Sprott's Take On Uranium, Gold, Silver, & Lithium: Navigating the Commodity Landscape for Long-Term Gains

• John Ciampaglia discusses the recent performance and outlook for lithium, silver, gold, and uranium markets
• Central banks, especially in China and other BRIC countries, are diversifying reserves into gold, providing support for gold prices
• Silver is benefiting from strong demand for solar panels and investment demand in India, despite lagging institutional interest in the West
• The uranium market is taking a breather after a strong run, but the long-term outlook remains very bullish due to insufficient supply to meet growing nuclear energy demand
• Governments are providing funding to support domestic uranium enrichment and conversion, but more investment is needed in greenfield uranium mining projects to meet long-term demand

Uranium: A Compelling Opportunity for Long-Term Investors

The uranium market has experienced significant volatility recently, but the long-term fundamentals remain compelling for investors. With growing global demand for clean, reliable energy, nuclear power is poised to play an increasingly important role in the world's energy mix. However, the uranium industry faces significant challenges in ramping up production to meet this growing demand, creating a structural supply deficit likely to persist for many years. For investors willing to take a long-term view, the uranium market offers a unique opportunity to gain exposure to a critical commodity with strong fundamentals and significant upside potential.

The Growing Demand for Nuclear Energy

Governments worldwide increasingly turn to nuclear power as a key component of their energy strategies. In the United States, the Department of Energy has stated its goal of tripling its nuclear capacity, which would require a massive increase in uranium consumption from around 50 million pounds per year to potentially 150 million pounds or more. Other countries, including China, India, and Russia, are investing heavily in nuclear power to reduce their reliance on fossil fuels and achieve their climate goals.

The Challenge of Increasing Uranium Supply

Despite the growing demand for uranium, the industry faces significant challenges in ramping up production to meet this demand. Many of the world's largest uranium producers, including Kazatomprom, have shifted their focus from maximizing volume to maximizing value, which means holding back production to support higher prices. While some idled mines are being restarted in jurisdictions like Africa, Canada, and Australia, the industry remains in a structural supply deficit, with annual consumption of around 180 million pounds far exceeding current production of around 150 million pounds.

The Need for Greenfield Investment

To meet the growing long-term demand for uranium, the industry must see significant investment in new greenfield mining projects. However, current uranium prices are still below the incentive level needed to justify the upfront capital expenditures required for these projects. As a result, many companies focus on mergers and acquisitions rather than new mine development. This is a bullish sign for the market as it suggests that prices have further room to run before new supply comes online.

Government Support for the Uranium Industry

Recognizing the strategic importance of uranium for energy security, governments are starting to support the domestic uranium industry. The Russian uranium enrichment ban in the United States was accompanied by several billion dollars of funding to support the reshoring of conversion and enrichment capabilities. However, there has been less support for the upstream mining sector, which will be critical to ensuring a stable, long-term uranium supply.

The Investment Thesis for Uranium

• The world is facing a structural supply deficit in uranium, with demand expected to outpace supply in the coming years significantly
• Uranium prices remain below the incentive level needed to justify major new greenfield mining investments, suggesting further upside potential
• Governments are starting to provide policy support for the uranium industry, but more investment is needed in upstream mining to ensure long-term security of supply
• Investors should consider taking a long-term view of the uranium market, using pullbacks and periods of volatility to build positions in high-quality uranium miners and physical uranium holdings

The uranium market offers a compelling opportunity for long-term investors seeking exposure to a critical commodity with strong fundamental drivers. While the market is likely to remain volatile in the near term, the underlying supply-demand imbalance and growing policy support for nuclear energy suggest that uranium prices have significant room to run in the years ahead. Investors can benefit from the coming bull market in uranium by taking a patient, long-term approach and using periods of weakness to accumulate positions.

Companies to Watch

IsoEnergy

IsoEnergy Ltd., a globally diversified uranium company, has established a strong presence in top uranium mining jurisdictions, including Canada, the U.S., Australia, and Argentina. The company's flagship Larocque East Project in Canada's Athabasca Basin hosts the world's highest grade Indicated uranium Mineral Resource at the Hurricane deposit. IsoEnergy also holds a portfolio of permitted, past-producing conventional uranium and vanadium mines in Utah, which are ready for rapid restart when market conditions allow, thanks to a toll milling arrangement with Energy Fuels Inc. With its diversified portfolio, high-grade resources, strategic partnerships, and the ability to quickly ramp up production, IsoEnergy is well-positioned to capitalize on the expected growth in the uranium market, driven by the global shift towards clean energy and the expanding nuclear power industry.

