The Guangzhou Futures Exchange (GFEX) is expected to launch its first platinum and palladium futures contracts in China in the first quarter of 2025, Weibin Deng, head of Asia Pacific at the World Platinum Investment Council, told a conference.
The contracts will be the first domestic price-hedging mechanism for platinum and palladium in the world’s second-largest economy, where the metals are used by auto makers and other industries, including jewellery and investment products.
The GFEX declined to comment.
The World Platinum Investment Council, whose five members are major platinum producers, hopes hedging will help revive demand for platinum jewellery, Deng told the London Bullion Market Association’s annual conference in Miami on Monday.
Hedging by jewellery makers could reduce the premium they charge clients and the discount on buybacks of jewellery and platinum products, which could boost demand, the council said.
While China is the key market for platinum group metals, platinum jewellery demand in the country has slumped 79% from a peak of around 2 million troy ounces in 2014 amid a downturn in consumer preference for the metal.
Google is adding nuclear plants to its seemingly ever-growing portfolio. The company has partnered with Kairos Power to back the construction of seven small nuclear reactors in the U.S. It’s the first agreement of its kind.
The first plant is expected to come online by 2030, the company announced in a blog post. Other reactors will be deployed by 2035. All totaled, the deal will funnel 500 megawatts of power to the company’s AI technologies—enough to power a midsize city.
“Nuclear solutions offer a clean, round-the-clock power source that can help us reliably meet electricity demands with carbon-free energy every hour of every day,” Google wrote in the blog post. “Advancing these power sources in close partnership with supportive local communities will rapidly drive the decarbonization of electricity grids around the world.”
The smaller reactors created by Kairos, a nuclear-energy startup, are different from the towers most people think of when they conjure up an image of a nuclear reactor. The company uses a molten salt cooling system (much like the one that will be used for the on-site reactor being built on the campus of Abilene Christian University), which operates at a lower pressure. The company broke ground on a demonstration reactor, which will be unpowered, earlier this year in Tennessee.
Google did not unveil the cost of the partnership. The project site (or sites) have not yet been determined.
Google’s announcement comes weeks after Microsoftannounced a partnership with Constellation Energy that will see the undamaged reactor at Three Mile Island, the site of the worst nuclear accident in U.S. history, resume operations to power Microsoft’s AI data centers.
Experts have warned data centers could become a big strain on the U.S. power grid, with the nine-year projected growth forecast for North America essentially doubling from where it stood a year ago. Last year, the five-year forecast from Grid Strategies projected growth of 2.6%. That number has since nearly doubled to 4.7%—and planners expect peak demand to grow by 38 gigawatts. In real-world terms, that’s sufficient to power 12.7 million homes.
Jakob Stausholm, Rio Tinto’s CEO since January 2021. (Image courtesy of Rio Tinto.)
A little over a decade ago, Rio Tinto Group was reeling from the impact of disastrous investments. First, the bruising top-of-the-market purchase of aluminum group Alcan Inc., and then the ill-conceived swoop for Mozambique-focused coal outfit Riversdale Mining Ltd. The commodities boom cooled, top managers were pushed out and writedowns piled up.
Now — after billions in charges, cost cuts, plus several chief executives and multiple false starts — the miner has returned to the M&A fray, announcing the agreed $6.7 billion acquisition of Arcadium Lithium Ltd. this week.
Modest by comparison with past splurges, the all-cash deal is a significant and long-awaited expansion of Rio’s bet on lithium, a metal other diversified miners have stayed away from, worried about geological abundance among other factors.
It also marks a clear step back toward acquisitive growth.
“The development of the Arcadium acquisition was years in the making,” said Kaan Peker, analyst with RBC Capital Markets LLC. “Eventually, as we’ve seen over the course of the last couple of months, it was driven by a cyclical bottoming of the lithium price.”
The mining sector across the board is only just beginning to shift its focus to expansion and deals. For years after the last frenzy soured, shareholders demanded only better returns. But while rival BHP Group tested the waters since 2022, with the move for OZ Minerals Ltd. — and eventually bid unsuccessfully for Anglo American Plc, earlier this year — Rio has held back.
People familiar with the matter have long pointed to cumbersome internal structures and a conservative approach from chief executive officer Jakob Stausholm, who was chief financial officer until the 2020 ousting of his predecessor provided an unexpected opening at the top. Public comments pointed away from deals.
