?? The Markets May Be Bad

CEO.CA Presents the Chairman's Briefing - October 5th,?2023

"The markets may be bad, but I slept like a baby last night!

(I woke up every hour and cried)"

-Anon

Metals/Crypto Price

In Today's Briefing

Volatility, as measured by the VIX, is back. Equities are testing critical support zones. Bonds are crumbling - yields are their highest in 16 years. And all this courtesy of the Fed's unwavering resolve to maintain its menacing "higher-for-longer" posturing, with one more quarter-point rate hike a distinct possibility before 2023 draws to a close.

But what's twisting the knife is the Fed's revised monetary policy going forward. Until recently, the market was anticipating a meaningful pivot via four quarter-point rate cuts in 2024... now it expects only two.

The gold market? It's not impressed. Not. One. Bit.

Clearly, the Bears have the upper hand where gold is concerned. If the selling pressure continues, a 'death cross' will come into play (top right, above chart).

Though it's on the ropes—we may see the $1800 level fall—it's not bleeding out. With the underlying fundamentals more compelling than ever—difficult-to-comprehend debt (all levels), soaring yields, and tapped-out governments, corporations, and consumers—we suspect that when a turn is triggered, the rush into the precious metal will be frantic.

The herd is already catching on - Costco is selling gold bars and they are selling out within a few hours.

Costco CFO Richard Galanti: “I’ve gotten a couple of calls that people have seen online that we’ve been selling 1 ounce gold bars. Yes, but when we load them on the site, they’re typically gone within a few hours, and we limit two per member."

Lithium

DOE Weighs $1 billion in Thacker Pass' Buildout Lend

With an aim to encourage domestic production of lithium, the US Energy Department (DOE) appears willing to fork out a weighty $1 billion loan to cover the lion's share of Lithium Americas' CapEx as the company tees up Thacker Pass for an aggressive push along the development curve - Lithium Americas in talks with US Energy Dept to secure over $1 billion loan, source says.

The Biden administration and Lithium Americas Corp. are negotiating the terms of an agreement that would fund more than half of the cost of the Thacker Pass mine in Nevada, according to a person familiar with the matter who asked not to be identified discussing confidential information.

Representing the largest deposit of the battery metal in the US—Measured and Indicated resources currently stand at 13.7 million tonnes of lithium carbonate equivalent—the $1B loan would go down as the fattest ever awarded to a mining company through the Energy Department’s loan desk.

Lithium Americas said in February it had received a letter of substantial completion from the Energy Department for its application to support the financing of Thacker Pass. The company said it expected the loan program to provide up to 75% of Thacker Pass’ total capital costs for construction, should a loan be issued.

Biden walks a fine line here. Resource extraction in environmentally sensitive areas such as Thacker Pass kicks against his campaign promises to protect sensitive habitat. Tricky business, this.

The Plot to Block Albermarle's Bid Thickens

We've been covering the drama surrounding Albemarle's $6.6 billion takeover bid to secure Liontown's?Kathleen Valley Lithium Project?in recent Briefing's. It now appears abundantly clear that Gina Rinehart's?Hancock Prospecting?is set on blocking the deal -?Gina Rinehart Expands Stake in Lithium Bid Target Liontown.

Rinehart first secured 7.61% of Liotown early last month, then upped her stake to 10.69% on Sep. 25th. More recently, she dropped AUD $152M, upping her stake yet again to just under 15%. That's pretty damn close to a block.

A stake above 15% has generally proven effective in blocking shareholder approvals of takeovers under Australian law. With the US-based Albemarle’s takeover due diligence of Liontown set to conclude as early as Monday, Rinehart’s accumulation may complicate one of the biggest deals in what has become one of the world’s hottest resources.

Rinehart, characterizing her appetite for Liontown equity as "Strategic," has yet to reveal her true intent. Under Australian law, a 20%-plus stake would typically trigger a mandatory offer.

The prize in Rinehart's eyes is Kathleen Valley's reserves pegged at 68.5 million tonnes grading 1.34% lithium oxide. The project has an after-tax NPV(8%) of A$ 4.2 billion and an IRR of 57%. Payback is 2.3 years.

Last week, Liontown raised its CapEx estimate for Kathleen Valley by 6% to AUD $951 million but confirmed it would meet its mid-2024 target for production.

Albermarle Confesses

Albemarle is making headlines outside of its pursuit of Liontown's high-grade Li assets - Albemarle to pay more than $218 mln to settle bribery probe, U.S. says.

The company recently confessed to using third parties "to pay bribes to government officials to obtain and retain chemical catalyst business with state-owned oil refineries in Vietnam, Indonesia, and India," taking in $98.5 million in profits, the Department of Justice said last Friday. To make things right, the company will pay more than $218 million, including more than $103 million to financial regulators.

The company also agreed to continue to cooperate with the Justice Department "in any ongoing or future criminal investigations relating to this conduct."

"The actions taken by a limited number of former employees and third-party sales representatives happened years ago ... Those responsible for these past actions were held to account and separated years ago," Albemarle said in a statement to Reuters.

U3O8

The fundamentals underpinning the uranium sector have turned decidedly positive in recent weeks, with clear indications of surging demand versus significantly diminished surplus inventories.

