In recent years, critical minerals have become intimately linked with the national security of Western nations.
Access to critical minerals is essential to any country hoping to gain or maintain technological superiority over its rivals - a fact that China was distinctly aware of when it moved to buy up the industry over a decade ago.
But now a fightback is underway.
Around the world, governments are racing to secure their critical mineral supply chains as they invest heavily in new exploration and production.
In fact, Canada was so concerned about critical minerals supply that it forced three Chinese companies to sell their mining assets in the country.
And as these countries move to combat China, the non-Chinese companies sitting on the strategically vital resources are becoming increasingly important.
In Canada, for example, when the Chinese companies were forced to divest their ownership interests in the country - one Canadian miner, PowerMetals Corp (TSXV:PWM,OTC: PWRMF), was left in control of not only a potential high-quality lithium mine but what might become the only functioning cesium mine in the world that China doesn’t own.
And while cesium may not be as well-known as lithium, it is undoubtedly critical.
Cesium is central to the United States’ goal of winning the 5G race, it plays a key role in aircraft guidance systems, oil and gas drilling, and global positioning satellites.
And despite its importance, all the known cesium deposits around the world have either been depleted, or the mines have been rendered inoperable.
All of this could leave PowerMetals Corp and its Case Lake project as one of the most unique and exciting natural resource plays in the world today.
A ‘Geologist’s Dream’
It isn’t just the geopolitical context and resource quality that makes PowerMetals Corp (TSXV:PWM,OTC: PWRMF) such an intriguing prospect. The miner’s main exploration project has been described by the company’s Chairman as a “geologist’s dream” and the equivalent of “prime real estate on Park Avenue”.
It’s accessible year-round by well-maintained roads, with all infrastructure in place, a real rarity in the mining industry. Nearly all discoveries in Canada’s critical metals market have been made in extremely remote areas. But at the Case Lake prospect, not only is all the road and electrical infrastructure already in place, but it even boasts cell phone signals - a benefit that is unheard of in most mining venues.
According to Power Metals, Case Lake is one of the most inexpensive properties to drill in Canada—not just because of its easy access, either. The cesium, lithium, and tantalum intersections here are in pegmatite that is exposed on the surface and running so shallow that it is less than 50 meters deep in various areas.
It’s a story that seems to keep getting better.
An Australian Advantage
According to PowerMetals, Case Lake has high-grade cesium that is similar to Australia’s famous Sinclair Mine.
That fact becomes increasingly interesting when you look at the experts and money backing this up-and-coming Canadian miner.
When the Chinese companies were forced out of their interests in Canada, big Australian money and expertise jumped at the opportunity to secure a potential critical minerals mine.
And when you add Australian cesium development expertise to what looks like a very promising potential for a mine, everything can fall into place.
Australia's first commercial cesium mine, Sinclair, extracted its last cesium in 2019. And it’s one of only three in the world. The other two are the Tanco mine in Manitoba, Canada, and the Bikita mine in Zimbabwe. Tanco shut down after the mine collapsed in 2015, and Bitika was depleted in 2018.
That could make PowerMetals’ Case Lake property a very big deal. It’s also why we think Canada is adamant that China does not get its hands on what could end up being the only supply of cesium known, or left, in the world. It also has Washington’s full support as the U.S. backs any effort to overturn China’s dominance of critical mineral supply chains.
The smart Australian money we are referring to is Australia’s Winsome Resources (ASX:WR1) which jumped at the opportunity to replace Chinese investors when the Canadian government issued its eviction notice in November last year due to national security concerns. The involved Chinese company was mining giant Sinomine Resource Group a multi-billion market cap Beijing based giant. The new buyer Winsome bought their stake as soon as the Canadian government demanded the divesture. Not only did Winsome purchase Sinomine’s 5.7% stake in Power Metals, but they have also since increased their stake to 10.7 % in the past couple of months.
