Uranium, Gold and Silver are Contrarian Opportunities
Uranium, gold, and silver are compelling contrarian opportunities. Their bull cases rest upon deeply negative sentiment despite strengthening fundamental investment cases over a 3-5 year horizon.
- Uranium, gold, and silver have strong investment potential as contrarian opportunities right now. Sentiment is very negative but fundamentals are improving.
- Gold needs to break above $2,100/oz for momentum to pick up. Silver is the most contrarian opportunity as sentiment is at rock bottom.
- Uranium fundamentals continue getting better with nuclear energy demand rising. Now above $100/lb and “lighting up” the junior mining stocks.
- Oil and gas is early in a cycle. Accumulate positions during any price declines over the next few years. Fundamentals likely stronger in 3-5 year timeframe.
- Major economic, political, and social changes coming that could make the Great Depression look mild. Wise to prepare with plan B or alternative investments.
With growing economic uncertainty and market volatility, many investors are looking to diversify into alternative assets that can provide portfolio resilience. Precious metals like gold and silver have historically functioned as safe-haven assets during periods of instability. Meanwhile, the uranium market is experiencing a structural supply/demand imbalance that makes the commodity compelling. This article looks at the investment case for increasing exposure to uranium, gold and silver in 2024 and beyond.
Uranium Outlook is Strong and Improving
Sentiment towards uranium has improved significantly from the bear market lows below $20 per pound seen just a few years ago. However, while spot uranium now trades around $100/lb, the market remains in the early stages of a bull cycle. Improving fundamentals driven by rising demand for nuclear power amidst mines struggling to boost production and falling inventory levels at utilities have trebled spot price in the last 12 months. This is indicative of a market where demand is expected to outstrip supply for years to come.
While junior mining stocks have lagged the move in the uranium price itself thus far, this could change if the spot price remains at elevated levels for a sustained period. Having recently broken through $106, the less-than-convincing supply forecasts suggest that we are in the early innings of a long period of deficit. This price catalyst could “light up” speculative interest in uranium exploration and development companies. For now, investors should focus on larger producers and near-term developers better poised to benefit from higher real-world pricing. In contrast to overhyped assets like cryptocurrencies, uranium has a multi-year bull potential. The clean energy attributes and reliability of nuclear power should drive increased reactor construction over the next couple of decades.
Gold Requires Breakout for Momentum
Gold price enjoyed a banner year in 2023, hitting an all-time high price above $2,000/oz during a period of severe inflation pressures and recession fears. However, sentiment towards the monetary metal has since cooled along with CPI readings. Gold currently trades around $2,000/oz, having established a higher support level versus where it spent years consolidating before the breakout. Gold needs to exceed $2,100/oz, to regain momentum with investors and media attention.
Continued dollar weakness and excessive money printing may be required to push gold to new highs. Geopolitics is also likely to impact price volatility going forward. Nonetheless, Gold has had an impressive track record this millennium relative to general equities. This key factoid seems underappreciated even among professional financial advisors. Plus, gold-related mining stocks remain deeply out-of-favor and present value upside compared to bullion. These stocks would be expected to outperform gold prices during the next leg higher.
Sentiment Extremely Negative on Silver
In contrast to gold, silver sentiment has reverted to extremely bearish conditions seen at major lows over the past decade. The grey metal has disappointed the inflation and industrial demand narrative many analysts painted. Silver now has better supply/demand fundamentals than in years past. But retail buyers tend to prefer quantity over quality, with many fleeing silver in favor of crypto or meme stocks in recent years. Silver has probably the best contrarian investment potential across metals right now.
At some point, silver will play catch up and even outperform gold over a period of time during the next bull cycle. Mining stocks will respond strongly to silver crossing $30/oz with conviction. Committed precious metals investors may be well served to scale into silver and silver mining stocks at currently depressed levels relative to historical norms. The price downside seems limited at this juncture, while greatly improved economics or industrial dynamics could spark tremendous upside.
Key Takeaways for Investors
- Nuclear power growth should continue driving uranium demand higher as mines fail to deliver meaningful supply growth in the face of challenging operational realities. Staying above $100/lb will act as rocket fuel for junior mining stocks.
- Gold has quietly been one of the top-performing assets since the turn of the millennium. Breaking above $2,100/oz resistance could regain investor attention and media headlines. Miners remain valued attractively versus the underlying gold price.
- Rock bottom sentiment combined with deeply oversold technicals make silver an intriguing contrarian opportunity for precious metals investors willing to endure short-term volatility. Eventual industrial user stockpiling could ignite a vicious rally.
In summary, uranium, gold and silver all present varying cases for value given current prices amidst improving supply/demand scenarios over the next 3-5 years. Their returns may significantly outperform general equities and provide portfolio ballast during the next economic or political crisis. Investors should conduct due diligence and consider accumulating exposure at favorable valuations.
