How To Play The Biggest Commodity Supply Squeeze In History

Metals prices aren’t just breaking records … they’re disrupting entire exchanges.

On Wednesday, three-month contract prices for nickel more than doubled in a matter of hours to over $100,000 per ton, causing the London Metal Exchange (LME) to suspend trading over what it called an “unprecedented” event.

Base metals across the board have continued to rise. Copper prices hit an all-time high last week, and Zinc has consistently broken records this month. Aluminum prices on the LME have increased by another 5% on Wednesday alone, on fears of a Russian supply disruption.

And gold has hit record highs of its own on the invasion of Ukraine’, not to mention high inflation. Some analysts even expect gold prices to triple over the next five years.

Russia’s war on Ukraine is roiling the metals markets beyond recognition …

That’s because Russia is a powerhouse supplier of so many of them, and now the rest of the world fears major supply chain disruptions.

That could be the perfect setup for North American explorers …

And one junior miner is looking to capitalize on the supply squeeze and rising prices for a number of those metals that have been disrupting exchanges right now.

Starr Peak Mining Ltd. (TSX:STE.V; OTCQX:STRPF), which has made a number of extremely well-timed acquisitions over the past few years, set out to find gold but ended up discovering an entire basket of some of these same base metals that are shocking the commodities exchanges into suspensions.

Overnight, Starr Peak has gone from being an exciting gold and base metal exploration play to being something even bigger: A potentially critical element in the future of North America’s supply chain security.

A Maiden Drill That Plays To Surging Metals Markets?

After scooping up prime gold acreage next to a discovery by Amex Exploration that at one point rewarded early investors with up to 7,000% returns, Starr Peak was hoping only to replicate Amex’s success, which may be exactly why an Amex executive jumped on with Starr Peak as an advisor. They were hoping for it, too.

But then Starr Peak surprised many of us with much more than a gold discovery.

On its maiden drill program at its NewMétal property in Quebec’s Abitibi Greenstone Belt, Starr Peak reported back with indications of a VMS (volcanogenic massive sulphide) discovery containing multiple base metals, including zinc, copper, silver, and gold.

A VMS deposit can help turn a junior gold miner into a company worth multiple times its market valuation because they’re rare finds that are found in clusters of deposits, and they boast longer-term production potential.

Now, with base metals prices soaring on a war-time footing and supply chain security becoming an issue of desperation, a VMS discovery would not just be timely–it would be critical.

In the second round of results on January 11th, Starr Peak reported its best VMS intercepts yet, of 8.98% zinc equivalent over 9.85 meters and 1.28% copper over 7.20 meters.

  • Upper Zone (above 400 meters, vertically): STE-21-73: 5.90 m of 6.04% Zinc Equivalent

  • Deep Zone (below 400 meters, vertically): STE-21-82-W1: 9.85 m of 8.98% Zinc Equivalent, including 0.82% of copper

  • Deep Zone (below 400 meters, vertically): STE-21-81: 7.20 m of 5.14% Zinc Equivalent, including 1.28% of copper

Drilling

Drilling

Drilling is ongoing, and Starr Peak secured a third rig in February for NewMétal, focusing on the priority VTEM anomalies on a projected extension of the Perron Eastern Gold Zone trend.

Hit

Hit

An Almost 100% Hit Rate So Far

Starr Peak (TSX:STE.V; OTCQX:STRPF) had almost a 100% hit rate on its reported drill hole targets, and each drill has led to further expansion of the drill program that started in May 2021.

We think this year could be even bigger, targeting the 4-kilometer prolific Normetmar-Normetal lithological contact on Starr Peak’s property and with NewMétal also set to be drill-tested.

And all of this is in one of Canada’s most prolific gold and polymetallic venues–the Abitibi Greenstone Belt.

They’re also well-funded to keep drilling, with seven private placement deals raising approximately $15 million since 2020.

With supply chain disruptions now likely assured, even for minerals that Russia isn’t a major supplier, it’s the perfect time to be announcing solid results in a play that indicates a basketful of ultra-high-demand metals.

