Key Themes For 2021 – Inflation, EV and battery growth, and the gold vs Bitcoin debate
Marc Chandler, Managing Partner at Bannockburn Global ForEx joins me to share his thoughts on the key themes for 2021. These themes include inflation (which is picking up), electric vehicle developments and the related metals that benefit from this increase in interest, and finally how younger investors view gold against Bitcoin.
Click here to visit Marc blog to keep up to date on his daily thoughts.
I really enjoyed this daily editorial today, because Marc mentioned a few areas worth consideration on the inflation/reflation trade, rising yields, and the overall rotation into more more energy metals and battery metals for the electrical vehicle and emerging markets electrification narrative.
He also brought up there was only 1 US Uraniun company with an active hardrock mill ( which is Energy Fuels UUUU). Energy Fuels at their mill can also produce Vanadium for the larger Vanadium Redox batteries used in energy storage for grid power (a different niche than the smaller Lithium Ion batteries used in autos, evokes, computers, phones and drones). In addition, Marc mentioned the national focus of many countries to secure their own Rare Earth supplies, and opportunistically, UUUU has also moved towards processing other companies waste rock to extract out the REEs. That gives Energy Fuels the unique and enviable ability to process Uranium, Vanadium, and Rare Earths for a triple whammy, and is why it has been my biggest Uranium position for some time now.
Speaking of 2021 themes and the battery metals, yes, Copper & Nickel should continue to do well, but one area still not garnering much attention from the normal circles of resource investors is the nice gains in the Lithium stocks over the latter part of 2020 into this year. When I go looking for information on that sector, it is shocking to see so many new younger millennial investors that are getting involved with Lithium miners and battery companies like Electrovaya, Eguana Technologies, or HPQ-Silicon Resources because of their initial interest in trading tech stocks and EV high flyer Tesla. There are also gains on the Asian exchanges for other larger battery manufactures like BYD, LG Chem, SK Innovations, and CATL.
This is a narrative that has been developing sideline to many of the tradition resource investors, by new inflows of freshly minted pandemic investors, and it has been a great place to be invested over the last year, and moving into this year.
Here are some line charts of some of the Lithium Battery manufacturers (that stockcharts can actually chart, as many don’t on stockcharts) just since the March sector lows:
Electrovaya, Eguana Technologies, HPQ-Silicon Resources, BYD Company:
https://stockcharts.com/freecharts/perf.php?EGT.V,EFL.TO,HPQ.V,BYDDF&n=200&O=011000
Even a look at this line chart of the March sector lows in almost all asset classes, shows just how far many of the Lithium companies have risen over the balance of 2020 through present day. The main Lithium stocks are up anywhere from 100% to 1000% from that spring pandemic crash, with most up 200%-600% in a relatively “stealth” bull market that few traditional resource investors are discussing on most of the traditional platforms. I have a number of people writing me in private over at ceo.ca every day, and we share our portfolios and sectors of interest, and have found very few resource investors that even have any allocation to the Lithium stocks, if so maybe 1 company from the list below or elsewhere. It is shocking how many have missed this run up completely. (I hold 4 of the companies below – Orocobre, Galaxy, Pilbara, and Lithium Americas, but sold a big chunck of LAC today).
Lithium Americas
Orocobre
Galaxy Resources
Pilbara Minerals
Bacanora Minerals
Cypress Development
Critical Elements
Leading Edge Materials
Standard Lithium
Albemarle
SQM
Neo Lithium
Lastly, as for the Rare Earths, mentioned today by Marc Chandler and up above in my comments, there has been legitimate movement in that space, and a few of the old deposits are coming back to life, along with some newer exploration stories, but there are also the downstream processing stories that are gaining more of following, but haven’t had the big runs yet, so REEs are definitely a niche sector that may be in play for 2021. More on that another time…
Nice charts. You can see how stocks like CYP (1000%) or SSL (500%) go to the moon
CYP made most of the gains during the last days
Probably because of the political change (US play)
Yeah, I almost got in early with Cypress Dev. (CYP) about 1 1/2 years – 2 years ago when Goldfinger and others first started discussing it over at ceo.ca, and passed on it. They’ve had a lot of developments to their story since then but, yes stellar performance.
1 1/2 year was a perfect timing 👍
Now, some of them are looking quite lofty
e.g. SSL close to half a billion and they only have 30% and depend on the decision of Lanxess
Agreed that some of the Lithium stocks are getting a bit lofty in valuation here, like Cypress development. For clarity, I did not take out the position 1 1/2 – 2 years back when first learning about them, so I missed that one.
