Resource World Magazine

26 www.resourceworld.com A P R I L / M A Y 2 0 1 8 Speculations by Leonard Melman W hile it is difficult to argue against the suggestion that the past five years or so have been particularly challenging for min- ing stocks as the industry encountered numerous price disappointments, confus- ing political background information and seemingly continuous hostility from regu- lators and political opponents, we are now seeing a growing number of signs that bet- ter times are on their way for precious and several specialty metals. In terms of broad economic fundamental information, I noticed a particularly relevant article in the Washington Examiner entitled Student activists should be protesting the crushing national debt. The article points to important developments which could accel- erate the worsening of several problems. First, the article points to the American national debt – now in excess of $21 trillion – as being a genuine threat to the future of young people. Next, we are told that, "… As Baby Boomers retire and health care costs grow at an alarming rate, these problems will continue to get worse." Then, we are advised that interest rates are likely to rise, making it less likely for the governments to ever reduce their national debt obligations. Ergo, we believe the fundamental case for monetary inflation is growing ever-stronger and, historically, that has been the primary underpinning of previous precious met- als bull markets. And now, we have a new factor being added to the growing pool of excitement regarding mining stocks and that is projected soaring demand for several specialty metals including cobalt, lithium, manganese and graphite. These projected demands are based on opportunities being created by various scientific and environ- mental developments. Cobalt has been the centre of recent attention following an Apple, Inc. announcement that it was attempting to ensure sufficient future supply of cobalt which has become an essential ingredient in the rapidly-expanding manufacture of i-phone batteries. In addition, BMW, Tesla and VW – among others – are searching for reliable future cobalt supplies as the demand for cobalt in electric-vehicle battery sys- tems is expected to grow from roughly 12,000 tonnes in 2016 to an astonish- ing 95,000 tonnes by 2026. Based on this type of information, the price of cobalt has exploded upward, rising from near $20,000 per tonne in early 2016 to $75,500 per tonne at year-end 2017. The Financial Post just noted that, "…The high price of cobalt has encouraged companies to mine for the metal outside the Democratic Republic of Congo (DRC)." The anticipated huge increases in annual worldwide electric car production – with some estimates showing growth from about 1.5 million vehicles this year to near 20 mil- lion within 10 years – also augurs well for escalating lithium demand. Lithium is a pri- mary ingredient in virtually all electric-car motors and the massive predicted growth in lithium demand is fueling increasing inter- national exploration for and development of prospective lithium projects. Another specialty metal also associated with electric car batteries is manganese. Virtually all current manganese produc- tion is devoted to steel production and, as electric-car usage grows many experts now predict a growing shortage in manganese. Accordingly, that metal's price has begun to also rise sharply, leading to increasing North American manganese exploration efforts. Graphite appears to have an almost unlimited future as new applications for graphite are announced with increasing frequency. A partial list presently includes electric car motors, batteries, steel making, brake linings and many other applications. One of graphite's components is graphene and its prospects appear to be particularly bright due to the ability to create incred- ibly thin products – as fine as just one atom in thickness – for adhesives and packaging requiring transparency. Numerous scientific studies are now underway to discover new graphene related products. Like cobalt, lith- ium and manganese, exploration for North American graphite ore bodies is also acceler- ating rapidly. A recent report by S&P Global notes that "…global spending on the search for nonferrous metals rose to an estimated US $8.4 billion in 2017, compared to US $7.3 billion in 2016. As excitement is growing in mining – par- ticularly evidenced by growing attendance at mining gatherings – another potentially dynamic factor may well come into play. At present, the estimated total value of world stock, bond and real estate investments amounts to some $90 to $120 trillion while the total estimated value of all mining share investments is below $2 trillion. It would seem reasonable that if the growing fundamental and specialty metals arguments for mining investments lead to visible successes in mining share prices, and if even a small proportion of the outsized world of conventional investments turns to mining share investments, the resultant upward price pressure could be historic. We saw a similar type of price rally in 1977-80 and I believe it is possible the same type of excitement could be building once again. n This material is taken from sources believed to be reliable and is provided for information only. Any investment decision should be made only after prior consultation with investment professionals. Leonard Melman is a financial and political writer who focuses on issues relat- ing to the resource sector. Mr. Melman lives in Nanoose Bay, British Columbia, Canada and can be reached at lmelman@shaw.ca The bright future of specialty metals

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