Iran War shocks mining industry (and, is deep-sea mining the answer?)

EPISODE 13. Anthony Milewski and Christian Purefoy are back after a few weeks to catch up on the seismic events happening across mining, supply chains, the conflict in the Middle East and its impact on diesel and sulphuric acid supply, and much more — and, is deep-sea mining the answer?

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Transcript

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All right. Welcome, everybody to another another episode of Boom Bust and BS with Anthony Milewski and me Christian Purefoy. Where you been man? We've been offline here for for a month and a half. We're just trying to keep up with the news. Well, we're bombing people. We're starting wars. We had a secret war in Venezuela that lasted a week or two. We had actually maybe a day or two, and now we're fighting in, in Iran. So it's been hectic in the commodities world. Yeah, exactly. Anything we say right now is just going to be out of date, in like, you know, as soon as Trump tweets something. So what are we talk about today? I mean, I think there's a couple of I mean, you know, I think the first thing to talk about is, the war machine, war metals, you know, and, you know, I think that it's interesting, all these developments that have been kind of unfolding now for a couple of years around rare earths and we'll call it minor metals, because, you know, there's things like tungsten. And it just seems like this isn't going away. You know, I can say like a cure for high prices is high prices, a cure for low prices, low prices. And, if you'd asked me 18 months ago, Anthony, what do you think is going to happen? Well, it's probably a round trip, but, you know, here we are. No, stop. No sign of stopping in sight. These Chinese tariffs or what have you have not let off. They continue to control the supply and it just keeps going. I mean, it's crazy. Yeah. I mean look at the price of tungsten. It's just gone up up up. I mean, all of them, not just tungsten. Oh, that's a you know, and you've had some corresponding, you know, stories like USA Rare Earth. I mean, they've got a low grade thing in Texas. Maybe it works, maybe it doesn't. They've got some magnet factories. They recently announced a big merger with the Brazilian rare earth production. But you know, they have a multibillion dollar market cap. So I think the market's responding by financing developers and producers. But you know it takes time. Yeah. And time I mean we have what I mean the complexity that we're seeing unfold here. Like it's you know obviously we're dealing with as you said, the tariffs. But then there's the diesel issue that's coming up out of the Strait of Hormuz. And supply chains with shipping and freight, you know, these companies and these financings, having to navigate just crazy waters right now. Yeah. And I look at look, it's sulfuric acid. I mean, like, you know, a fundamental, you know, component of leaching and nickel mining and copper mining and a bunch of types of mining. So I don't know. I don't know what that means, though. I think in the short term, it means that there will be shortages, there will be mispriced commodities. You know, it's different, though, than a supply demand imbalance where you are fundamentally short, supply leaning into new demand, which we see, I think we see now with everything related to, ammunition and nightvision and, you know, with the advances in drone technology, it seems like there's more likely to be more war, not less because it costs a lot, you know, go to Costco and pick up 50 drones and have a war. And so I think that these minor metals, these rare earths are going to continue to be interesting. They're probably not all going to move together because they have different dynamics that process differently. But I think that continues to be interesting in the foreseeable future. And yeah, and I agree, I don't think they're going to move. Certainly not the same momentum. But there's going to be I mean, if there was a single point of failure for mining and pricing like sulfuric acid, diesel, and as you said, like the demand for national security just across, you know, not just defense, but also data centers, which are being treated. I mean, if you look at the MAG7, you know, it's treated as a sort of national security thing in America. The demand for these during a supply crisis, plus the demand across all of these, these metals, I mean, tin, tantalum, you know, so the the there's momentum definitely across all of them. Yeah. I mean look another I think that segment actually. So Anthony I mean just to say in your time have you ever seen dynamics like this. Now I it's unprecedented. I mean you know normally you have okay uranium is hot for this reason or copper for that reason. But you have a bunch of really strong tailwinds, across a bunch of metals. And we just talked about the war metals, but then you've got the AI metals or AI, as it pertains to energy, another big theme going on. But I'll tell you, one that's really caught my eye. And I think it's an idea that's been around, you know, for decades. Is undersea mining. And, you know, historically, I don't think