Energy Fuels

Energy Fuels, a leading US-based uranium and critical minerals company, mines uranium and produces natural uranium concentrates for the production of carbon-free nuclear energy. The company has recently expanded its operations to include the production of advanced rare earth element (REE) materials, vanadium, and is exploring the potential recovery of radionuclides for emerging cancer treatments. Energy Fuels operates two key uranium production centers in the United States: the White Mesa Mill in Utah and the Nichols Ranch in-situ recovery (ISR) Project in Wyoming. The company has also acquired the Bahia Project in Brazil and entered into a joint venture to develop the Donald Project in Australia, both believed to contain significant quantities of titanium, zirconium, and REE minerals. Energy Fuels boasts one of the largest NI 43-101 compliant uranium resource portfolios in the US, with several projects in various stages of production, standby, permitting, and development.

Global Atomic

Global Atomic Corporation is a unique company that operates in two distinct sectors: uranium mining and zinc recycling. The company's Uranium Division is focused on developing the high-grade Dasa Deposit in Niger, which was discovered by the company's geologists in 2010. The project has recently achieved a significant milestone with the "First Blast Ceremony" in November 2022, and the processing plant is expected to be commissioned by Q1, 2026. Additionally, the company has identified three more uranium deposits in Niger that will be further explored. In the Base Metals Division, Global Atomic holds a 49% stake in a joint venture with Befesa Zinc S.A.U., which operates a modern zinc recycling plant in Iskenderun, Türkiye. The plant processes Electric Arc Furnace Dust (EAFD) to produce high-grade zinc oxide concentrate, which is then sold to zinc smelters worldwide. Befesa, a market leader in EAFD recycling, holds a 51% interest in the joint venture and is responsible for its operation.

Premier American Uranium

Premier American Uranium Inc. (PUR) is a uranium exploration and development company focused on consolidating and advancing uranium projects in two historically productive regions of the United States: the Great Divide Basin in Wyoming and the Uravan Mineral Belt in Colorado. The company benefits from extensive land holdings in these areas, which have a history of past production and contain historic uranium mineral resources. PUR is currently implementing work programs to further develop its portfolio, backed by notable investors such as Sachem Cove Partners and IsoEnergy, as well as a team with significant experience in the U.S. uranium industry. The company's entry into the market is well-timed, as uranium fundamentals are currently at their strongest in a decade, positioning PUR to capitalize on the favorable market conditions.

Silver: Gaining Momentum Despite Challenges

Silver has recently gained attention due to its strong performance and growing demand from various sectors. John Ciampaglia highlights several key factors driving the silver market:

• Solar Energy: The increasing global demand for solar panels is a significant driver for silver, as it is a critical component in photovoltaic cells. With countries investing in renewable energy infrastructure, the demand for silver in the solar industry is expected to rise.
• Investment Demand: Silver is attracting interest from investors, particularly in India, where it is seen as a store of value and a more affordable alternative to gold. As gold prices rise, some investors are turning to silver to gain exposure to precious metals.
• Industrial Applications: Silver's unique properties make it valuable in various industrial applications, including electronics, medicine, and water purification. As the global economy recovers, industrial demand for silver is expected to increase.

However, Ciampaglia also notes some challenges facing the silver market:

• Lack of Pure-Play Silver Miners: Many companies produce silver as a by-product of mining other metals, making it difficult for investors to gain direct exposure to silver.
• Muted Institutional Interest: Compared to other precious metals like gold, institutional interest in silver from Western investors has been relatively subdued.

Despite these challenges, Ciampaglia maintains a positive long-term outlook for silver, driven by the growing focus on renewable energy, sustainable technologies, and the metal's monetary properties.

Companies to Watch

Outcrop Silver

Outcrop Silver is a prominent exploration and development company primarily focused on advancing the high-grade Santa Ana silver project in Colombia. The company's experienced team of professionals, with extensive knowledge of the region, is committed to expanding the project's current mineral resources through targeted exploration efforts. Outcrop Silver places a strong emphasis on responsible mining practices and community engagement, demonstrating its dedication to sustainable development. By leveraging its expertise in navigating the complex geological and market conditions in Colombia, the company aims to identify and capitalize on opportunities to enhance shareholder value. With a proven track record of successful exploration and a deep understanding of the Colombian mining landscape, Outcrop Silver is well-positioned to transform the Santa Ana project into a significant silver producer, potentially contributing to the local economy and setting new standards within the mining industry.

GoGold Resources

GoGold Resources (TSX: GGD) is a Canadian silver and gold mining company with a focus on operations, development, exploration, and acquisition of high-quality projects in Mexico. The company currently operates the Parral Tailings mine in Chihuahua and has two exploration projects, Los Ricos South and Los Ricos North, in Jalisco. Based in Halifax, Nova Scotia, GoGold aims to build a portfolio of low-cost, high-margin projects to maximize shareholder value. The company's strategy involves leveraging its expertise and experience in the Mexican mining industry to identify and develop promising silver and gold projects while maintaining a strong commitment to operational efficiency and financial discipline.

