Metal prices rise as geopolitical tensions increase
Metal prices have continued to rise as Russia launched an invasion of Ukraine on the 24th of February. We had discussed what the possibility of such would do, having predicting a rise in Copper prices. This proved to be accurate, as Copper had breached all-time-highs a week ago, having pulled back a little recently:
Gold has also been rising, having crossed $2,000 / Oz recently, it is currently in the $1,900 – $2,000 range. This is very close to it’s previous all-time-highs, and could very well breach it again some time in 2022:
Cobalt, a very important battery metal, has experienced a similar price rise. Cobalt Consumers are continuing to chase advance restocking due to this price increase.
CME Group offers trading in both cobalt and lithium futures. It launched a cobalt metal contract in December 2020 and a lithium hydroxide contract in May 2021. Since launching, prices in both contracts have trended higher. Cobalt is now trading at $34/kg, more than twice the level it was at launch.
Note, since the above article was published, Cobalt has further increased in price to $37+/kg.
Sabrin Chowdhury, Head of Commodities Analysis at Fitch indicated a sentiment echoing what we had mentioned earlier. As well, she believes Gold will continue to rise due to the ongoing geopolitical uncertainty. On top of all that, the green revolution is also contributing to metal price increases, particularly ones like Copper. Watch her interview with BNN Bloomberg here:
US CPI up 7.9% in February
A major catalyst to metal prices increasing has been the continued increase in inflation at an abnormally high level. The Ukraine-Russia conflict has contributed to this, leading to a rise in oil prices on top of other commodities.
The consumer price index, which measures a wide-ranging basket of goods and services, increased 7.9% over the past 12 months, a fresh 40-year high for the closely followed gauge, according to the Labor Department’s Bureau of Labor Statistics.
The February acceleration was the fastest pace since January1982, back when the U.S. economy confronted the twin threat of higher inflation and reduced economic growth.
How to play this
The current environment of metal prices experiencing a rise across the board can be capitalized in a few different ways. A great way to capitalize off of this is to look for metals that are benefiting from the geopolitical situation in Eastern Europe, i.e. metals linked with the conflict, and to capitalize off of prevailing environmental policies, i.e. metals linked to the Green Revolution. We remain very bullish on both ETR.c and GZD.
We like Grizzly Discoveries (TSXV: GZD) and their Robocop and Greenwood properties. Their Robocop property lies on the Purcell Supergroup, which has played host to past-producing stratabound Copper-Cobalt mines. Robocop has shown high grades of both copper and cobalt. Cobalt is extremely valuable in the production of electric vehicle batteries. It is an expensive and rare component, of which more than 65% of the global supply originates from the Democratic Republic of Congo. Robocop has had sample grades like 1.41% Cu, 0.62% and 0.134% Co, 1.19% Cu, with silver credits.
GZD is trading at an extreme discount at 7.5 c. Our research shows this stock to be worth at least 15 c using conservative estimated and based on the inevitable demand increase of both copper and cobalt in the green transition. You can read our full report here: https://www.tsxvresearch.com/research/gzd-cobalt-copper-tsxv/
We remain bullish on Etruscus Resources (CSE:ETR) as well. The company is cashed up, with approximately $1M in the bank, and is still the cheapest in the Golden Triangle given the stage of the projects, and has had incredible exploration results. Neighboring companies worth north of $1B, and located in a region with monster mines. We published our update report on the company showing that it is worth $1.50 given today’s information.