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With 2018 just underway, we have reviewed the data and identified three themes and related companies that we believe investors should pay close attention to this year. In the precious metals space, we believe discovery and other value creating catalysts are likely to drive investor returns versus metal price appreciation. We believe battery metals are going to continue to be strong, with both cobalt and lithium companies likely to have good years. Finally, zinc continues to be our favourite base metal; however, fundamentals appear to be improving for copper. For more details see the summary below, our video summary and our detailed report. read more
Yesterday, we received two additional data points, that continue to support our positive view on the Lithium market. First, Orocobre (TSX:ORL) announced 1st half 2018 Lithium Carbonate pricing, is trending towards being 25% higher than the second half of 2017. This is not surprising, considering the expectation that the Lithium market is in deficit next year. Secondly, Lithium X Energy Corp (TSXV:LIX) announced it has entered into a definitive agreement to be acquired by Nextview New Energy Lion Hong Kong Ltd for C$265 million which again, highlights the scarcity of quality Lithium projects and/or off-take opportunities and the need for metals companies (i.e. Tibet Summit Resources Co a partner of Nextview) to acquire assets at an early stage. In our view, both of these events highlight the expected tight market conditions over both the near and long-term. read more
The uranium industry has experienced a difficult 5-10 years, from the peak of the bull market in 2007 to the financial crisis in 2008 and then the Fukushima incident in 2011, the price has gone from a peak of $136/lb U3O8 to a low of $18/lb U3O8 in November last year. Recently, the spot price has been hovering just above last November’s 11-year low at $20/lb U3O8. With the spot price still far below the industry’s average cost of production of ~$40/lb U3O8 (2015) one of two things is likely to happen, either the price stays where it is and the trend of supply destruction continues or the price rises to a level that incentivizes producers to operate, ensuring a robust supply pipeline for one of the world's most relied upon sources of energy. It is important to note that there is no substitute for uranium in fission reactors and uranium only represents ~3-5% of nuclear power plant costs. At $20/lb U3O8, some of the lowest cost producers in the world are losing money and have elected to reduce production or put operations on care and maintenance, and we can be certain that no new mines are likely to be built at these price levels. Therefore, as a result of the inelasticity of uranium demand, we expect that with reduced supply it is only a matter of time before we see significant positive momentum in the uranium price. read more
The global production of Li-ion batteries is expected to significantly increase over the next few years as the costs of production continue to decrease and auto manufacturers implement plans for electric vehicles (EV’s). With the demand of Li-ion batteries comes the demand for lithium, a silvery-white metal that under standard conditions is the lightest metal and solid element on Earth. This enables lithium to have a high charge-to-weight ratio, which makes it an important component for batteries. Li-ion batteries require both lithium carbonate and lithium hydroxide, which have both experienced a +120% price increase between the beginning of 2015 and 2017. The boom in battery demand and lithium prices were met by an estimated 12% increase in mine supply for 2016 from existing operations, with the remaining supply gap to be met by new production from emerging producers (USGS). read more
Battery production is expected to ramp up significantly in the next few years and in our view, the best way to play this theme via mining is with cobalt and the underlying equities. While investors have primarily been focused on lithium, and to a lesser extent graphite, to-date, we believe that cobalt, which is the largest battery metal component by weight of the favoured lithium ion battery technology, is the best way to play this theme going forward because of expected meaningful demand growth coupled with lack of supply growth and the elevated political risk from the world’s largest miner of cobalt, the Democratic Republic of Congo (DRC). While we have identified several exploration and development stage companies looking to advance primary cobalt projects, we favour eCobalt Solutions Inc. (TSX:ECS), which is developing the Idaho Cobalt Project (ICP), because it is best positioned to benefit from the anticipated near to medium term increase in the Cobalt price. read more
While we believe that we are in a new bull market for gold equities, it is early days. As such, investors should remain selective and focus on companies that fit three key themes: scarcity, viability and catalysts. In our view AMI, ER, GRR, GQC, IDM, ICG, MLN, NUG, UGD and VIT are ten companies that fit these themes and should outperform peers. read more
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