Sierra Madre Gold & Silver

Sierra Madre Gold and Silver Ltd. (TSXV: SM, OTCQX: SMDRF) is a precious metals company focused on two projects in Mexico: the potential restart of the La Guitarra Mine in the Temascaltepec mining district and the exploration and development of the Tepic property in Nayarit. The La Guitarra Mine is a past-producing underground mine with an existing 500 t/d processing facility that ceased operations in mid-2018. The Tepic Project, spanning over 2,600 ha, hosts low-sulphidation epithermal gold and silver mineralization and has an existing historic resource. Sierra Madre's management team brings extensive experience in the mining industry, having collectively managed the exploration and development of more than 22Moz of gold and 600Moz of silver in combined mineral reserves and resources, and raised over $1 billion for mining companies.

Gold: Central Banks and Investors Seek Safe Haven

Gold remains a sought-after safe-haven asset, providing investors with a hedge against various risks. Ciampaglia discusses several key drivers in the gold market:

• Central Bank Demand: Central banks, especially in China and other emerging economies, are accumulating gold to diversify their foreign exchange reserves away from the US dollar. This trend is expected to persist as countries aim to reduce their dollar dependence and protect their wealth.
• Geopolitical Risks: Gold performs well during geopolitical uncertainty, as investors seek safe-haven assets. Ongoing tensions between the US and China and other geopolitical risks are likely to support gold's attractiveness.
• Inflation Concerns: Gold is often viewed as an inflation hedge, and the expansionary monetary policies adopted by central banks worldwide have raised concerns about potential inflationary pressures.

Ciampaglia notes that while gold has faced some headwinds recently, such as the strong performance of equity markets and the rollout of COVID-19 vaccines, the long-term outlook remains positive. Central bank demand, particularly from emerging markets, will likely provide a floor for gold prices, and ongoing economic uncertainty could drive more investors towards gold.

Companies to Watch

Cabral Gold

Cabral Gold focuses on identifying, exploring, and developing mineral properties, with a primary emphasis on gold properties in Brazil. Its main asset is the Cuiú Cuiú gold district, located in the Tapajós Region of Pará state in northern Brazil, where the company holds a 100% interest. The Cuiú Cuiú project has two main gold deposits with National Instrument 43-101 compliant Indicated resources of 21.6Mt @ 0.87 g/t gold (604,000 oz) and Inferred resources of 19.8Mt @ 0.84 g/t gold (534,500 oz), as reported in the technical report dated October 12, 2022. The Tapajós Gold Province, where Cuiú Cuiú is located, is historically significant as the site of Brazil's largest gold rush, which produced an estimated 30 to 50 million ounces of placer gold between 1978 and 1995, according to the National Mining Agency of Brazil (ANM). Notably, Cuiú Cuiú was the largest area of placer workings in the Tapajós and has an estimated historical production of 2Moz of placer gold.

First Mining Gold

First Mining is a gold development company focused on advancing two major gold projects in Canada: the Springpole Gold Project in northwestern Ontario and the Duparquet Gold Project in Quebec. The company has initiated a Feasibility Study and permitting activities for the Springpole Gold Project, with a draft Environmental Impact Statement (EIS) published in June 2022. The Duparquet Gold Project, located on the Destor-Porcupine Fault Zone in the Abitibi region, is currently at the PEA stage. In addition to these key projects, First Mining holds interests in several other gold projects, including the Cameron Gold Project in Ontario, the Pickle Crow Gold Project (being advanced in partnership with Firefly Metals Ltd.), and the Hope Brook Gold Project (being advanced in partnership with Big Ridge Gold Corp.). First Mining was founded in 2015 by Keith Neumeyer, who previously established First Majestic Silver Corp. as its founding President and CEO.

Karora Resources

Karora is a gold mining company focused on increasing production at its integrated Beta Hunt Gold Mine and Higginsville Gold Operations (HGO) in Western Australia. The company processes ore from its underground Beta Hunt mine and Higginsville mines at the low-cost 1.6 Mtpa Higginsville treatment facility, which operates at capacity. In July 2022, Karora expanded its processing capabilities by acquiring the 1.0 Mtpa Lakewood Mill in Western Australia. The Beta Hunt mine hosts a robust gold Mineral Resource and Reserve within multiple gold shears, with intersections along a 5 km strike length remaining open in multiple directions. HGO also has a substantial gold Mineral Resource and Reserve, as well as a prospective land package covering approximately 1,900 square kilometers. Karora benefits from a strong Board of Directors and management team committed to delivering shareholder value and responsible mining practices, including a focus on reducing emissions across its operations.