The Lithium stocks I hold are:
1) Orocobre, the first junior to get into salar brine production after Talison. (I did own Talison back in 2012, which is now referred to as Greenbrushes and was taken private by Tianqi Lithium Corporation and Albemarle in the prior Lithium boom). Since Orocobre is the most established of the Jr Producers, and not very hyped by newsletter writers or promo companies, then it doesn’t surprise me that it just went up about 100-150% most of the year. It was one I didn’t have to fret over though, as it is a well run company, so it was a more conservative bet on the Li sector.
2) Galaxy Resources – Smaller hard rock producer, with big boy JV partners on their large salar brine project (which they scooped up from Lithium One back in the last cycle), and they have a lithium clay project near the Clayton Valley in the US.
3) Pilbara Minerals – nice success story of an explorer, that went to a developer, and then to a producer, and they’ve done well over the last few months in getting rerated.
4) Lithium Americas Corp – One of the premier Lithium developer stories and the most likely to be taken over this cycle. It’s had a hell of a run, so I trimmed back a big chunk of the position on Friday to lock in the gain, and moved funds to the sidelines. If it would pull back 15-20% or more, I’d add that position right back to LAC.
I’ve considered Bacanora off and on for years, but never pulled the trigger, and in hindsight should have, as they’ve really taken off on their ramp up from developer to producer.
As for Standard Lithium, I had one of those telemarketing stock tip guys wearing me out about it for a few months, and while it showed potential I couldn’t tell if it was just going to a be a pump and dump and end in tears for retail investors. Of course it has had a major run from all the promotion, but it seems inflated at this point relative to the other companies in the space.
Critical Elements has had a few commodities in their pipeline, but their Lithium project looks prospective, and I’ve considered positioning a number of times, and still may.
Leading Edge Materials has a 3 prong approach with Graphite, Lithium, and Rare Earths, and actually holds Norra Karr (one of the most coveted heavy REE deposits found in the 2010-2013 Rare Earths boom). Also their Graphite plant was previously in production by the prior holder of that asset years back. They do have a prospective Lithium deposit as well.
Albemarle and SQM are 2 of the 4 Majors (along with Livient and Ganfeng Lithium)
Neo Lithium is another Li company with a large following, and I don’t know much about it, but felt it should be included on the chart with it’s peers for comparative purposes.
As for the Precious Metals, todays swan dive in Gold down all the way to $1833, or especially Silver diving down to $24.59 was a real jolt to most investors, but like usual it presented a number of great buying opportunities in the miners for those that had wisely trimmed back their winnings at higher levels.
Wishing everyone good trading in these highly volatile markets. With the volatility comes the opportunity.
I was quite active today and completely sold my Harte and Sierra Metals position, and trimmed back my Orex and Lithium Americas positions.
As for purchases I just added to and fortified existing positions in Sandstorm, Endeavour Silver, Blackrock Gold, Aurcana, Galiano, Alexco, Coeur, Dolly Varden, and Reyna Silver.
There were stink bids in place for other companies as well, but their share prices didn’t get down to those levels. Towards the end of the day many companies started clawing their ways back out of the whole the dug.
If we see some follow through selling and more weakness in the week to come, then maybe a few more stink bids will get filled.
whole = hole. (although it was a whole lot of fun going shopping for bargains)
Good job Ex.
If we go lower on Monday, then my plan is to do a final pick up of PM shares (4 companies) throughout the week… likely focused on end of day Monday and through Tuesday. I’ll be watching to see which ones on my shortlist of 10 look most appealing. 7 out of 10 I already own, while the other 3 would be new entries for me.
For examples, if we get a good drop down on Monday, I will add to my already healthy Hecla position if it gets down close to another .40. Possibly Alexco as well. I own a lot of CDE and Pure Gold, but I’ve been keeping my eye on them as well.
I’m a little late to the Discovery party but keep watching it too.
If I pull the trigger, I would have gas in the tank for more rounds rounds if needed, but I think it’ll be enough for me. I think we’re skimming along the bottom.
Bonzo, I don’t own any NULGF and haven’t really spent any time on it. I do appreciate you raising its attention, and wish you well.
Thanks Chris. Yes, good strategy of going down the watchlist and looking to add to companies offering another place to layer on another tranche or start a new position.
I’ve been considering de-emphasizing my Coeur in lieu of Hecla, based on some of the ratio charts Matthew shared, but when things got crazy today, I just added to CDE because I already had a position and just fortified it.
I also have some Pure Gold left in the portfolio, but did sell a chunk in September and a larger chunk in December, so I only have about 30% of the initial position left. It occurred to me today, to add more back, as I really like the story, and still see there being the potential wildcard of a larger producer coming in and taking them over once they get their production up and running. Pure Gold also still has a huge opportunity to expand their mine life and resources through exploration, so if they can keep exploring with organic revenues and keep hitting it big, then that would unlock more value.