Mining The Numbers
Before discovering cesium, PowerMetals was already making waves with its lithium and tantalum discoveries. So far, it has drilled 80 holes over some 15,000 meters at Case Lake, making a significant world-class, high-grade (over 4%) lithium discovery at a very shallow, open depth. Just a preview of the highlights from this discovery include:
1.94% Lithium and 323.75pp Tantalum over 26 meters
2.07% Lithium and 213.96pp Tantalum over 18 meters
4.75 % Lithium and 396.00pp Tantalum over 2 meters
1.71 % Lithium and 240.77pp Tantalum over 12 meters
1.20 % Lithium and 218.68pp Tantalum over 19 meters
It was while drilling for this lithium and tantalum that Power Metals made a surprise discovery of rare cesium at Case Lake’s West Joe Dyke.
This is some of the highest-grade cesium found in decades, with grades as high as 24% over good intervals.
24.07% Cesium over 1 meter
20.36% Cesium over 1 meter
22.22% Cesium over 2 meters
7.65% Cesium over 7.09 meters
It was then that a Chinese company pounced on the opportunity to acquire 5.7% of Power Metals.
As the global war for critical minerals heats up, it is companies like PowerMetals that are able to extricate themselves from China’s influence that may have the most to gain.
Other companies battling it out for metal dominance:
Southern Copper Corporation (NYSE: SCCO), hailing from Phoenix, Arizona, is a key player in the world's copper production landscape, owing to its status as one of the largest integrated producers. The firm, which is a subsidiary of Grupo Mexico, has a wealth of reserves in its portfolio, including molybdenum, zinc, silver, lead, and gold. Given the burgeoning demand for copper in the renewable energy and electric vehicle industries, Southern Copper's prospects seem promising.
The corporation's strong record of production growth and operational efficiency are indeed commendable, adding to its lure for investors. What's more, for those seeking a steady stream of income, Southern Copper's consistent track record of dividend payouts serves as a significant draw.
However, it's not all smooth sailing. Like any major mining operation, Southern Copper is not immune to challenges. The company has faced backlash over environmental concerns, and disruptions to operations pose a risk. Potential investors should bear these points in mind when contemplating an investment in Southern Copper.
Compass Minerals International (NYSE: CMP), operating out of Overland Park, Kansas, is a significant force in the supply of essential minerals. With an array of products that include salt, sulfate of potash, and magnesium chloride, the company caters to various markets like agriculture, consumer deicing, water conditioning, and multiple industrial applications.
The strength of Compass Minerals lies in its diversified product range, solid market position, and consistent cash flow generation. It becomes an interesting consideration for potential investors owing to its balanced portfolio and commitment to sustainable operational excellence.
However, prospective investors should note that Compass Minerals' performance is subject to weather conditions and the volatility of commodity prices. Milder winters can adversely affect the demand for their deicing products, a factor to consider when evaluating an investment.
Freeport-McMoRan Inc. (NYSE: FCX), headquartered in Phoenix, Arizona, ranks amongst the world's leading mining companies. It boasts an impressive array of reserves comprising copper, gold, and molybdenum. Its most significant asset includes the Grasberg minerals district in Indonesia, one of the world's largest copper and gold deposits, and extensive mining operations in the Americas.
The rise of renewable energy and electric vehicle technologies has positioned copper as a crucial material. As a significant player in copper mining, Freeport-McMoRan stands to gain from this trend. Additionally, the company's sound operational performance and commitment to reducing debt make it an attractive investment prospect.
However, there are regulatory and political challenges associated with the company's operations in certain regions. Its Indonesian operations have faced regulatory changes and environmental controversies. While Freeport-McMoRan has taken measures to manage these issues, they highlight the geopolitical risks tied to global mining operations.
Turquoise Hill Resources (NYSE: TRQ), a Canadian firm based in Vancouver, is an international mining company primarily focused on operating and further developing the Oyu Tolgoi copper-gold mine in southern Mongolia. Turquoise Hill has a 66% interest in one of the world's largest known copper and gold deposits, with the remaining stake held by the Government of Mongolia.