Perseus Mining

Perseus Mining, a gold exploration company founded in 2004, has evolved into a multi-mine, multi-jurisdictional gold producer, developer, and explorer. The company's journey began with the acquisition of the Ayanfuri exploration licences in Ghana in 2006, which led to significant exploration success and the development of the Edikan Gold Mine in 2012. Perseus further expanded its operations by developing the Sissingué Gold Mine in Côte d'Ivoire, which has consistently exceeded expectations since achieving commercial production in March 2018. The company's third mine, the Yaouré Gold Mine, also in Côte d'Ivoire, commenced development in May 2019 and declared commercial production in March 2021. In May 2022, Perseus acquired Orca Gold, gaining ownership of the Meyas Sand Gold Project in northern Sudan and a 17.8% stake in the Koné Gold Project in Côte d'Ivoire. With a focus on maintaining its annual gold production of 535,000oz and generating a cash operating margin of at least US$400 per ounce, Perseus continues to optimize and extend the life of its existing assets while seeking new Mineral Reserves through discovery and acquisition, leveraging its extensive development and operational experience in Africa.

Serabi Gold

Serabi, a UK-based gold producer operating in the Tapajós region of Brazil, aims to establish itself as a 100-200koz per annum gold producer within the next 3-5 years through organic growth and strategic corporate opportunities. The company's flagship asset, the Palito Complex, is a technically de-risked underground mine that has been in continuous production since 2012. In 2023, Serabi produced 33,153 ounces of gold, with an all-in sustaining cost (AISC) of $1,533 per ounce for the first nine months. The company has a global mineral inventory of 1.07 million ounces of gold and a cash position of $11.6 million as of December 31, 2023. Serabi's strategy involves doubling production to 60,000 ounces per annum by the end of 2025, leveraging its extensive exploration portfolio, capitalizing on management's proven track record in developing and operating mines in Brazil, and engaging in strategic mergers and acquisitions. The company's growth is expected to benefit shareholders, employees, and the local economy while enriching community life.

Lithium: Navigating Near-Term Challenges, Long-Term Potential Remains Strong

Lithium has experienced significant growth in recent years, driven by the increasing demand for electric vehicles (EVs) and the batteries that power them. However, Ciampaglia points out some near-term challenges in the lithium market:

• Supply Concerns: The rapid expansion of lithium production has led to concerns about oversupply, as new projects come online in various regions.
• EV Demand Slowdown: While the long-term outlook for EVs remains positive, near-term demand has been impacted by factors such as changes in government subsidies, increased competition, and the economic impact of the COVID-19 pandemic.
• Price Volatility: The combination of supply and demand factors has resulted in significant volatility in lithium prices, creating challenges for investors.

Despite these near-term hurdles, Ciampaglia believes in the lithium market's long-term potential. The global shift towards electrification and the adoption of EVs is expected to drive significant demand for lithium-ion batteries in the coming years. Additionally, the growing focus on energy storage solutions for renewable energy systems will likely further boost lithium demand.

Ciampaglia advises investors to focus on companies with high-quality assets, strong balance sheets, and experienced management teams to position themselves for long-term growth in the lithium market. He also suggests considering exposure to the broader EV supply chain, including companies involved in battery production, charging infrastructure, and other key components.

Companies to Watch

American Lithium

American Lithium is a mining company focused on developing large-scale lithium projects in mining-friendly jurisdictions across the Americas. The company's primary focus is on advancing its strategically located TLC lithium project in Nevada's Esmeralda lithium district, as well as its Falchani lithium and Macusani uranium development-stage projects in southeastern Peru. All three projects have undergone preliminary economic assessments, demonstrating significant expansion potential and enjoying strong community support. American Lithium is currently progressing pre-feasibility studies for both the TLC and Falchani projects, aiming to capitalize on the growing demand for lithium driven by the shift towards clean energy and the increasing adoption of electric vehicles and renewable energy storage solutions. The company's commitment to sustainable mining practices and community engagement positions it well to contribute to the global lithium supply chain while creating value for its stakeholders.

Li-FT Power

LIFT is a mineral exploration company focused on acquiring, exploring, and developing lithium pegmatite projects in Canada. The company's primary asset is the Yellowknife Lithium Project, located in the Northwest Territories, which serves as its flagship project. In addition to the Yellowknife Lithium Project, LIFT has a portfolio of three early-stage exploration properties in Quebec, Canada, that show promising potential for the discovery of buried lithium pegmatites. The company also holds the Cali Project, situated within the Little Nahanni Pegmatite Group in the Northwest Territories. As the demand for lithium continues to grow due to its crucial role in the production of batteries for electric vehicles and renewable energy storage, LIFT is well-positioned to capitalize on the increasing interest in domestic lithium sources within Canada. The company's focus on exploring and developing lithium pegmatite projects in mining-friendly jurisdictions across Canada highlights its commitment to contributing to the global lithium supply chain while operating in an environmentally responsible manner.