With Discovery Metals, it ran a bit hot and I’ve trade around it over a dozen times, but ultimately reduced my position size selling a 20% tranche in July, another 20% tranche in mid August, and sold a 3rd 20% tranche in November. I’ve got about 40% left of that position, but would love to see it pull back more and I’d add back 20%. They have a huge resource, but are focused on making the high grade starter pit economic on it’s own to and less capital to raise, and then grow organically to incorporate the rest of the massive Silver resource. It’s still going to take them some time before they advance it far enough to take it into production on their own, or to get acquired, so I plan on trading around a core position as things unfold in the bull market. I had just picked up Silver Bull as another larger lower grade but sizable Zinc/Lead/Silver deposit, but sold it for a quick gain this last Wednesday. I may pick up Southern Silver instead the next time I get in the mood for another large scale low grade optionality play. I had owned it earlier in the year and did well with it, but took the gain and moved into some smaller Silver exploration plays instead.
I’m not sure if we are skimming the bottom or not, but I deployed 1/3 of my dry powder into todays assault on the PM sector, and have 2/3 left to deploy, but want some of those funds earmarked for Uranium, Lithium, Specialty Metals, and Cryptos.
I may blow out some of my other Gold & Silver stocks as they have big breakouts, or hit major milestones, or if they get acquired. Surely a few of the several dozen gold & Silver developers or small producers in my portfolio are going to get scooped up by the big boys this cycle, and that will free up funds to move further down the food chain.
Good trading to you Chris and hopefully you snag a few good deals on Monday and Tuesday (providing we see more selling and not a big recovery bounce).
Cheers!
ROME IS FALLING>………hello……..
With what happened today and what is happening in the real World, I am seriously considering selling and sitting on the sidelines. I just think it’s too risky to be a player in any market at this time. DT
DT – You could shift to investing in an underground bunker. 😉
Check out your new potential pad:
Severe down days like today, are actually a blessing in a bull market. Yeah, it’s not fun to see positions being sold down hard, but if one has trimmed profits during the good times (like the last few weeks, or even earlier this week) then those profits can be reinvested when stocks go on fire sale at a way better cost basis.
Opportunity usually comes mixed with volatility. Last year the best time to buy was in mid-March when everyone was freaking out and going to cower in cash. That was actually the worst time to sell, but the best time to buy. I wouldn’t have had nearly as good of year in 2020 if I hadn’t been buying like crazy in March & April when assets were being sold down to silly valuations.
What we saw today was an extreme move down in the PM sector and other sectors, but nothing as bad as that was. Ultimately we’re still in a solid longer term bull market, and if we see more weakness in the weeks to come, it is really a gift to reload positions that were trimmed or initiate new positions in companies that may have run away from investors.
Wishing everyone here at the KER good trading for the week ahead.
Ex, thanks for the comments—I’ve been waiting for some time to add to my sandstorm position and will do soon. I just bought a stock for the first time that I’ve been waiting on—fundamentally it looks good and I like the technicals. The stock is Fosterville south—what do you think?
Hi Doc. Yes, it was hard to pass up the levels that Sandstorm had headed down to recently so I started a position with profits from other trades, but then when further selling hit today, I added more SAND. When it dipped down in the March sector low, I had considered buying it then, and didn’t, and then as it ascended, I was kicking myself for having hesitated buying one of the quality names when at a bargain bin sale price. I vowed not to hesitate if I saw Sandstorm sell down the next time… and alas, here we are… 🙂
As for Fosterville South, I’ve read some chatter about it over at ceo.ca, but have not looked at it and don’t know much about it. If you feel it looks interesting, on a fundamental and technical basis, then I’ll definitely take a look.
Hoping you do well on the new positions, and I’ve got a laundry list of companies to review as potential new positions, and may spend some time over the weekend doing some homework.
Thanks for all that you do sharing info and your analysis with us here at the KE Report. It is appreciated!
Thanks Ex, I should buy shares in some concrete bunker companies, I think you might be onto something! LOL! DT
Agreed DT. We can probably go pick off a bunch of underground bunkers people bought for 2012, and then resell them to folks for when they really need them 2021.
The gloom and doomers must have just transposed those last two numbers 2012 = 2021
Haha!
Yeup, Rome is falling.
It’s going to get interesting next week.
Sorry to see you have not been around…..
You should have come over to the political page.
I buy gold, silver and cryptos
I believe it was my last contribution to KER where I mentioned it looked technically like the first quarter of this year could be problematic for the precious metals but another great time to add or start new positions. It certainly looks like it now. There are going to be great buys. Ex mentioned SAND—I believe there will be a little more down pressure on this good company but then ( it is now) a great opportunity to purchase. Like EX I was disappointed that I had not purchased more before it took off but it looks like it’s going to give us some redemption in this sell off.