American Lithium is developing large-scale lithium projects in Nevada and Peru as well as one of the world's biggest uranium projects, with the goal of playing a major role in the transition to sustainable energy. The company's assets are the advanced-stage TLC lithium project in Nevada and the Falchanilithium project in Peru, which have robust preliminary economic assessments. American Lithium also owns the Macusani uranium project in Peru, which has seen significant historical development. With assets at various stages of pre-feasibility and feasibility studies, American Lithium is positioned to be a major player in lithium and uranium mining.
Cabral Gold is an exploration and development company that controls the entire Cuiú Cuiú gold district in Northern Brazil, which has multi-million ounce potential. The Company has made several new discoveries in the last 2years, including three new near-surface oxide gold deposits, opening up a pathway to near-term production via low-cost heap leaching. Cabral Gold already has 1 million ounces of gold in resources. Since the last resource update inJune 2018, the Company has more than doubled drilling and identified new oxide deposits and high-grade zones within existing deposits. Cabral Gold is actively exploring and expanding resources in this highly prospective gold district.
Canada Nickel is emerging as a major player in the nickel mining sector through its 100% owned Crawford Nickel Sulphide project in Timmins, Ontario. Crawford is the largest nickel discovery since the 1970s and is located in an established mining jurisdiction with good infrastructure. Through over 20 transactions, Canada Nickel has also consolidated a vast regional land package 50 times larger than Crawford with 20 additional targets, demonstrating the potential for further substantial discoveries and resource growth. With its significant existing resource, low carbon production potential and exploration upside across its district-scale land holdings, Canada Nickel is well positioned to become a leading nickel producer.
Chakana Copper is a Canadian minerals exploration company advancing the high-grade copper-gold-silver Soledad discovery in Peru. The mineralization is hosted in breccia pipes, which are cylindrical masses of fragmented rock cemented together. An initial inferred resource estimate for 7 breccia pipes was announced in Q1 2022, totalling 6.73 million tonnes containing 191,000 ounces of gold, 11.7 million ounces of silver, and 130 million pounds of copper at a copper-equivalent grade of 1.81%. This is from only a small fraction of the explored property, with significant potential remaining.
Elemental Altus Royaltiescompany providing
Elemental Altus Royalties is a rapidly growing gold royalty companyproviding investors with de-risked, quality investments in top-tier mining companies across four continents. As the only emerging royalty company with material revenue and sustained organic growth, Elemental Altus is backed by the successful Discovery Group and offers a unique combination of innovation,global expertise, and entrepreneurial spirit to conduct complex international transactions in the mining sector.
Energy Fuels is the largest uranium and advanced rare earth element producer in the United States. The company has significant uranium production capacity and long-term sales contracts with U.S. nuclear utilities that it expects to fulfil starting in 2023-2024. Energy Fuels is also quickly moving to establish a domestic rare earth element supply chain, with plans to produce high-value separated REE oxides by late 2023 or early 2024. The company additionally produces vanadium when conditions warrant, recycles materials to recover uranium, vanadium and medical isotopes, and is advancing capabilities for medical isotope production. Overall, Energy Fuels is a major U.S. producer of strategic minerals like uranium and rare earth elements that are critical for energy, technology, and medical applications.
First Mining Gold is a Canadian gold development company focused on advancing its flagship Springpole Gold Project in Ontario, one of the largest undeveloped gold projects in Canada, and the recently acquired Duparquet Gold Project in Quebec, a top 20 Canadian gold asset. The company also has interests in several partnership assets including the Pickle Crow project in Ontario with Auteco Minerals, the Hope Brook project in Newfoundland with Big Ridge Gold, and is the largest shareholder of TreasuryMetals which is advancing the Goliath Gold Complex in Ontario. First Mining was founded in 2015 by Keith Neumeyer, the founding President and CEO of FirstMajestic Silver Corp.
Global Atomic Corporation is a publicly traded company with two main divisions - a Uranium Division that is developing the large, high-grade Dasa uranium project in Niger, which is now fully permitted with excavation underway, and a Base Metals Division that holds a 49%stake in a zinc production joint venture in Turkey operated by Befesa. The joint venture recycles Electric Arc Furnace Dust to produce zinc oxide concentrate sold to zinc smelters globally. Global Atomic’s unique combination of uranium production and cash-flowing zinc operations positions it well for growth.
Li-FT is a mineral exploration company focused on acquiring and developing lithium pegmatite projects in Canada. Their flagship Yellowknife Lithium Project in Northwest Territories contains 13lithium pegmatite dykes near infrastructure and they have initiated a 45,000-meter drill program in 2023 to define resources. Li-FT also has an early-stage Project in the Northwest Territories within a historic lithium pegmatite belt and drilling is planned once permits are received. In Quebec, Li-FT has three large exploration properties near the Whabouchi deposit where 10 targets have been generated and initial drilling of two targets will occur in summer 2023 with more exploration planned for 2024. Overall, Li-FT is advancing a portfolio of Canadian lithium assets through systematic exploration and drilling.