But it’s also true that the miner struggled with an issue that has dogged other large peers like BHP. When profit comes overwhelmingly from vast iron ore mines, it is hard to find additions that are lucrative — and sizeable — enough to move the needle. Copper is expensive and hard to find. Energy-transition friendly metals like lithium, used in batteries, tend to be smaller scale, with plenty of value in the processing and not just extraction.
Even with China’s sputtering economy, the profit margin for Rio’s Pilbara iron ore operations was 67% in the first half of 2024.
Battery bet
Rio has significant additional copper and iron production due from Oyu Tolgoi in Mongolia and Simandou in Guinea, respectively. Still, its answer to the question of where new, greener growth will come from has been lithium.
The path has not been smooth. Efforts to invest in new materials through private equity-inspired unit Rio Ventures, starting in 2017, went virtually nowhere and attempts to buy into lithium heavyweight SQM around that time were also thwarted. Projects too have stumbled, with Jadar in Serbia, Stausholm’s early bet, turning for a time into a local cause celebre.
“There were some people in Rio that were very disappointed they didn’t buy the stake in SQM. If you look back at Rio in those days they weren’t really ready,” said George Cheveley, portfolio manager at Ninety One UK Ltd.
“Since Jakob became CEO, he has been fixing internal problems and projects that were stuck. Operationally, we’ve seen them hit their targets. Now to be moving into lithium and getting back to M&A is the obvious next step. You can see him rebuilding the company back to where it was.”
Rio completed its $825 million purchase of the Rincon project in Argentina in 2022, but it was the collapse of lithium prices since the end of that year that opened up more avenues for M&A, with many new suppliers struggling to stay afloat.
The second-largest miner has seized the opportunity, and investors are cautiously welcoming a move that brings future production — Arcadium is projected to be the world’s third-largest producer by 2030 — but also technological nous, particularly in direct lithium extraction, or DLE, which could turbocharge output.
“We are happy Rio’s CEO Jakob Stausholm showed discipline and waited for the right time; makes a lot of sense and Arcadium is a nice add-on,” said Matthew Haupt, a portfolio manager at Wilson Asset Management Ltd. in Sydney, who holds both Rio and Arcadium.
Others echoed the sentiment — even with a premium to the undisturbed price of 90%, hefty despite the halving of Arcadium shares this year.
“You could almost say it’s akin to what BHP did last year when they bought OZ Minerals. Go out there, do a deal that is a small percentage of your market cap, execute it and prove that you can buy well,” said Barrenjoey analyst Glyn Lawcock. “The question now is whether there’s more to come down the pipe after this.”
Still, Rio has work to do when it comes to convincing all its investors that it’s ready to get back to spending.
“If they indulge in large scale M&A, it’ll be a negative thing,” said Prasad Patkar at Platypus Asset Management. “I’m a little bit more comfortable with this transaction than I would’ve been with anything larger. Or any top-of-the-market stuff.”
A Rio spokesman pointed to Stausholm’s comments this week committing to remain disciplined in capital allocation, but declined to comment further.
At a closely watched briefing on Saturday, the finance ministry did pledge more help for the crisis-wracked property sector — a keystone of raw materials demand in China — and heavily indebted local authorities, as well as hinting at expanded government borrowing. But the measures weren’t accompanied by concrete spending proposals, which investors had hoped could run to as much as 2 trillion yuan ($283 billion).
Iron ore futures in Singapore fell 0.7% to $105.50 a ton in Singapore as of 8:01 a.m. local time. Futures of the steel-making material have been on a roller-coaster this year, climbing above $140 a ton in January before sinking below $90 last month.
The copper market has followed a similar trajectory, hitting a record north of $11,000 a ton in May before retreating. In early trade, the three-month contract on the London Metal Exchange was 0.7% lower at $9,719 a ton. Brent crude oil futures also fell 1.8%. China is the world’s biggest importer of all three commodities.
Metals had rallied in recent weeks after Beijing launched a barrage of monetary interventions to support growth. But commodities investors have clamored for further measures on the fiscal side of the equation, which has a more direct impact on consumption of materials, and is needed to replace demand lost to China’s prolonged real estate slump.
As such, the government’s focus on plans to right the property sector will be welcomed by markets, not only through demand for raw materials but because housing is such an important store of wealth for Chinese people.
