The Only Mining Stocks That Matter
Check out this recent headline from CNN Business:
"The Taliban Are Sitting on $1 Trillion Worth of Minerals the World Desperately Needs."
My response:
And???
The Taliban could be sitting on $100 trillion worth of vital minerals and it wouldn't matter.
Journalist Julia Horowitz writes:
Afghanistan is one of the poorest nations in the world. But in 2010, U.S. military officials and geologists revealed that the country, which lies at the crossroads of Central and South Asia, was sitting on mineral deposits worth nearly $1 trillion.
Supplies of minerals such as iron, copper, and gold are scattered across provinces. There are also rare earth minerals and, perhaps most importantly, what could be one of the world's biggest deposits of lithium - an essential but scarce component in rechargeable batteries and other technologies vital to tackling the climate crisis.
After this article came out, I got quite a few emails from readers asking me if there was an investment opportunity here.
Not even a little bit!
Afghanistan doesn't have the infrastructure to even start to develop those deposits, nor does it have a readily available trained labor force or the cash to even get proper surveys.
And of course, the country has just been taken over by violent religious zealots who would rather cultivate, process, and sell opium to the highest bidder than actually help the country develop a reliable and legitimate industry.
Moreover, even if they could develop those deposits, it would have to rely primarily on China as a customer because most countries have no interest in doing business with this government.
Understand, the global community has no ill will toward the good people of Afghanistan. It's the government they loathe. And we know that in North America, Australia, and the EU, there's been a move away from sourcing minerals from countries that violate human rights and employ slave labor. Don't think for a second that if Afghanistan could develop those resources it would do it in a socially responsible way.
This is why I've been so bullish on mining operations in North America, Australia, and Europe.
One I'm particularly fond of is Jervois Mining (OTCBB: JRVMF).
In terms of finding the poster child for a responsible mining company, Jervois has it all.
Not only does the company currently have a fully permitted cobalt mine in the U.S. (Idaho, to be exact), but it's construction-ready with more than $100 million already invested, and production is expected to begin next year. In addition, it's the largest NI 43-101-compliant cobalt resource in the U.S., where there is currently no cobalt mining, and it meets all the necessary environmental "check marks" that make it attractive to regulators and lawmakers.
Check it out:
Power to the site comes from the Idaho grid, which is about 65% renewable, and Idaho Power has offered 100% renewable power starting in 2023.An on-site water treatment plant and mine pump back system ensure no contaminated water leaves the mine.No waste rock leaves the site, and it's stored underground.A site wetland exists that allows for the upkeep of trees and natural vegetation.It has partnered with the Idaho Conservation League, which provides conservation and fisheries as well as funding for the protection and restoration of fish and wildlife habitats, including water quality and biodiversity within the Upper Salmon River basin.It has integrated ESG into all strategic planning.The Best Free Investment You'll Ever Make Our analysts have traveled the world over, dedicated to finding the best and most profitable investments in the global energy markets. All you have to do to join our Energy and Capital investment community is sign up for the daily newsletter below.
The returns on the Idaho plant look very nice too:
Net present value is at an 8% discount rate of $113.4 million on pretax cash flows and $95.7 million on post-tax cash flows.Nominal internal rates of return come in at 45.2% pretax and 40.6% post-tax.Average annual contained production comes in at 1,915 metric tons of cobalt, 2,900 metric tons of copper, and 6,700 ounces of gold.At a cobalt price of $25.00/pound, average projected EBITDA comes in at $54.8 million. I expect to see cobalt prices reach in excess of $40/pound by 2027.The total project capital cost is $78.4 million with a post-tax payback of all capital in 2.8 years from technical completion.Commissioning should begin in Q3 2022.
While I'm most bullish on Jervois' Idaho cobalt operation, the company also has another interesting asset in the S??o Miguel Paulista nickel and cobalt refinery.
This refinery was actually commissioned in 1981 but was placed on care and maintenance in 2016 after the closure of the Niquel??ndia feed supply (Niquel??ndia is a municipality in the northern Goi??s state of Brazil).
Jervois is expected to restart the refinery in Q2 2022.
While there are plenty of mining operations across the globe in which you can invest, there are three realities every investor must face:
The demand for many of these minerals will continue to climb for the foreseeable future.The most valuable mining plays in the coming decades will be in regions that don't violate human rights.Afghanistan has ZERO shot at developing its massive mineral deposits.Bottom line: If you want to make money in rare earth materials mining, don't waste your time thinking that one day there will be a huge opportunity in Afghanistan.
There won't be.
I don't say this to be crass or uncaring, by the way. It's just an observation of truth.
To a new way of life and a new generation of wealth...
Jeff Siegel
@JeffSiegel on Twitter
Jeff is the founder and managing editor of Green Chip Stocks, a private investment community that capitalizes on opportunities in alternative energy, organic food markets, legal cannabis, and socially responsible investing. He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor's page.