Great comments as per usual Doc.
Yes investors need to be on the lookout for some of the quality companies they wished they had positioned in before they ran higher; which are now going to be showing up for sale at discounted prices.
People often discuss buying the dips, but few actually do it when the rubber meets the road. These kinds of corrective moves are the ideal times to add another tranche to a core position or start a new position, especially if we see more follow through pressure over the next few weeks.
Ira Epstein’s Metals #Video (1/8/2021)
#TechnicalAnalysis, #Gold, #Silver, #Copper, #Platinum
Ex, would be interested on your thoughts about Sandstorm vs Osisko Royalties
Osisko just spun out their development activities and is now a pure royalty play
Yes, Osisko really took off in valuation once they spun out their development projects and went pure royalty/streamer, as the hybrid model was not valuing either set of assets correctly. Most investors of royalty companies are doing so specifically to diversify out of the risks associated with developing a mining deposit.
This has been the wart on Sandstorm now, because folks feel that they have too much exposure to Hod Maden, that they got when acquiring Mariana Resources back in 2017, which makes them a hybrid company.
While the Hod Maden project is a world class deposit, many investors are nervous about it being in Turkey. That is a justified concern, but many miners are moving forward with projects in Turkey, and it hasn’t interfered much with most miners, because it needs the mining tax revenues.
Nolan Watson has reiterated many times that they feel the transaction was deep value and transformative, and we’ll see if they spin it out or option it to another larger miner now that the metals markets are much better than in 2017.
Regardless, with Sandstorm, I’m most interested in the 200+ royalties and streams and how that basket of assets will continue to grow in the revenues and free cash flows that it throws off. Hod Maden is the wildcard that could keep Sandstorm stunted compared to peers like Osisko, or bring in considerable value when the right suitor comes along.
This knock against Sandstorm reminds me of when EMX Royalty had exposure to that huge Copper company in Russia, and they traded at a discount for some time due to that jurisdiction risk and the large exposure they had to it. However, then when that project got bought out and they made all that money they looked like geniuses and the stock rocketed higher. It is quite possible that Sandstorm will take a similar journey where investor concerns turn to investor praise, and even if it doesn’t work as expected, I still see their overall asset mix as quite impressive.
Doc,
What do you see for SPX short term and for the rest of 2021, do you see it reaching 4000 before a correction ?
Thanks
Further flow through financing at McEwen Mining
What is different at this time, the flow-throughs are financed at current market price
It will be great when McEwen gets out of the financial stress it’s been under the last few years, and starts making enough organically through it’s production that it can pay for growth that way. Rob was so anti-royalties for raising capital, but he’s done dilutive financing after dilutive financing, along with liquidating his winning bet on Great Bear at lower levels to keep the lights on. This flow through financing has another 11.6 million shares, and just further thwarts the upward advance in the share price. That isn’t unique to McEwen though, because so many mining companies are just money burners and mining shareholders by taking money for a larger and larger pile of paper. My hope was that they’d start having some bang up operation results at higher metals prices and start making good money, and that still may be in the cards, but there have sure been an endless list of hurtles at almost every mine they run in Mexico, Argentina, the US, and Canada.
Here’s to MUX having a better 2021 and becoming the kind of profitable world-class producer they initially set out to be.
I always had MUX as a candidate to buy on my list
But after this last financing I wan‘t buy anymore
I’ve been in MUX 3 times previous to my current 4th run with them. The first time I had nice gains, the second run a loss, and the 3rd time a slight loss but mostly a wash after scalping some gains in a few trades around the core position. I’ve been joking that this time it will be “4th time a charm,” I and still believe they will blast out of this current valuation level and get a rerating. However, this financing came as a bit of a surprise as one would think with 4 gold/silver mines and these high metals prices that they’d not be in such a dire need for money. For now I’m holding my MUX position for the eventual re-rate, but there have been many better gold producer investments over the last few years that I’ve done great with or that others have done great with, and so the opportunity cost of holding it has been a bummer, but it will have it’s day in the sun later in 2021.
I have owned MUX since the beginning, even before it changed its name to MUX, and am underwater, as is Rob, but I still have hopes for it. Rob will not fail if we are patient.
I bought more NULGF at 9.9 cents share today. I sure hope they will find an elephant in the Red Hills of Nevada. I wonder if Matthew, Doc, Cory, AL, and Excelsior own it. I know Eric does. It was always Quinton’s favorite spot to drill in Nevada, and he is no fool.