Housing Crisis
The housing crisis has of necessity shrunk the sector’s importance to Chinese steel mills, with construction accounting for 24% of consumption in 2023 from 42% in 2011, according to mining giant BHP Group Ltd. Machinery-making by contrast has gone from 20% to 30% in that time, while steel exports have risen sharply over the past two years.
Copper benefits from more widespread applications than steel and has a starring role in the energy transition, although construction still accounts for almost a fifth of the market, according to Citic Securities Co. Prices of other metals such as aluminum and zinc, and fuels like diesel, are also influenced by the level of activity on building sites, as well as the purchases of durable goods that typically accompany a new home.
It’s the emphasis on boosting consumption which is expected to steer the government’s fiscal response to its economic woes. Decades of urbanization have saturated the space for metals-intensive state investment in infrastructure, which has become much less reliable as a driver of growth. But, again, the finance’s ministry’s briefing contained few new pointers on how the government plans to lift spending among its citizens.
The extent of China’s challenges on that front were laid bare once more by price data on Sunday, which showed the economy heavily beset by deflationary pressures. Consumer prices rose less than forecast in September, while at the factory-gate they fell for a 24th straight month, underscoring the need for further policy support.
Details — and a price tag — for enhanced fiscal measures could still be forthcoming, perhaps when Chinese legislators meet later in the year. But in the meantime, commodities bulls are likely to draw in their horns until the scale of the government’s support is revealed.
Integrated Mine Plan Complete with Estimated Net Present Value of $1.6 billion
Average Annual Production of 4.7 Million Tons at First Quartile Cost and Mine Life of 25+ years
ST. LOUIS, Oct. 11, 2024 /PRNewswire/ — Peabody (NYSE: BTU) today provided an investor presentation on project development and the related integrated mine plan at Centurion, the Company’s premium low volatile hard coking coal project located in Australia’s Bowen Basin. The Company will hold a conference call on Monday, October 14, 2024, at 3:00 p.m. CST to share a comprehensive update on Peabody’s development of Centurion. To watch the event live or access a replay, please visit www.peabodyenergy.com.
Centurion is quickly becoming the cornerstone metallurgical coal asset in Peabody’s global coal portfolio, unlocking substantial, untapped reserves and repositioning Peabody as primarily a metallurgical coal producer. “The development of Centurion is a key strategic priority to maximize shareholder value and reweight our portfolio and long-term cashflows to metallurgical coal,” Jim Grech, Peabody’s President and Chief Executive Officer, said. “Combined with Peabody’s diversified portfolio, resilient balance sheet, fully funded reclamation obligations and robust shareholder return program, Peabody is uniquely positioned as a leading global coal producer.”
Thus far, two continuous miner units have been commissioned and the mine successfully produced its first development coal in June. The prep plant successfully washed its first coal and moved it to stockpile via the overhead belts in September. Peabody expects to commission a third continuous miner and ship the first cargo of coal in the fourth quarter.
Centurion is set to significantly enhance Peabody’s metallurgical coal production with average volume of 4.7 million tons per year at expected costs of $105 per ton over the twenty-five plus year life of the mine. Centurion will also reposition the metallurgical coal portfolio toward higher quality premium met coals.
“We anticipate demand for premium hard coking coals to grow significantly,” Malcolm Roberts, Peabody’s Chief Marketing Officer, said. “While demand for this product continues to grow, new projects are increasingly rare, making Centurion’s product highly sought after.”
At September 30, 2024, Peabody has completed approximately $250 million of the anticipated $489 million of initial development capital to achieve longwall production in March 2026. With a $210 per metric ton benchmark price assumption, Centurion has an estimated net present value of $1.6 billion and a 25 percent internal rate of return.
“Peabody is committed to increasing shareholder value through a balanced approach of maximizing shareholder returns and developing Centurion,” Mark Spurbeck, Peabody’s Chief Financial Officer, said. “Centurion provides increased optionality to tightening metallurgical coal markets and will be a strategic asset in Peabody’s global coal portfolio for decades.”
Concurrent with this release, Peabody has issued a presentation on the Centurion project that can be found on the investor section of www.peabodyenergy.com.
Peabody (NYSE: BTU) is a leading coal producer, providing essential products for the production of affordable, reliable energy and steel. Our commitment to sustainability underpins everything we do and shapes our strategy for the future. For further information, visit www.PeabodyEnergy.com.