If Starr Peak can prove up a commercial VMS deposit, we think it could become the junior mining discovery of the decade, right at a time when the market is in “panic mode in terms of supply”, as T-Commodity’s Gianclaudio Torlizzi tells Mining.com.

As giant automakers look to establish battery supply chains amid a brutal Russian war in Ukraine that has major sanctions backlash, Starr Peak could be one of our best picks for playing the base metals supply squeeze.

Other companies looking to capitalize on the commodity boom:

Newmont (NYSE:NEM, TSX:NGT) is a mining company with a global footprint. It has operations in the United States, Australia, Peru and Ghana. They are one of the world’s largest gold producers and they have been operating for over 100 years. Newmont has its headquarters in Greenwood Village, Colorado (a suburb of Denver) where it was founded in 1921 by William Boyce Thompson.

Following its acquisition of Goldcorp, Newmont became the single biggest gold company in the world, but that doesn’t mean it doesn’t still have some room to run. As far as management goes Newmont doesn’t have any weak spots. Its board includes veteran mining executives like Bob McAdam of Barrick Gold Corp., Tom Albanese of Rio Tinto plc (NYSE:RIO), Joe Jimenez of Dow Chemical Company (DOW) and John Wiebe of Kinross Gold Corporation (KGC).

Like other miners, Newmont Corporation has had a great year. Since January, the company has seen its share price rise by 21%, and there are a growing number of catalysts that could push it even higher in the short-to-medium term.

Barrick Gold (NYSE:GOLD, TSX:ABX) is a Canada-based mining, exploration and production company. It has operations in North America and South America with mines in North America (Nevada), Chile and Argentina. Barrick also operates an open-pit mine at Pascua Lama on the border of Chile and Argentina. The Company’s growth strategy includes expanding its Carlin Trend gold deposit in Nevada through selective acquisitions of key properties to provide meaningful leverage to rising gold prices as well as increased exploration for new deposits.

Year to date, Barrick Gold has already seen its share price increase by 27%, and it’s showing no signs of slowing. As geopolitical fissures continue to grow, and the Federal Reserve rushes to curb runaway inflation, solid gold miners like Barrick have drawn a lot of attention for investors, especially considering the healthy 0.96% dividend per share that comes with the purchase.



Yamana Gold (NYSE:AUY, TSX:YRI) is another one of the world’s top gold and precious metals miners. The company has been producing gold for over 50 years and operates two mines: the Canadian Malartic mine in Canada and the Minera Florida mine in Chile. It also owns three other properties: Agua Rica, Tapada do Norte, and Caiena. One of Yamana’s most notable mines is the Chapada mine in Brazil which has been operational since 2011.

In 2021, Yamana signed a deal with industry giants Glencore and Goldcorp to develop and operate another Argentinian project, the Agua Rica. Initial analysis suggests the potential for a mine life in excess of 25 years at average annual production of approximately 236,000 tonnes (520 million pounds) of copper-equivalent metal, including the contributions of gold, molybdenum, and silver, for the first 10 years of operation.

In February alone, shares of Yamana Gold jumped by 20% on its solid financials and growing geopolitical and economic instability. And now, as investors pile into safe haven resources, miners with strong financials and ambitious plans to expand, like Yamana Gold, have some major upside potential in the coming months.

Kirkland Lake Gold (NYSE:KL, TSX:KL) is yet another Canadian gold miner. Kirkland has been in operation for over half a century. They are one of the world’s largest producers of gold, with their mines located throughout Canada. The company focuses on using sustainable practices to ensure they are leaving behind an environment that can be enjoyed by generations to come.

While it doesn’t hold the same clout as Barrick or Newmont, Kirkland is no stranger to striking headline-grabbing deals in the industry. In fact, just recently, Kirkland and Newmont signed a $75 million exploration deal that could wind up being a game-changer for the industry. The two companies have agreed to split the cost 50/50 over five years with each company investing $15 million every year into joint projects between both companies for exploration purposes only.

