Has the Commodity Cycle Already Peaked?

We spend a lot of time here at Mining Memo pointing out the underlying strength of the mining sector.

But given the recent sell-off, you might be asking: “have we already peaked?”

There’s a few points of references that I’ll draw on over the coming weeks to pinpoint where we might be positioned in this cycle.

One interesting side note, worldwide spending on finding new metal deposits (like gold, copper, and lithium) was about $12.4 billion in 2025.

That’s 40% BELOW the peak of the last cycle, the early 2000s mining boom.

Large volumes of speculative capital moving into the junior miners would be my primary warning sign that a top was in and by all measures we’re not there yet in 2026.

In terms of investment at the junior end, we still haven’t seen significant investment.

And for that to happen, long term drivers still need to play out…

That could include the AI build out, higher defence spending, India’s rise, or the re-industrialisation of Western economies. Or a combination of all these factors.

Long term, there’s still a lot to like about this sector.

But in the middle of that sits risk

Ray Dalio, founder of Bridgewater Associates (the world’s largest hedge fund) recently vocalised the markets fears:

“I think that right now we are at a decision-making point and very close to a recession. And I’m worried about something worse than a recession if this isn’t handled well.”

As I said on Friday, right now, there’s strong parallels to the 1970s…if so, then the current AI pullback could morph into the kind of severe market event Dalio hints at.

Then again, Dalio has been saying this since 2023!

But we must acknowledge his bearishness is becoming an increasingly consensus view.

And China falls are adding to the fear

I said recently that China’s economic data is holding up well and that manufacturing activity is on the up.

But there’s a worry that China’s rising factory output is being heavily propped up by domestic policy adjustments.

That factories are producing more than they’re selling to stockpile key items and offset the property downturn at the governments request.

The stock market activity seems to support that view.

China’s benchmark CSI 300 Index has officially cratered into a technical bear market, logging its longest consecutive weekly losing streak on record and flashing its most extreme oversold reading since inception.

Retail investors – who make up an astonishing 90% of daily mainland volume – are panic-selling en masse.

It’s yet another thing to spook the market and it’s starting to hit sentiment over here too.

Check out this chart of an index of top 300 mining stocks on the ASX:

Source: Trading View

[Click to open in a new window]

As you can see we’re hovering around what looks like a key point right now. If that support level breaks, we could see some big falls in mining stocks – especially juniors.

But my base case is any imminent pullback is an opportunity to buy the dip in what I think is a larger commodities bull market.

And if you share our rosier version of the future, this is the ideal time to go shopping – or at least prepare what you want to buy on any panic falls.

My colleague Greg Canavan put it well in a recent post on X:

Source: X.com

[Click to open in a new window]

Greg’s right.

Peak gloom is usually a great time to start buying. After all, you want to buy when things are cheap, not when they’re expensive.

In short, its time to build your watchlist

Funnily enough, my process remains the same no matter market conditions.

Look for out-of-favour sectors where supply and demand work in your favour.

You want demand that will stay strong, in areas where exploration spend has been weak.

Don’t forget: it can take 15 years or more to move a mine from discovery to production. High interest rates and costly diesel are slowing that pipeline even more.

Next, find stocks trading well below their true value, the Warren Buffett way.

In practice, that means firms trading at a big discount to their Definitive Feasibility Study (DFS) value.

And when I say big, I mean big.

A DFS is only an estimate. A lot can go wrong before a mine starts producing. So if the price doesn’t give you a good margin of safety, walk away, no matter how good a project looks.

Last of all, funding.

With tax changes making small-cap investing less attractive, money is getting harder to raise. Plenty of stocks that look good on paper will never see the light of day. They simply can’t get funded.

So a stock with funding secured is a bigger tick than usual.

The ideal stock?

A company priced at a deep discount, with funding in place, riding a multiyear trend in a commodity that’s been under-explored.

That combination is rare, but it’s a lot easier to find in times of peak pessimism than in roaring bull markets.

Which is why the current set up could be an opportunity for you.

If you want to see what’s in my portfolio right now, go here.

Speak soon…