector gains of any given year. Conversely, if the anticipated seasonality didn’t work in my favour, the resulting losses were minimized as I was already buying at a seasonal low.

After two years in 2019 & 2020 of textbook seasonality, the first quarter of 2021 was one of those times where the seasonality for gold didn’t play out as anticipated. Actually, for the most part – it failed. While the yellow metal did rise by US$115 to US$1,895 in late 2020, the small follow thru to US$1,955 ended suddenly on January 5th, and the above-mentioned trading range for the first half of the year was established. But while the first half of 2020 may have been frustrating to gold resource investors, the 3rd-quarter may play out as the best of late. Why so?

One of the more interesting aspects of seasonality is that when there is momentum failure or delay in the traditional move – that move, or value is then added to the next seasonal move, giving it more magnitude than normal. So, where gold gained over 10^% in the first quarter of 2020 and only 3^% in those early days of January 2021, one could expect that additional 7^% may be added to the anticipated gains to come this year. Looking back a year, gold bullion gained $365 or 21^% from early June to early August 2020 to a new high of US$2,070. Adding an additional 7^% to 2020’s gain and projecting it forward could see the price of gold bullion higher by some $400 late this summer to new all-time highs in the range of US$2,200. Precious metal resource investors could be well rewarded for their patience as while gold stocks tend to underperform the price of bullion on the way down, they are known to greatly outperform the metal on the way up – especially when the metal rallies to new highs.

To manage this article for time and space, I’ve only used data for one year in this example, but if one goes back over a long-term chart of gold, the seasonal patterns are visibly distinguishable. Market seasonality – just like the seasons of the year – is not an exact science and can vary somewhat from year to year. But just as autumn follows summer, I feel that gold bullion tends to have a seasonal strength near the 3rd-quarter of the year. Entering the gold market before a time of seasonal strength should enhance gains, and conversely limit losses if there is a seasonal delay or failure. Try managing your investment seasonality to enhance your returns. ‘Ts the season for gold.

Galleon Gold Corp. [GGO-TSXV; PNCKF-OTC] is advancing its 100%-owned West Cache Gold Project located 13 km west of Timmins, Ontario in the prolific Porcupine Destor Gold Belt.

The Porcupine camp is one of the world’s great depositories of gold, having produced some 75 million ounces of the yellow metal with several active mines along trend with the West Cache Gold Project, including Pan American Silver’s Timmins West Mine 7 km to the east and Newmont’s Hollinger Mine 14 km to the west.

The area continues to see new gold discoveries, and Galleon Gold is no exception. The company recently completed its 2020-2021 46,000-metre, 213-hole drill program at West Cache and in the process discovered a high-grade mineralized shoot (Zone #9), a new mineralized area (South Area), and also extended the mineralization at the margins of the existing resource. What is exciting about the Zone #9 high grade discovery is the continuity of width and grade, intercepts include WC-20-081 with 8.68 g/t over 10 metres, WC-20-082 with 9.4 g/t over 10 metres and WC-20-097 with 7.66 g/t over 10 metres. Moreover, the mineralization of the shoot resembles that of much deeper historic intercepts at depths of up to 700 metres. There is 500 metres of undrilled real estate between the 2020 discovery and the deeper holes drilled in 2010 (West Deep).

David Russell, CEO and president, noted, “Results from our 2020 to 21 exploration program have exceeded our expectations. We started with an infill drill program to improve and gain an understanding of the economic potential of the existing mineralization at West Cache and, in the process, discovered the high-grade Zone # 9 shoot. Building on our model for Zone # 9 mineral controls, we extended three holes to the south at the end of 2020 and had our first indication that something new and very significant might exist there. We confirmed those early results with a follow-up program in 2021 and made the discovery of the South Area official.”

The South Area, is located on previously undrilled ground 50 to 250 metres south of high-grade Zone # 9, higher-grade intercepts include drill hole WC-21-198 with 2 metres grading 14.54 g/t gold and WC-21-192 with 2 metres at 7.96 g/t gold. Significant thicker intervals included drill hole WC-20-077 with 41.5 metres at 1.03 g/t gold. Mineralization remains open along strike and down dip with portions of the South Area displaying mineralogy similar to Zone #9 and the West Deep.

To date, the property has over 550 diamond drill holes totalling some 230,000 metres.

The company’s management has a history of building mines in the camp, and have commenced the permitting process early to ensure critical path items are addressed so that the bulk sample can commence at a timely pace.

Baseline studies have begun and a survey is underway for the necessary conversion of its mineral claims to leases for mining operations. ├é The company checks all of the boxes for a successful project. Located in a historic mining camp with excellent infrastructure, the property is bisected by Highway 101 and a main powerline, and importantly Galleon Gold has a MOU with the area’s First Nations communities. Eric Sprott holds 23 % of the company’s outstanding shares and is also a partner on the company’s Neal Gold Project near Boise, Idaho (80% GGO, 20% Eric Sprott).

A preliminary economic assessment (PEA) and an updated resource estimate, currently underway with results expected early September, will provide a more complete assessment of the advanced and prospective West Cache Gold Project.