As you know, our core theme at Mining Memo follows developments that tell us where we are in the commodity cycle.
Boom, bust or somewhere in between.
Historically, commodities and mining stocks have pivoted from extreme prices to depressed conditions. That’s the cycle.
And understanding where we are ‘in real time’ is far more difficult than looking back at these cycles in hindsight.
That’s why we must carefully monitor and revisit signals that might point to our position.
An obvious one is a surge in M&A activity, which tends to correlate with the upward leg of a cycle… As prices rise, confidence builds, and more deals take place.
However, M&A activity tends to lag higher prices, meaning it doesn’t offer early clues about what could happen in the months ahead.
That’s why I keep returning to the theme of resource nationalisation and global hostilities, putting commodities front and centre.
Who would have thought five years ago that minerals would become the front-line battlefield in geopolitical wrangling?
But that’s what we have today.
From the US’s attempt to secure mineral deals in small backwater locations across Africa to the big trade war with China, putting the spotlight on rare earths.
Now, you don’t need to look at each development in minute detail; just recognise that collectively, they point to the upward turning of a multi-year cycle.
Which is why this latest ‘mineral dilemma’ coming out of Guinea caught my attention last week.
“Exclusive: Guinea moves to cancel EGA’s mining licence, sources say”
Here’s the brief if you can’t get behind the Reuters paywall:
A sovereign wealth fund between Abu Dhabi and Dubai called Emirates Global Aluminium (EGA) has been caught up in a dispute with officials from Guinea.
Authorities in this mineral-rich West African nation have suspended EGA’s bauxite exports and mining operations.
So what’s the reason for EGA’s cancelled mining license?
Apparently, its concerns about its ‘customs duties.’
Mining Memo’s Take
Of course, we know the real reason here isn’t customs duties at all…
This is all about resource-rich nations taking back control of their mineral wealth in an era of higher prices and stronger demand.
Nations that hold mineral-rich ground recognise that they now have the upper hand in bargaining power, even if they lack the capital to develop new mining projects.
This promises to be a challenging environment for the US and other mineral-dependent countries seeking to secure supply chains for raw materials.
Minerals critical for tech, medicine, energy utilities, and defence.
So, while deals might get signed, there’s no guaranteed protection for international miners developing projects in these volatile places.
Paper contracts are meaningless in the age of scarcity, when countries with mineral wealth have all the negotiating power.
And that’s something overseas miners tend to forget at the dawn of a new commodity cycle.
This is shaping to be a historic turning point, but as I’ve detailed, location is key if you want to benefit as an investor.
EGA shareholders are undoubtedly learning that important lesson right now, and plenty more will in the future, too.
Until next time,
Regards,
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James Cooper,
Editor, Mining: Phase One and Diggers and Drillers
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