Uranium, Gold, and Copper: Mining Experts Reveal Top Picks and Strategies from PDAC 2024

• Merlin and Matt discuss their key takeaways and observations from the 2024 PDAC mining conference
• They note that the mining sector is fairly beaten up, with many crushed valuations and struggling exploration companies, but optimism that things can only improve from here
• Some commodities like uranium, gold, and copper are seeing positive price action and fundamentals, while lithium and nickel CEOs are struggling more
• The pair discuss specific mining companies that caught their eye at PDAC, both positively and negatively
• They argue more companies need to focus on good assets, management, and efficient marketing rather than fluff like ESG to attract investors in this environment

Navigating the Beaten-Up Mining Sector: Insights from PDAC 2024 on How to Spot the Winners

The 2024 PDAC mining conference provided valuable insights into the current state of the mining sector and the outlook for various commodities. Industry veterans Merlin and Matt, who run a family office focused on mining investments, shared their key observations and analysis from the conference in a wide-ranging discussion.

Beaten Up Sector, But Optimism Ahead

A major theme that emerged is that the mining sector is fairly beaten up at the moment, with many companies trading at crushed valuations compared to the peaks of the last few years. This is especially true for earlier-stage exploration companies.

As Matt noted: "It felt like palliative care, the last time I'd see them in their current form because they were cash strapped, didn't know where to go to get money. Not that it was on offer quite frankly, and just crawling to get to PDAC in the hope that someone would say 'Hey, why don't we merge?' That might they get some money, and might pay the salary for a bit longer.

However, intermingled with this fatalism is a degree of optimism that things can only get better from here. The thinking is that many companies have hit "rock bottom" and the only direction is up. If the supply-demand fundamentals for certain commodities remain strong, it should eventually lead to a price response and an improved environment.

Uranium, Gold, Copper Seeing Positive Moves

This is exactly what has already started happening for uranium, gold, and copper. The uranium price move in 2023-2024 from $30/lb to over $100/lb, even if it has pulled back some, shows that the market does respond to structural supply deficits. Similarly, gold spiked $150/oz during the week of PDAC towards $2,200/oz, as the devaluation of fiat currencies makes sound money more attractive.

Copper also looks poised for positive price action given the long-term demand growth, especially from new sources like electric vehicles and renewable energy, coupled with supply constraints. As Johnson explained:

You've got very very long-term demand, growing demand, you've got new sources of demand which is an additional 20% on that demand load, and you've got that structural supply constraint. So it makes me think that the supply-demand fundamental analysis does work - uranium proved it, gold is in the process, and copper is probably next.

In contrast, CEOs of nickel and lithium companies were described as "looking as if a stun grenade had just gone off near their heads" and struggling more given the pullback in prices for those metals. But the overall mood was that for commodities with the right fundamentals, better times are ahead.

Key Qualities to Look For

In this environment, the pair emphasized that investors need to focus on mining companies with a few key qualities:

Grade: Both Merlin repeatedly highlighted the importance of grades for mining projects. Higher grades make a deposit more economic and can help overcome other challenges.

Management: Companies need experienced, credible management teams with a track record of success. Many PDAC attendees stressed the importance of betting on good people.

Marketing: Investors want to see efficient, cost-effective marketing using tools like online interviews and videos rather than excessive spending on things like conferences. The story needs to be communicated well.

They were less enthused about the industry's focus on ESG, seeing a lot of it as superficial rather than substantive. As Matt colorfully put it:

"We used to be known for being a lot harder and a lot tougher, but guess what, those company CEOs didn't come back. So we don't have a chance of actually learning. I'd rather have the odd barbed and stinging question in there than 100% of the time, because you want these companies to feel pushed and slightly awkward, but not to the extent where they tell their IR teams 'never again.

Specific Company Observations

Throughout the discussion, Johnson and Matt highlighted some specific companies that caught their attention at PDAC for various reasons. On the positive side:

G2 Goldfields: Described as having an impressive CEO in Dan Noone and an attractive combination of grade and scale in their gold projects.

Omai Gold Mines: Another gold company lauded for an experienced CEO in Elaine Ellingham and a large land package in Guyana with exploration upside.

Collective Mining: A newer gold explorer that seems to be going about things the right way under CEO Ari Sussman.

Erdene Resource Development: A Mongolian gold company with a solid CEO in Peter Akerley that has achieved an attractive in-country joint venture.

Energy Fuels: This uranium producer is well-positioned with its White Mesa Mill and ability to buy ore from other mines, even if the share price hasn't reflected it yet.

The pair also recounted an anecdote about Korora Resources and how they appeared genuinely blindsided and upset by an Australian journalist breaking news of potential buyout discussions, showing how even positive developments can cause challenges for mining companies when they come out at the wrong time or in the wrong way.

The Investment Thesis for Commodities

• Focus on commodities with strong long-term supply-demand fundamentals, as evidenced by recent price action in uranium, gold, and copper
• Avoid commodities facing negative near-term sentiment and struggling companies, such as nickel and lithium currently
• Look for mining companies with high-grade deposits, as this is a key differentiator in an inflationary cost environment
• Bet on experienced, credible management teams with track records of success in advancing projects
• Pay attention to how companies allocate their marketing dollars, with a preference for cost-effective online methods versus excessive spending on conferences
• Don't buy the hype on ESG - look for substantive practices on the ground, not just superficial marketing
• Be selective and concentrate on the highest-quality 10-20% of mining companies rather than spreading bets too widely

Key Takeaways and Conclusion

The mining sector is navigating a challenging environment but offers compelling investment opportunities for those who can sift the wheat from the chaff. Commodities like uranium, gold, and copper have the most attractive long-term fundamentals and are already seeing the benefits in their price action.

Mining investors should focus their attention on companies with the key attributes of high-grade deposits, strong management teams, and smart marketing strategies. They would be wise to ignore the ESG hype and instead concentrate their portfolios on the highest-quality names.

While the industry mood at PDAC 2024 was undoubtedly subdued compared to the frothy peaks of recent years, the discussions highlighted that now is the time to get positioned in the best companies to enjoy the upside to come. As Merlin pithily summarized:

"If you can take a copper asset and it's good, then it's going to be valuable. It makes me think about market efficiency - if it's good, it's expensive, if it's not good, it's cheap.

The key is knowing the difference, and Merlin and Matt's observations offer a valuable guide for mining investors looking to do just that.