Kirkland has bucked the trend in gold miner returns this year, with its share price falling by 26% since January. That doesn’t mean it is still not a force to be reckoned with, however. Supply chain issues have proven to be a major thorn in Kirkland’s side, but that won’t last forever. Kirkland may still have a little bit further to fall, but it’s definitely worth keeping an eye on, because once it hits a bottom, it could see a strong run.

Lithium Americas Corp. (NYSE:LAC, TSX:LAC) is one of North America’s most important and successful pure-play lithium companies. With two world-class lithium projects in Argentina and Nevada, Lithium Americas is well-positioned to ride the wave of growing lithium demand in the years to come. It’s already raised nearly a billion dollars in equity and debt, showing that investors have a ton of interest in the company’s ambitious plans, and it will likely continue its promising growth and expansion for years to come.

It’s not ignoring the growing demand from investors for responsible and sustainable mining, either. In fact, one of its primary goals is to create a positive impact on society and the environment through its projects. This includes cleaner mining tech, strong workplace safety practices, a range of opportunities for employees, and strong relationships with local governments to ensure that not only are its employees being taken care of, but locals as well.

While Lithium Americas has seen some volatility in recent months, the miner is up 60% since this time last year. And it’s easy to see why. If lithium truly is the new oil, Lithium Americas may well be one of the supermajors of the industry.

Sociedad Química y Minera de Chile (NYSE:SQM) is a Chilean company that produces more than 55 minerals, including lithium, iodine, potassium nitrate and copper. The company’s headquarters are located on Avenida Kennedy, Santiago which was once an industrial area of the city with as many of 300 factories built there during its heyday between 1880 to 1930s.

Sociedad Química y Minera sees the lithium industry growing at around 20 percent per year in the long term, supported by rising EV sales and emission reduction goals from China to the United States. And as one of the largest lithium miners in the Western hemisphere, SQM is well positioned to take advantage of the boom.

Year-to-date, Sociedad Quimica y Minera has fared a bit better than one of its biggest competitors, Lithium Americas. Since January, SQM has seen its share price rise by 38%, and if it continues to post solid financials, it could climb even higher. Analysts are already raising their estimates for SQM, and this year’s just getting started.

By. Tom Kool

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Forward-Looking Statements

This publication 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 publication include that prices for gold, silver, copper, zinc and other base metals will retain their value in future as currently expected, or could continue to increase due to global demand and political reasons; that Starr Peak can fulfill all its obligations to acquire its Quebec properties; that Starr Peak’s property can continue to achieve drilling and mining success for gold and other metals; that historical geological information and estimations will prove to be accurate or at least very indicative; that high-grade targets exist; that Starr Peak will be able to carry out its business plans, including future exploration and drilling programs; that the preliminary drilling results will be confirmed as further exploration continues; that the lab results from Starr Peak’s initial exploration program will confirm evidence of a significant VMS deposit; that Starr Peak’s exploration results will gain the attention and interest of larger mining companies and investors; that Starr Peak’s exploration results will continue to show promising results justifying ongoing exploration and possible development efforts. 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 politics don’t have nearly the strong effect on gold and other base metal prices as expected; that demand for base metals may not continue to increase; that the Company may not complete all its announced mineral property purchases for various reasons; that the Company may not be able to finance its intended drilling and exploration programs; Starr Peak may not raise sufficient funds to carry out its business plans; that geological interpretations and technological results based on current data may change with more detailed information or testing; that the lab results from Starr Peak’s initial exploration program may not support evidence of a significant VMS deposit; that the preliminary drilling results may not be confirmed during further exploration efforts; that Starr Peak will fail to gain the attention and interest of other mining companies and investors; that Starr Peak’s exploration results may fail to find additional promising results justifying ongoing exploration and/or development efforts; and despite promising results from drilling and exploration, there may be no commercially viable minerals or ore on Starr Peak’s property. The forward-looking information contained herein is given as of the date hereof and we assume no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.

DISCLAIMERS

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Harry Byrne

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