This press release contains forward-looking statements within the meaning of the securities laws. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words or variation of words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “projects,” “forecasts,” “targets,” “would,” “will,” “should,” “goal,” “could” or “may” or other similar expressions. Forward-looking statements provide management’s or the Board’s current expectations or predictions of future conditions, events or results. All statements that address operating performance, events, or developments that may occur in the future are forward-looking statements, including statements regarding the shareholder return framework, execution of Peabody’s operating plans, market conditions, reclamation obligations, financial outlook, potential acquisitions and strategic investments, and liquidity requirements. They may include estimates of sales and other operating performance targets, cost savings, capital expenditures, other expense items, actions relating to strategic initiatives, demand for the company’s products, liquidity, capital structure, market share, industry volume, other financial items, descriptions of management’s plans or objectives for future operations and descriptions of assumptions underlying any of the above. All forward-looking statements speak only as of the date they are made and reflect Peabody’s good faith beliefs, assumptions and expectations, but they are not guarantees of future performance or events. Furthermore, Peabody disclaims any obligation to publicly update or revise any forward-looking statement, except as required by law. By their nature, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that might cause such differences include, but are not limited to, a variety of economic, competitive, and regulatory factors, many of which are beyond Peabody’s control, that are described in Peabody’s periodic reports filed with the SEC including its Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2023 and Quarterly Report on Form 10-Q for the quarter ended Jun. 30, 2024 and other factors that Peabody may describe from time to time in other filings with the SEC. You may get such filings for free at Peabody’s website at www.peabodyenergy.com. You should understand that it is not possible to predict or identify all such factors and, consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.
LAKE KARIBA, Zambia (AP) — Tindor Sikunyongana is trying to run a welding business which these days means buying a diesel generator with costly fuel he can’t always afford.
Like everyone in Zambia, Sikunyongana is facing a daily struggle to find and afford electricity during a climate-induced energy crisis that’s robbed the southern African country of almost all its power.
“Only God knows when this crisis will end,” said Sikunyongana. His generator ran out of diesel and spluttered to a halt as he spoke. “You see what I mean?” he said.
Zambia’s worst electricity blackouts in memory have been caused by a severe drought in the region that has left the critical Kariba dam, the source of Sikunyongana’s woes, with insufficient water to run its hydroelectric turbines. Kariba is the largest man-made lake in the world by volume and lies 200 kilometers (125 miles) south of Lusaka on the border between Zambia and Zimbabwe.
The massive dam wall was built in the 1950s and more than 80 workers died during construction. It was meant to revolutionize the countries’ energy supplies by trapping the water of the Zambezi River, turning a valley into a huge lake and providing an endless supply of renewable hydroelectric power.
That’s not the case anymore as months of drought brought by the naturally occurring El Nino weather pattern and exacerbated by warming temperatures have put Zambia’s hydroelectric station on the brink of completely shutting down for the first time.
The water level is so low that only one of the six turbines on Zambia’s side of the dam is able to operate, cutting generation to less than 10% of normal output. Zambia relies on Kariba for more than 80% of its national electricity supply, and the result is Zambians have barely a few hours of power a day at the best of times. Often, areas are going without electricity for days.
Edla Musonda is so exasperated that she’s taken to lugging her entire desktop computer — hard drive, monitor, everything — to a local cafe so she can work.
Musonda and others cram into the Mercato Cafe in the Zambian capital of Lusaka, not for the sandwiches or the ambiance but because it has a diesel generator. Tables are cluttered with power strips and cables as people plug in cell phones, laptops and in Musonda’s case, a home office. This is the only way her small travel business is going to survive.
Less than half of Zambia’s 20 million people had access to electricity before Kariba’s problems. Millions more have now been forced to adjust as mothers find different ways to cook for their families and children do their homework by candlelight. The most damaging impact is during the daylight hours when small businesses, the backbone of the country, struggle to operate.
“This is also going to increase poverty levels in the country,” said economist Trevor Hambayi, who fears Zambia’s economy will shrink dramatically if the power crisis is prolonged. It’s a warning call to the Zambian government and the continent in general about the danger to development of relying heavily on one source of energy that is so climate dependent.
The power crisis is a bigger blow to the economy and the battle against poverty than the lockdowns during the COVID-19 pandemic, said Zambia Association of Manufacturers president Ashu Sagar.
Africa contributes the least to global warming but is the most vulnerable continent to extreme weather events and climate change as poor countries can’t meet the high financials costs of adapting. This year’s drought in southern Africa is the worst in decades and has parched crops and left millions hungry, causing Zambia and others to already declare national disasters and ask for aid.