KaroraResources is a growing gold and nickel producer in Western Australia with its main assets being the Beta Hunt mine, Higginsville operations, and LakewoodMill located near Kalgoorlie. With over 1,900 km of highly prospective land, Karora produced a record 133,836 ounces of gold in 2022 and over 80,000 ounces in the first half of 2023, aiming to reach 170,000-195,000 ounces by 2024. A leader in ESG, Karora achieved carbon neutrality in the past two years. The company believes growing to 200,000 ounces of annual production will re-rate its valuation to the next tier of gold producers, and Karora is debt-free and well-positioned to self-fund growth from operational cash flow.
Marimaca Copper is aTSX-listed company with an exciting copper discovery - the Marimaca Copper Project in Chile's Antofagasta region. This is the only major new copper discovery globally in the past 5 years and is considered low-risk with significant exploration potential. Marimaca's vision is to create value for shareholders by realizing the full potential of Marimaca, which could become one of the most significant recent copper-oxide discoveries, as well as exploring for other large-scale deposits in the region. The Marimaca deposit challenges accepted exploration wisdom as an intrusive-hosted system unlike the typical volcanic-hosted deposits nearby. Its prime coastal location and excellent infrastructure enable potentially low-cost development. As one of the most important new copper projects in Chile in the past decade, Marimaca is a high-profile development opportunity in a country with limited new copper exploration success.
Palladium One Mining is a Canadian exploration company focused on discovering metals for green technologies, primarily nickel, copper, and platinum group elements. The company has made recent high-grade nickel-copper discoveries at its Tykoproject in Ontario outlining a new nickel district over 20km of strike length. Palladium One also has an existing platinum group metals resource at its LK project in Finland. The company is well funded after strategic investments in 2023 and continues exploration at Tyko aimed at expanding known zones. Recent acquisitions have added projects and royalties, positioning Palladium One for further discoveries of metals critical to the energy transition.
Pan Global ResourcesInc. is a mining company focused on copper exploration and development in southern Spain. The company's main project is the large, wholly-owned EscacenaCopper Project, located in a prolific region near active mines. Escacena hosts the La Romana discovery, where significant copper-tin-silver mineralization has been intersected over 140 drill holes since 2019. With the EU seeking to increase domestic copper production to meet rising demand and implement more sustainable mining practices, Pan Global is well-positioned to potentially fast-track permitting and financing for La Romana. The company remains focused on expanding the deposit scale prior to establishing a maiden resource estimate.
Serabi Gold plc is a gold mining company focused on Brazil. The company operates the Palito MiningComplex which produces around 40,000 ounces of gold per year. Serabi also recently acquired the Coringa Gold Project, which is forecast to produce an average of 38,000 ounces of gold annually once in production. Together, Serabi's main assets in the Tapajos region of northern Brazil position the company as an important player in Brazilian gold production.
Sovereign Metals is an Australian mining company focused on developing its large, world-class Kasiya rutile and graphite project in Malawi, Africa. Kasiya is the largest natural rutile deposit and one of the largest flake graphite deposits globally. Expanded scoping studies indicate the project could become a leading low-cost producer of natural rutile and graphite, with exceptional economics including post-tax NPV of US$1.5 billion and IRR of 36%. Sovereign Metals offers investors exposure to critical minerals rutile and graphite through the development of its flagship Kasiya deposit.
TreasuryMetals is a Canadian gold exploration and development company focused on advancing its Goliath Gold Complex in Northwestern Ontario, which contains 2.1 million ounces of measured and indicated resources and 1.3 million ounces of proven and probable reserves. The project benefits from proximity to infrastructure like roads, power, rail, and communities. Treasury also has early-stage exploration projects in Ontario, including Gold Rock and a joint venture at Weebigee-Sandy Lake. The company aims to foster open dialogue with regional communities and Indigenous Nations to create sustainable economic opportunities, safe workplaces, social value, and community well-being.
Bannerman Energy is an Australian uranium development company focused on advancing its flagship 3.5Mlb pa open pit uranium project in Namibia, a major global uranium producer. Bannerman is currently working on Front End Engineering and Design (FEED) and financing for the Namibia project. The company also holds a significant 41.8% stake in Namibia Critical Metals, developer of the large-scale Lofdal heavy rare earths project in Namibia, one of only a few heavy rare earth deposits outside China.
Ur-Energy is a U.S. uranium mining company well positioned to benefit from rising uranium prices driven by growing demand for nuclear power. Within-situ recovery operations in Wyoming, Ur-Energy has been producing from its Lost Creek facility since 2013 and can now effectively double the licensed annual production capacity to 2 million pounds with its permitted Shirley Basin project. With over $70 million in cash, Ur-Energy is funded to ramp up low-cost production from its Wyoming hub as it restarts wellfield construction. The company utilizes mining methods with a light environmental footprint and is advancing next-generation technologies to further reduce costs. If uranium prices continue strengthening, Ur-Energy offers leverage as an experienced producer with scalable, permitted projects in a rising uranium market.
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