With anticipated production ramp-up in the coming years, the Oyu Tolgoi mine offers immense growth potential. The company has been actively working on strengthening its balance sheet and enhancing its operational performance, adding to its long-term value creation proposition.
However, potential investors should be aware of the company's concentrated risk profile due to its reliance on the Mongolia mine. The ongoing disputes with its largest shareholder, Rio Tinto, and the Mongolian government, could potentially impact Turquoise Hill's future performance.
FMC Corporation (NYSE: FMC), located in Philadelphia, Pennsylvania, operates globally as an agricultural sciences company. It offers innovative solutions to growers worldwide. FMC plays a significant role in the lithium market, a key component in rechargeable batteries and other high-tech applications, even though it's not a traditional mining company.
FMC's dedication to innovation and sustainability is commendable. Its agricultural products significantly contribute to improving crop yield and quality, making it a key player in addressing global food security issues. FMC has seen growth owing to the strong demand for its crop protection products, driven by high commodity prices and robust agricultural market fundamentals.
However, FMC spun off its lithium business into a separate publicly-traded company, Livent Corporation, in 2018. While FMC continues to be a robust and diversified company with strong growth prospects, investors specifically looking for lithium exposure would need to consider Livent or other lithium-focused companies.
Livent Corporation (NYSE: LTHM) is a global leader in lithium technology. This Philadelphia-based company is a spin-off from FMC Corporation. It supplies lithium used in batteries for hybrid and electric vehicles, mobile devices, and other consumer electronics.
The high-growth lithium market's increasing demand for electric vehicles makes Livent an appealing option for investors interested in green energy transition. The company's unique processing technology, focusing on high-purity lithium compounds, provides it with a competitive edge.
Nonetheless, Livent's business significantly relies on the lithium market, which has seen volatility in recent years due to supply and demand dynamics. Also, Livent has substantial operations in Argentina, presenting potential geopolitical risks that prospective investors should consider.
Glencore (OTC: GLNCY) is a Switzerland-based multinational that ranks among the world's largest diversified natural resource companies. Its operations span across the complete value chain, including mining, processing, refining, transportation, financing, and marketing. It offers an expansive product range including metals, minerals, energy, and agricultural products, making it a strong contender for investors looking for broad commodity market exposure.
Glencore is making strategic moves to transition into a low-carbon economy, with substantial investments in cobalt and copper, both crucial metals for electric vehicle batteries. The company is also committed to carbon reduction and aims to be carbon-neutral by 2050. However, potential investors should note that Glencore, like other large mining corporations, has faced controversies over environmental impact and governance.
While Glencore's stock is traded over-the-counter in the U.S., it is primarily listed on the London Stock Exchange and the Johannesburg Stock Exchange. It's essential for prospective investors to understand the associated risks with over-the-counter trading, such as lower liquidity and less stringent reporting requirements.
Vale S.A. (NYSE: VALE), a multinational corporation based in Brazil, is one of the world's leading producers of iron ore and nickel. The company's diverse operations also encompass manganese, ferroalloys, copper, bauxite, potash, kaolin, and cobalt. Being the largest logistics operator in Brazil, Vale also has a robust infrastructure for the distribution of its products.
Given the surging global demand for iron ore, especially from China, Vale's vast reserves and efficient production position it well for investors interested in commodities. The company is also future-focused with investments in renewable energy projects and a stated goal of achieving carbon neutrality by 2050.
However, prospective investors should consider the risks associated with investing in Vale. The company's stock has demonstrated volatility in recent years due to disruptions in its mining operations, including the tragic dam collapse in Brumadinho, Brazil in 2019. While Vale has taken significant measures to improve safety and dam management, these incidents underline the potential risks tied to mining operations.
ArcelorMittal (NYSE: MT), based in Luxembourg, stands as the world's leading steel and mining company, with operations in 60 countries and an industrial footprint in 18 countries. It supplies high-quality steel in key global markets that include automotive, construction, household appliances, and packaging.