Hydroelectric power accounts for 17% of Africa’s energy generation, but that figure is expected to rise to 23% by 2040, according to the International Energy Agency. Zambia is not alone in that hydroelectric power makes up over 80% of the energy mix in Mozambique, Malawi, Uganda, Ethiopia and Congo, even as experts warn it will become more unreliable.
“Extreme weather patterns, including prolonged droughts, make it clear that overreliance on hydro is no longer sustainable,” said Carlos Lopes, a professor at the Mandela School of Public Governance at the University of Cape Town in South Africa.
The Zambian government has urged people and businesses to embrace solar power. But many Zambians can’t afford the technology, while the government itself has turned to more familiar but polluting diesel generators to temporarily power hospitals and other buildings. It has also said it will increase its electricity from coal-fired stations out of necessity. While neighboring Zimbabwe has also lost much of its electricity generation from Kariba and blackouts there are also frequent, it gets a greater share of its power from coal plants.
At Kariba, the 128-meter-high (420-feet) dam wall is almost completely exposed. A dry, reddish-brown stain near the top marks where the water once reached in better times more than a decade ago.
Leonard Siamubotu, who has taken tourists on boat cruises on the picturesque lake for more than 20 years, has seen the change. As the water level dropped, it exposed old, dead trees that were completely submerged for years after the wall was built. “I’m seeing this tree for the first time,” he said of one that’s appeared in the middle of the lake.
The lake’s water level naturally rises and recedes according to the season, but generally it should go up by around six meters after the rains. It moved by less than 30 centimeters after the last rainy season barely materialized, authorities said. They hope this year’s rains, which should start in November, will be good. But they estimate that it’ll still take three good years for Kariba to fully recover its hydroelectric capability.
Experts say there’s also no guarantee those rains will come and it’s dangerous to rely on a changing climate given Zambia has had drought-induced power problems before, and the trend is they are getting worse.
“That’s not a solution … just to sit and wait for nature,” said Hambayi.
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Associated Press journalist Taiwo Adebayo in Abuja, Nigeria contributed to this report.
The Associated Press receives financial support for global health and development coverage in Africa from the Gates Foundation. The AP is solely responsible for all content. Find AP’s standards for working with philanthropies, a list of supporters and funded coverage areas at AP.org.
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The Associated Press’ climate and environmental coverage receives financial support from multiple private foundations. AP is solely responsible for all content. Find AP’s standards for working with philanthropies, a list of supporters and funded coverage areas at AP.org.
FILE PHOTO: A man walks in the Central Business District on a rainy day, in Beijing · Reuters
Fri, October 11, 2024 at 11:24 PM EDT
SINGAPORE (Reuters) – China said on Saturday it will “significantly increase” government debt issuance to offer subsidies to people with low incomes, support the property market and replenish state banks’ capital as it pushes to revive sputtering economic growth.
Without providing details on the size of the fiscal stimulus being prepared, Finance Minister Lan Foan told a news conference there will be more “counter-cyclical measures” this year.
Global financial markets have been keenly awaiting more details on China’s stimulus plans, fearing its 2024 economic growth target and longer-term growth trajectory may be at risk if more support is not announced soon.
Here are some comments from investors and analysts on the press briefing from China’s finance ministry:
RONG REN GOH, PORTFOLIO MANAGER, EASTSPRING INVESTMENTS, SINGAPORE
“Investors were hoping for fresh stimulus, accompanied by specific numbers, to be announced at the MOF presser, including the size of these commitments. From this perspective, it turned out to be somewhat of a damp squib given only vague guidance was provided.
“That said, there were meaningful measures announced. The MoF affirmed room for the central government to increase debt, more support for housing markets, and increased local government debt quotas to alleviate refinancing woes.
“However, with markets focused on ‘how much’ over ‘what’, they were invariably set up to be disappointed by this briefing.”
HUANG XUEFENG, CREDIT RESEARCH DIRECTOR, SHANGHAI ANFANG PRIVATE FUND CO, SHANGHAI
“The focus seems to be around funding the fiscal gap and solving local government debt risks, which far undershoots expectations that had been priced into the recent stock market jump. Without arrangements targeting demand and investment, it’s hard to ease the deflationary pressure.”
