While commodities are trending downward due to monetary tightening, a select few remain highly prospective over the long term.
Oil
Oil, for example, is down almost 27 per cent YoY, but is still holding onto near 200-per-cent gains over the past three years due to COVID supply chain shocks and output strains due to the Russia-Ukraine war.
The fossil fuel, increasingly maligned as ESG-centric management becomes the norm, is also decades away from there being enough green infrastructure to replace it. This is to say that company’s sitting on hefty reserves with the know-how to efficiently extract them will be prime assets for generations to come.
Lithium
The price of lithium carbonate, for its part, has plummeted over 50 per cent YTD, reflecting concerns about a global recession and excessive interest in electric vehicles and battery technology potentially having negative effects on supply/demand dynamics. That said, the metal is still approximately 4x higher compared to 2021, with shortages expected as soon as 2025 given mines’ average of 16.5 years to enter production, as well as geopolitical tensions with China, which accounts for over 60 per cent of global production.
Additionally, the cost to produce one ton of lithium carbonate – US$2,500 on the low end up to US$6,000 on the high end, according to Rover Metals – makes deposit extraction still quite attractive, whether from brine, claystone or hard rock, with the price per ton hovering around US$26,000. This is especially true compared to gold production, with the sustaining cost per ounce at around US$1,000 vs. an ounce running you in the vicinity of US$2,000.
Now that the electrification revolution is a foregone conclusion, given the dire alternatives, and despite the ample hype, purveyors of the silvery-white metal are in a position of power when it comes to humanity’s technological dependency and climate change’s preventable harm.
Nickel
Another prized commodity commanding investors’ attention, despite its almost 20-per-cent drop YoY, is nickel, a key component enabling increased energy density in lithium-ion batteries.
An EV requires an average of 40 kg of nickel, compared to negligible amounts for a standard internal combustion vehicle, with Visual Capitalist estimating that demand will grow by up to 80 per cent by 2030.
The world is unlikely to meet its need for nickel for a number of reasons, including lack of investment in the class-1 nickel (99.8 per cent purity or higher) required for battery technology, mostly due to mines’ long development runways and electrification’s relatively recent momentum, as well as the 10-15x increase in carbon footprint required to refine more prevalent low-grade nickel.
This state of affairs affords nickel explorers and producers with an undeniable tailwind, as evidenced by nickel’s almost 100-per-cent gain since 2020.
Potential investors looking to top up or institute a commodity sleeve in their portfolios are welcomed to consider three related companies that made the rounds across TMH readers this week:
Surge Battery Metals (TSXV:NILI) updates investors
The company recently added some valuable talent to its board and completed several private placements leading up to its upcoming drill program.
CEO Greg Reimer spoke with Simon Druker about the news.
Drilling follows notable lithium expansion at the Nevada North Lithium Project.
Though down by over 30 per cent YTD, Surge Battery Metals (NILI) has gained approximately 280 per cent over the past year.
Giga Metals (TSXV:GIGA) issues corporate updates and details investment prospects
The company is progressing with an ongoing pre-feasibility study at its Turnagain Nickel Project in British Columbia alongside Mitsubishi.
CEO Mark Jarvis spoke with Simon Druker about the news amid ongoing conversations with numerous potential strategic investors in the project.
Jarvis joined The Market Herald Canada earlier in the year to provide a thorough overview of the company’s future plans.
Giga Metals (GIGA) is down by 10 per cent over the past year, and relatively flat over the past five years, suggesting a value-conscious entry point amid Turnagain’s ongoing development.
Saturn Oil & Gas (TSXV:SOIL) reports successful Q1 2023 drilling results
Saturn released results for 12 wells drilled in the first quarter of 2023.
Kevin Smith, VP of Corporate Development, spoke with Simon Druker about the encouraging findings, including one well that stood out from the rest.
The news follows standout Q4 and 2022 financial results as the company develops its multimillion BOE reserves in Alberta and Saskatchewan.
Saturn Oil & Gas (SOIL) is down by roughly 15 per cent YoY and over the past five years, indicating an out-of-favour trajectory in contrast to its considerable reserves.
This is sponsored content issued on behalf of Surge Battery Metals, Giga Metals and Saturn Oil & Gas, please see full disclaimer here.