Quoting a TD Cowen Industry Note: "We believe that the outlook for uranium prices and the nuclear sector in general is the best it has been in more than 15 years." The price performance of the underlying equities year to date reflects the appetites of those seeking exposure to the energy-dense metal...

IsoEnergy Takes Out Consolidated Uranium

We're also seeing the first signs of M&A activity in the U3O8 space, as evidenced by IsoEnergy (ISO.V) taking a run at Consolidated Uranium (CUR.V) in an all-paper deal giving the combined entity a valuation of C$903.5 million -?IsoEnergy and Consolidated Uranium Announce Merger to Create a Leading, Diversified Uranium Company, Focused on the World's Top Uranium Jurisdictions.

The new IsoEnergy entity has a project pipeline spanning multiple jurisdictions, including Canada, the United States, Australia, and Argentina.

According to this late Sep. press release, the rationale for the merger is 'Strategic' (a common theme in this Briefing). Aside from Iso's Hurricane Deposit, the world's highest grade U3O8 resource (48.6 million lbs at an astonishing 34.5% U3O8), the combined entity holds "an impressive suite of projects, with substantial current and historical resources, in top uranium mining jurisdictions, at varying stages of development, providing near, medium, and long term leverage to rising uranium prices" (Consolidated Uranium brings a portfolio of permitted, past-producing uranium mines in Utah and Colorado to the table).

In connection with the deal, IsoEnergy announced a $21M PP of subscription receipts,?subsequently upsized?to $35M due to solid demand.

Copper

Peru’s Status as No. 2 Copper Supplier at Risk

Two big projects with a (potential) fast track to production sit idle, waiting for the green light to begin construction in a country that desperately needs the subsurface mineral wealth. But, community opposition and bureaucratic permitting hurdles stand in the way.

Building?Tia Maria?and a new pit at?Las Bambas?would provide a much-needed boost to Peru's economy by adding 220,000 metric tons of copper production a year, worth roughly $1.8 billion at current metal prices. However, the government isn't willing to push them through without complete support from the Andean communities impacted by their development.

Tía María’s construction plan has been halted and tweaked twice, in 2011 and 2015, due to fierce opposition by locals. Las Bambas, whose current pit is nearly tapped out, was cleared for an expansion pit buildout last year, but intense opposition from the Huancuire community put the kibosh on those plans.

An industry-funded study released this week said Peru had lost $32 billion in tax revenue due to social conflict and delayed projects.

President Dina Boluarte, who took over after the impeachment of Pedro Castillo amid a wave of protests that led to 50 civilian deaths and multiple mine disruptions, is walking a fine line here.

But it's not just local opposition holding development back as mining executives attending the Perumin mining show this week appeared more concerned over the country's permitting process, which is holding back an estimated $57 billion project pipeline -?Peru Grapples With Red Tape That's Burying Giant Copper Projects.

There’s a lot at stake, including Peru’s status as the world’s No. 2 copper supplier and spending that would help reignite economic growth. Along with winning over local communities, reducing bureaucracy is seen as a key to reversing a drop in mining investment that the central bank estimates at 18% this year and 8% in 2024.

Peru will do a lot to facilitate mining investment as a way to boost the ailing economy. But it will stop short of pressuring Andean communities to accept two key projects, a top official said Thursday.

Barrick Tees Up More Cu

It's no secret Barrick wants more exposure to copper. Today (Oct. 4), the world's second-largest gold producer announced an aggressive $2 billion expansion plan for its Lumwana Copper Mine located in Zambia's Copperbelt—one of the most prospective copper regions in the world - Gold behemoth Barrick invests $2 billion in major expansion of Lumwana copper mine in Zambia.

The expansion plan targets?annual production of 240,000 tonnes of copper over a 36-year life of mine.

Lumwana's Measured resource currently stands at 140 million tonnes grading 0.48% for 1.5 billion pounds of copper. Indicated resources are pegged at 960 million tonnes grading 0.55% for 12 billion pounds. An additional 820 million tonnes is grading 0.5% (8.7 billion pounds of Cu) falls into the lower confidence Inferred category.

Since Barrick took over operations at Lumwana in 2019, the mine has contributed almost $3 billion to the Zambian economy through taxes, royalties, salaries, and acquiring goods and services. In addition to its local procurement policy, the company is committed to local employment - 99.3% of Lumwana’s current workforce hail from Zambia.

Barrick CEO Mark Bristow: “Barrick believes that its host countries are its key stakeholders and that partnering with them creates sustainable value for both of us. In Zambia as elsewhere in our global network, we seek to share the economic benefits generated by our mines with the countries’ governments and people, notably our neighbouring communities.”

Hits of the Week

Panama’s government authorized on Tuesday the withdrawal of a proposed contract to regulate operations of Canadian miner First Quantum’s local unit, Minera Panama, from Congress to make changes requested by lawmakers - Panama govt to pull proposed contract for miner First Quantum from Congress

Asteroid mining only works in a science-fiction world where metals are thousands of times more expensive than they are today. And in that world, plenty of metal deposits on Earth could be developed more economically - If gold surges 140,000-fold, then asteroid mining works

Anglo American Plc unit De Beers and Botswana’s government signed a deal covering the main aspects of a new sales and mining agreement for their Debswana diamond venture in the African nation - De Beers Signs 10-Year Sales Deal for Botswana Diamonds

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