ZHAOPENG XING, SENIOR CHINA STRATEGIST, ANZ, SHANGHAI
“MOF focused more on derisking local governments. It will likely add new quotas of treasury and local bonds. We expect a 10 trillion yuan ($1.42 trillion) implicit debt swap in the next few years. Official deficit and local bond quotas may both increase to 5 trillion yuan going forward. But it looks (to be) not much this year. We expect 1 trillion ultra-long treasury and 1 trillion local bonds to be announced by NPC this month end.”
BRUCE PANG, CHIEF ECONOMIST CHINA, JONES LANG LASALLE, HONG KONG
“The message released from today’s press conference is actually quite in line with the expectations of those familiar with China’s policy-making process and state structure. The officials have given answers to questions of ‘how’ but no details of ‘when’, yet.
“I will expect more details and number of the previewed fiscal stimulus to be published only after the upcoming meeting of the NPCSC to approve a plan to increase treasury issuance and provide a mid-year revision to the national budget. And it would be reasonable and practical to keep room for policy manoeuvring to prepare for external shocks and uncertainties.”
CHRISTOPHER WONG, CURRENCY STRATEGIST, OCBC, SINGAPORE
“There was mention of 2.3 trillion yuan and some details on local bond issuance that can support housing … but it stopped short of a big surprise factor. That said, we shouldn’t lose sight of the bigger picture and that is policymakers acknowledged the issues and are putting in genuine effort to tackle those issues.
“More time may be needed for more thought-out and targeted measures. But those measures also need to come fast as markets are eagerly waiting for them. Over expectations vs under-delivery would result in disappointment and that can manifest itself into Chinese markets.”
TIANCHEN XU, SENIOR ECONOMIST, ECONOMIST INTELLIGENCE UNIT, BEIJING
“Our overall take is quite positive in that MoF is willing to tackle China’s many economic challenges by leveraging its borrowing room. The immediate benefits to the economy will be limited, as the MoF avoided large-scale direct cash handouts to households. However, its commitment to restoring local public finances through fiscal transfer and debt replacement is highly commendable.
“In the medium term, it will put an end to the aggressive deleveraging by local governments and ease the resulting deflationary pressure. And as their financial position stabilises, local governments will be better positioned to support the economy by providing public services and embark on public investments.
“The Chinese government’s determination to provide a backstop to the ailing property market and economy came through clearly in the press briefing by the MoF. However, specific numbers with regards to initiatives announced was lacking. The lack of a big headline figure may also disappoint some investors who were hoping for the government to announce a sizeable 2 trillion yuan in fresh fiscal stimulus to shore up the economy and boost confidence.
“Investors were hoping for more measures targeted at households instead of only the real estate sector. While today’s measures were focused on local governments and helping them to purchase unsold homes, it is unclear if this will translate into action as local governments have been reluctant so far to participate in the home purchase program for fear that home prices could fall further.
“Nevertheless, investors will take some comfort from the Finance Minister’s pronouncement that the central government has room to increase debt and the deficit, and that it has other tools in consideration to use in future. This offers hope that more can and will be done, although investors hoping for a big bang fiscal bazooka today will probably be disappointed.
($1 = 7.0666 Chinese yuan renminbi)
(Reporting by Asia markets team and China economics team; compiled by Ankur Banerjee; Editing by Kim Coghill)
Cycles surround us. In markets, astronomy, and our lives.
Every day is a circadian cycle for us all. Our bodies move through phases based on our exposure to light or darkness.
Markets are also remarkably cyclical, responding to the environment around them. Interest rates, regulation, monetary policy and investor psychology all play important roles.
Precious metals are no different. The sector’s performance ebbs and flows over time.
An even better example is from 1972 to 1980 when gold returned 1,256% to the S&P 500’s 97%.
Of course, stocks take their turn in the spotlight too.
From 2012 to 2021, stocks returned 336% vs gold’s 16%. And from 1980 to 1999, stocks were absolutely dominant as gold went dormant for nearly two decades.
Over the past few years, both have done well.
The point here is that it’s a cycle.
Just take a look at the chart below. It shows the ratio of S&P 500 performance vs gold through 2021.
I believe we switched back to precious metals mode at the beginning of this year. And if this is the beginning of a fresh cycle, we may be in for another 7-plus years of precious metals outperforming stocks.
Given the magnitude of what we’re facing, it could go on longer than that.
Catalysts and Causes
Periods where gold outperforms tend to be chaotic.
Past catalysts have included a crash at the end of a major bull market (1971 and 2000), and an inflationary shift in monetary policy (1971 and 2000).
