Useful resource Roulette: Worth in Mineral-Wealthy Congo? | Australian Markets
Right now, James Cooper shares his insights on the Congo’s mineral-rich Kivu area, the place gorillas roam, and rebels conflict! Uncover how escalating battle impacts international useful resource markets, and why buyers should now weigh geopolitical dangers alongside geological potential.
I’ve obtained an attention-grabbing article to stroll via right now:
Rwandan-backed rebels entered Congo’s Goma in a main escalation.
For those who can’t get behind the Reuters paywall, right here’s a temporary abstract:
The article particulars final week’s escalation in violence throughout the Kivu Area within the Japanese Democratic Republic of Congo (DRC).
An space with unimaginable natural magnificence, volcanoes and mountain gorillas.
However for years, it has been a hotbed of ‘off and on again’ battle between the Congolese navy and M23 rebels, which the UN claims is backed by Rwandan rebels.
So, why may this have implications for the useful resource market?
Mining Memo’s Take
You may already know that the DRC is wealthy in copper and cobalt. However these deposits are positioned within the south, a long approach from the battle occurring in Kivu.
However as you head into the dense jungles of the Japanese DRC, you’ll enter a area recognized for its prolific ‘3T Minerals’.
That’s… Tantalum, Tin, and Tungsten.
The Japanese DRC is a main source of the three T’s.
In actual fact, one Canadian-listed producer, which we’ll element beneath, is chargeable for about 7% of international tin manufacturing!
I had the possibility to go to this area back in 2011.
A good friend of mine, who ran a tourism business out of Jinja in neighbouring Uganda, lent me one of her 4WDs, which I drove across the nation as a ‘self-driving tourist’.
I deliberate to depart the car on the border, cross into the DRC, and go to the mountain gorillas with a tourism operator.
That was back in my more intrepid travelling days, effectively earlier than I had youngsters!
However back then, the Japanese DRC was additionally heating up. Confrontation was building, and I made a decision to not go to Kivu.
And similar to right now, I consider larger commodity costs have been the first trigger of the rising battle.
You see, we’ve entered a period the place minerals and power have gotten the precursors to battle worldwide.
As I’ve identified, useful resource nationalisation and struggle in mineral-rich areas are likely to escalate with rising commodity costs.
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Simply as buyers develop into more bullish on the long-term useful resource outlook…
So do governments and navy teams!
For higher or worse, they’ll look to seize a higher share of that wealth, whether or not that’s via larger royalties, outright nationalisation or, within the case of the DRC, navy intervention.
These are all warning indicators for worldwide miners (and their buyers) who’ve spent years developing initiatives in relative peace and subdued commodity costs.
However the scenario is altering, and figuring out the place you’re invested has by no means been more essential.
Corporations CAN and DO lose mines, which might have a terminal impression on the stock.
And I don’t consider buyers are paying enough consideration to what we call jurisdictional risk.
So, what’s the implication?
Working example…the Canadian-listed tin miner I alluded to earlier.
Geologically talking, Alphamin Sources [TSX-V:AFM] most likely holds the world’s most interesting tin deposit and is a main international provider.
However you may’t transfer the rocks… Not rapidly, anyway!
After investing closely within the Kivu area, Alphamin’s flagship asset now sits in no-man’s land amid intense preventing between two navy teams—a nightmare end result for its shareholders.
And of course, the thousands and thousands of harmless people residing right here.
I consider mining nationalisation and mineral battle will solely escalate from right here.
Which means you need to consider your shares and whether or not they’re positioned in locations with a historical past of battle or useful resource nationalisation.
However there are alternatives, too…
Valuations on shares with publicity to tantalum, tin, and tungsten (in secure areas) have the potential to re-rate.
That’s as a result of jurisdictional risk will manifest into a REAL risk because the commodity cycle turns and costs rise.
Keep tuned as we discover some of these alternatives over the approaching weeks.
Regards,
James Cooper,
Editor, Mining: Section One and Diggers and Drillers
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All advice is common advice and has not taken into consideration your personal circumstances.
Please search unbiased financial advice concerning your own scenario, or if doubtful concerning the suitability of an investment.
James Cooper has been a working geologist in mines throughout Australia, Canada, and Africa for the reason that early 2000s. He’s led the operations of tiny explorers via to large producer outfits. He’s seen booms and busts firsthand and he additionally understands the cyclical nature of particular person commodities. For instance, James was proper there when Barrick Gold launched an huge $7.5 billion takeover bid for Equinox. That was the height of the final cycle.
Along with his background as a geo and finance skilled, he brings a distinctive insight and expertise to Fats Tail Funding Analysis. He writes the broader resource-focused investing letter Diggers and Drillers and the ultra-speculative explorer-focused trading service Mining: Section One.
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