FN Media Group Presents Oilprice.com Market Commentary
London – March 27, 2020 – The coronavirus may be wreaking havoc on the global economy, but when the dust settles, moving forward will be all about access to critical metals, from the 5G war to every high-tech energy transition in the pipeline. Critical metals are a big part of the difference between global dominance and … second place, at best. Mentioned in today’s commentary includes: Teck Resources Limited (NYSE:TECK), Turquoise Hill Resources Ltd. (NYSE:TRQ), Pretium Resources Inc. (NYSE:PVG), Magna International Inc. (NYSE:MGA), Agnico Eagle Mines Limited (NYSE:AEM).
As things stand, China is winning because it has supreme access, while the United States has smaller mineral pockets. So, when a Canadian junior miner emerges as the owner of three properties in Ontario that could provide the only new supply of one of these critical metals, North America sees hope.
The 5G revolution, American military defense, healthcare and even time itself are dependent on this one critical metal that China monopolizes and that the U.S. is desperate to get more of. There are only three cesium mines in the world, with China controlling the supplies entirely. That means that it’s all about new supply. Of five cesium occurrences in Canada’s Ontario province, Power Metals owns 100% of three of them (West Joe, Tot Lake and Marko).
America’s Belated Desperation
China produces roughly 70% of the world’s rare earth minerals. It also supplied about 80% of America’s rare earth imports in the three years ended 2018, according to the U.S. Geological Survey (USGS). While China was pushing ahead at full speed, America was caught sleeping at the wheel. Indeed, at the height of the trade war, China indicated it might restrict the export of some rare earth minerals. Now, it’s past time to wake up.
In May 2018, the United States Department of the Interior included lithium, cesium, and tantalum on its list of Critical Minerals. Now, Trump is bent on fostering domestic production and forming partnerships with other countries for new supply.
Drones are being developed to scour the land for potential critical mineral occurrences, and in late April, the U.S. State Department aided the launch of an online tool designed to help countries with critical mineral resource potential to develop those assets for U.S. investors, Bloomberg reported.
It’s an unprecedented effort to help remove the risk of investing in certain venues and to “stake American’s claim to many of the world’s rare-earth minerals”. And the point is to find resources in countries where investors may find the setup. The problem is that the bulk of new critical metals supply will be in venues that are risky for investors.
“Either the world will not get the minerals it needs in order to fuel energy transition technologies,” or “that investment would only come from those who are less concerned about governance issues, transparency, corruption, environmental standards and best practices,” Francis Fannon, the U.S. assistant secretary of state for energy resources, told Bloomberg in an interview.
But for cesium, there is hope that it’s not a risky venue that needs a special “toolkit”: It’s Canada–home of some of the world’s best-in-class junior miners who forge new exploration paths before they are scooped up by larger companies.
Cesium: Beyond Critical
Cesium is described by the German Institute for Strategic Metals (ISE) as “the most electropositive of all stable elements in the periodic table”, and the heaviest of the stable metals. Cesium is “extremely pyrophoric, ignites spontaneously when in contact with air, and explodes violently in water or ice at any temperature above -116 ° C”. But the industry would describe it very differently.
There won’t be a 5G revolution without this metal. It’s also critical to the healthcare industry which uses cesium compounds in medical imaging, cancer therapy, positron emission tomography (PET) … just to name a few. For everything from catalyst promoters, glass amplifiers, photoelectric cell components, crystals in scintillation counters and getters in vacuum tubes, cesium is critical.
In terms of world dominance, the “cesium standard” is the key. This is the standard by which the accurate commercially available atomic clocks measure time, and it’s vital for the data transmission infrastructure of mobile networks, GPS and the internet.
That means it has serious defense applications as well, including in infrared detectors, optics, night vision goggles and much, much more. A cesium laser has even been invented for use in missile defense and other technological applications. Cesium is so obscure that it’s nearly impossible to track its real market price. It’s strategic in and of itself, but its rarity makes it even more critical.
In the entire world, there are only three pegmatite mines that can produce cesium: one is the Tanco mine in Manitoba, the second is the Bitika mine in Zimbabwe, and the third is the Sinclair mine in Australia. China controls them all, beyond its own borders. Tanco and Bitiki are no longer producing, but Sinomine Resources Group holds all their cesium ore stockpiles.
There are 16 metals in total that are absolutely critical to high-tech industries, military applications and telecommunications–and China controls the supply of every single one because it controls 96% of production. That includes cesium, for which China has a monopoly on stockpiles, mines aren’t really producing anymore, and the United States has none, leaving North America’s only hope in Canada.
The Promise of Ontario
Power Metals discovered the pegmatites at West Joe Dyke in August 2018, intersecting high-grade cesium mineralization in six drill holes when it was targeting lithium instead. But Dr. Julie Selway, a key geologist for the Ontario Geological Survey during the tantalum boom of the early 2000s, and now VP of exploration for Power Metals, says the three properties the company is drilling are hoped to have similar finds as the strategically important Sinclair mine in Australia.