Post-COVID-19, the company has demonstrated a robust recovery and has benefitted from strong global steel demand and price recovery. Recently, ArcelorMittal committed to carbon-neutral steelmaking in Europe by 2050 and launched XCarb™, an initiative that aims to progress towards carbon-neutral steel. This innovative step positions ArcelorMittal favorably to potential investors seeking sustainability-focused holdings.
However, the cyclical nature of the steel industry and its sensitivity to global economic conditions should be factored into any investment decision. While ArcelorMittal's growth plans and commitment to sustainability are positive indicators, the inherent volatility of the steel market necessitates careful consideration.
Rio Tinto (NYSE: RIO), a top-tier mining and metals organization, has a reputation for efficient operations and a dedication to sustainable practices. This UK-Australian multinational conducts business in approximately 35 nations worldwide and possesses considerable resources across a variety of commodities such as aluminum, copper, diamonds, coal, iron ore, and uranium. Supported by favorable market conditions, especially within copper and iron ore sectors, Rio Tinto's formidable portfolio presents an enticing opportunity for prospective investors.
Recently, Rio Tinto has amplified its efforts within the renewable energy industry. It's investing heavily in technologies designed to reduce carbon emissions and is proactively participating in the production of materials crucial to the renewable energy sector, including copper and lithium. With its robust financial performance, characterized by substantial profit margins and an appealing dividend yield, Rio Tinto could be an attractive option for investors seeking a regular income stream.
Despite its strengths, Rio Tinto has faced backlash over certain environmental and indigenous rights issues, the most prominent being the destruction of the Juukan Gorge caves in Western Australia. Such occurrences underscore the need for investors to weigh ESG (Environmental, Social, and Governance) factors in addition to financial aspects when assessing potential investment opportunities.
By. Tom Kool
**IMPORTANT! BY READING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ CAREFULLY**
This publication contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this publication include that the Canadian mining sector will continue to protect its supply of critical minerals without involvement of China; that cesium and other metals will remain as critical minerals will continue as a national security issue for Western countries; that access to rare metals, and in particular cesium, will be essential to gaining technical superiority, including the development of 5G networks; that cesium and other rare earth metals will continue to be critical for use in various technologies, including the 5G cellular and wireless technologies; that cesium will continue to be a critical mineral and considered as matter of national security for Western countries; that Power Metals Corp. (the “Company”) and its investors will be in control of the only cesium mine that China does not own; that the Company’s properties will be able to commercially produce cesium, lithium, tantalum and/or other critical minerals; that the Company will be able to finance and operationally establish mines on its properties to viably and commercially extract the critical minerals; that Australian shareholders and investors in the Company will provide development and other expertise to assist the Company; that Winsome Resources will continue to own a significant stake in the Company; that the Company’s property will one day have one of the only potential mines in the world that is producing cesium; that the Company can finance ongoing operations and development; that the Company can achieve its business plans and objectives as anticipated. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include the development of alternative technologies that do not require the use of minerals and resources currently considered as critical; that other resources are utilized in future in favour of rare earth metals such as cesium; that alternative technologies utilize other resources or that cesium, lithium, and tantalum are not utilized; that other companies discover resources of cesium and other battery metals that are more favorable or more easily developed into commercial production that the Company’s property; that the Company’s properties are unable to produce commercial amounts of cesium, lithium, tantalum or other critical metals; that the Company will be unable to finance or operationally establish mines on its properties for commercial extraction of any critical minerals; that the Company’s Australian investors will not be able to provide development and other expertise to meaningful assist the Company; that Winsome Resources may for various reasons divest its stake in the Company in future; that the Company’s properties may fail to develop mines producing cesium; that the Company may be unable to finance its ongoing operations and development; that the business of the Company may be unsuccessful for various reasons. The forward-looking information contained herein is given as of the date hereof and we assume no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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