Wars often play a part as well, as they did in the 1970s (Vietnam and others), and the early 2000s (War on Terror). Wars spike deficits and increase the monetary supply. They also drive safe-haven demand from both central banks and investors.
I believe our situation today fits the bill.
Stocks are still doing well, for now, but markets look expensive. The chart below, from Longview Economics, shows that 90% of U.S. stock sectors are in their top quartile (25%) of historical valuations.
Stocks are richly valued across almost the entire board. This tends to happen near market peaks. And I don’t see any positive catalysts hiding around the corner to drive sustainable real growth.
Of course, the broad bubble in U.S. stocks could go on for longer than we expect, but at this point, I’m more focused on precious metals and even certain foreign markets.
To be clear, I do own U.S. stocks and will continue to.
But during times like these, I lower that exposure and boost my allocation to alternatives, particularly gold and silver.
Macro Looks Bullish for Gold
The U.S. and many other countries are reaching a tipping point with debt. Total global debt just reached $315 trillion, which is 333% of global GDP.
The Federal Reserve just switched into easy-money mode and is likely to fire up formal QE in the near future. China’s central bank just injected massive liquidity to boost its sluggish economy. More countries will follow suit, and global liquidity is poised to surge.
In addition, we have multiple wars and conflicts raging in Yemen, Ukraine, Israel, Iran and beyond. Nascent proxy wars between the US and Russia are quietly breaking out in multiple African countries.
Military spending is booming, with Russia increasing its annual defense spending to 40% of its total budget. And China’s defense spending now rivals the U.S. in terms of purchasing power parity (PPP). Naturally, the U.S. is no slouch in this area and is also ramping up spending and production.
Durable Catalysts
The stage is set for a powerful precious metals bull market cycle. The problems facing the world are not going away anytime soon. Even if all the conflicts end tomorrow, and they won’t, we’re still facing a structural debt problem of unprecedented magnitude.
Further conflict and spending will just add gas to the fire.
For now, markets seem complacent that all is well with the economy. It won’t last forever. If we get a nice pullback in gold and silver here, and we may well, it’ll be an amazing opportunity to stack up. I will continue to buy on pullbacks.
Toronto, Ontario–(Newsfile Corp. – October 10, 2024) – Derek Macpherson of Toronto, Ontario acquired personally 240,000 units of Gold79 Mines Ltd. (“Gold79” or the “Company”) comprising 240,000 common shares and 120,000 warrants, at a price of $0.25 per unit for a purchase price of $60,000, in a private placement that closed on October 9, 2024. Each unit consists of one common share and one-half common share purchase warrant of the Company. Each whole warrant is exercisable for $0.40 per share until their expiry on October 9, 2026. All securities issued to Mr. Macpherson pursuant to the placement are subject to a statutory hold period which expires February 10, 2024.
Immediately prior to the private placement, Mr. Macpherson and joint actors Kanaga Capital Corp. and Olive Resource Capital Inc. owned 1,725,400 common shares of the Company, representing 7.7% of the then issued and outstanding common shares of the Company. As a result of the private placement, Mr. Macpherson’s and joint actors’ ownership of the issued and outstanding common shares of the Company decreased from 7.7% to 6.3% on an undiluted basis. In addition, if Mr. Macpherson and joint actors were to exercise all of their warrants and stock options of the Company, they would own 3,374,150 common shares of the Company, representing 10.4% of the issued and outstanding common shares of the Company on a partially-diluted basis, assuming no further common shares of the Company have been issued.
Mr. Macpherson acquired the securities for investment purposes. Mr. Macpherson may, depending on market and other conditions, increase or decrease his beneficial ownership of the Company’s securities, whether in the open market, by privately negotiated agreements or otherwise, subject to a number of factors, including general market conditions and other available investment and business opportunities.
The disclosure respecting Mr. Macpherson’s shareholdings contained in this press release is made pursuant to National Instrument 62-103 and a copy of the report in respect of the above acquisition will be filed with applicable securities commissions using the Canadian System for Electronic Document Analysis and Retrieval (SEDAR+) and will be available on Gold79’s SEDAR+ profile (www.sedarplus.ca). A copy may be obtained by contacting Gold79 as noted under “Contact” below.
For further information regarding this press release contact: Derek Macpherson, President & CEO of Gold79 Mines Ltd. Phone: 416-294-6713 Email: dm@gold79mines.com