“They are shipping their resource, which they say is higher than 10% cesium-oxide, and ours have some that are between 12% and 14% of cesium-oxide,” Selway–one of the world’s most renowned experts on pegmatites–told Oilprice.com.
Power Metals has intersected cesium (Cs) mineralization in 6 drill holes on West Joe Dyke, with “exceptionally high-grade” Li and Ta intervals. They also found Cs mineralization in drill core in the first new dyke below Main Dyke, as well as in the drill core in Northeast Dyke.
On February 20th, Power Metals announced its exploration plans and will begin stripping and channel sampling on West Joe Dyke in Q2 of this year already. That’s when they’ll expose, sample and assay the cesium mineralization on surface outcrops and look to locate more cesium-bearing pegmatite dykes nearby.
This is one big chance to one-up Beijing, which, according to the Wall Street Journal, has tried to manipulate the market so critical metals such as Cesium are cheaper in China than outside the country. What this did was prompt some major manufacturers and tech industries to set up shop in China, where they could get supplies at a lower cost.
If you weren’t familiar with cesium before, you will be soon because it will make a difference in the war for global technological dominance. And the front line of defense could end up being Ontario, where a junior explorer may be sitting on one of the only commercial-sized deposits that China doesn’t control.
Larger miners are diving into the strategic metals game, as well, with Teck Resources (TECK) arguably taking the lead. Teck could be one of the best-diversified miners out there, with a broad portfolio of Copper, Zinc, Energy, Gold, Silver and Molybdenum assets. Its free cash flow and a lower volatility outlook for base metals in combination with a potential trade war breakthrough could send the stock higher in H2 of this year.
Teck’s share price stabilized last year and many investment banks now see the stock as undervalued. Low prices for Canadian crude and disappointing base metals prices weighed on Q4 earnings.
Despite its struggles, however, Teck Resources recently received a favorable investment rating from Fitch and Moody’s, and will likely benefit from its upgraded score. “Having investment grade ratings is very important to us and confirms the strong financial position of the company,” said Don Lindsay, President and CEO. “We are very pleased to receive this second credit rating upgrade.”
Turquoise Hill Resources (TRQ) is another Canadian mineral exploration and development company headquartered in Vancouver, British Columbia. Its focus is on the Pacific Rim where it is in the process of developing several large mines. The company mines a diversified set of metals/minerals including Coal, Gold, Copper, Molybdenum, Silver, Rhenium, Uranium, Lead and Zinc. One of the fortes of Turquoise hill is its good relationship with mining giant Rio Tinto.
When talking about Canadian miners, however, Pretium Resources (PVG) can’t be ignored. This impressive Canadian company is engaged in the acquisition, exploration and development of precious metal resource properties in the Americas. Pretium has an impressive portfolio and if you can catch the stock while the price is right, there could be huge opportunity for upside. Additionally, construction and engineering activities at its top location continue to advance, and commercial production is targeted for this year.
Agnico Eagle Mines Ltd (AEM) Agnico Eagle Mines is an especially noteworthy company for investors. Why? Between 1991-2010, the company paid out dividends every year. With operations in Quebec, Mexico, and Finland, the company also is taking place in exploration activities in Europe, Latin America, and the United States.
While Agnico primarily focuses on gold, it made this list because it’s a prime example of sustainability and environmental consciousness, and that means everything in a world rapidly shifting away from traditional mining.
The EV edge can’t be ignored, either. Magna International (MGA) is a global automotive supplier is gutsy and innovative–and definitely tuned to the obvious future–clean transportation. A great catalyst is its development of a combo electric/hydrogen vehicle–a fuel cell range-extended EV (FCREEV). It’s not going to produce them (for now, at least) but plans to use the model to show off its engineering and design prowess and produce elements of the electric drivetrain and contract manufacturing. It’s insightful, forward-thinking and smart value/low cost for shareholders.
By. Charles Kennedy
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This news release 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 release include that prices for cesium will retain value in future as currently expected; that PWM can fulfill all its obligations to maintain its properties; that PWM’s property can successfully mine commercial quantities of cesium; that the three properties the company is drilling are hoped to have similar finds as the strategically important Sinclair mine in Australia; that occurrences and indications of a commercially sized deposit become reality; that high grades found in samples are indicative of a high grade deposit; and that PWM will be able to carry out its business plans. 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 that aspects or all of the properties’ development may not be successful, mining of the cesium may not be cost effective, the price of cesium may not stay high and it may never be profitable to mine cesium; PWM may not raise sufficient funds to carry out its plans, changing costs for mining and processing; increased capital costs; the timing and content of upcoming work programs; geological interpretations and technological results based on current data that may change with more detailed information or testing; potential process methods and mineral recoveries assumptions based on limited test work with further test work may not be viable; competitors may offer cheaper cesium; more production of Cesium could reduce its price; alternatives could be found for cesium; the availability of labour, equipment and markets for the products produced; and despite the current expected viability of its projects, that the minerals cannot be economically mined on its properties, or that the required permits to build and operate the envisaged mines cannot be obtained. The forward-looking information contained herein is given as of the date hereof and the Company assumes no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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