the price of commodities was at a place where you could really justify mining this stuff. Forget, you know, whatever your political views are, your environmental views, like, it just didn't make sense financially. I don't think now we're sitting in a moment where, geopolitics being what it is, commodity prices being what they are, it's become really interesting. And you got to TMC who, you know. Within the last month announced that they'd spent $250 million kind of paving the way, for this industry. And now they've announced permitting updates, and they're moving down the path that I think you're going to see a boom, like, you know, TMC find their their first movers. They probably have an advantage simply because of the money and the they've the time they've spent. And, you know, they've really probably built the team and all that. But I think you're going to see ten new entrants or five new entrants, in this space. And it's probably going to be, really interesting in the coming years. And, you know, setting TMC aside, there was another merger that happened,$1 billion merger. Tom Albany's former, you know, Rio CEO, I think is the chairman of the company, a little bit different. You know, there's things to learn about deep sea mining. There are nodules, polymetallic nodules, which are high grade. There's, you know, on the shelf, off the shelf. So there's all sorts of things to kind of explore with deep sea mining, but as a theme, as a, realistic new entrant to the, to the mining actual mining that now prospecting kind of part of the cycle. I think we're here and this is going to really be a narrative that's going now for some time. Yeah I agree, I mean we we've been watching it play out, you know, on The Oregon Group and it's been there's been some tentative steps. And now you can really see the, you know, the ball rolling. I mean you've had Japan I think it was Norway and America all making steps. Very sort of they're not making it very public because as you said, there's some tension there over some of the politics, but they're all moving politically. But again, because of national security, right? These things are on their doorstep. They're just under the sea. And they need to get and also look, I mean like like the US exported pollution in the 80s that I mean, like fundamentally globalization was the exercise, among other things, in exporting pollution. And we exported it to China. And, you know, if we're talking about our space, in particular with the processing of minerals, you know, the Chinese were happy to, to accept that. And, you know, also, just in general, in the United States, the collapse of the copper mining industry and really no real new mines being built of any note, you know, that unfolded starting in the 80s until now. So now you've got a U.S. government that's sort of sitting there saying, okay, what are we going to do? We can't rely on the Congo child labor, can't rely on processing in China. By the way, you know, a lot of the places where the stuff comes from are difficult at best. So deep sea mining, a new narrative, an idea whose age is come in terms of just the price of commodities, the technology. It's there. And and it kind of fits in with this overall theme that we're talking about, about the war and everything else. It kind of fits in with it. So this is going to be really, I think, a transformative few years for that space. And that narrative is going to be carried, I think, through, all of mining. I mean, you know what I mean? Like look at nickel, like take nickel. If in fact, TMC is successful in their nickel mining, adventure, if they if they're able to collect these polymer and not just TMC, but there are, you know, at least 3 or 4 other that I'm aware of and have chatted with. I mean, that's going to impact the price of nickel. And, you know, what does that do to Indonesia? Indonesian production and all these things don't play out next year. They play out over the next ten years. But they're certainly relevant and going to become increasingly at the forefront of the conversations around around mining. Yeah. And these the timeframes we deal in are, you know, ten years. They are decades, right. When you're looking at Indonesia, it controls what, 60-70% of the global nickel supply right now. You know, and just to take one example, you know, the diesel, the sulfuric, sulfuric acid problem that could create a single point of failure in Indonesia. You know, when you're American, you're looking at this stuff and it's not just America. You're saying, hold on. We need other options here. And this is kind of the bull case in general. It's like, it's not like oil and gas, like onshore oil and gas. You can literally drill a well, have it flow and be producing in a month. I mean, I mean, I mean, you could be producing so quickly in certain basins and certain situations. In mining, No. Like you drill a hole in the ground and you make a discovery. Well, that's hole one. We're going to be drilling for next five years, you know, and the metallurgy and like it just it's such a slow process relative to, the possibilities in oil and gas. And that's what the US government and really all Western governments got fundamentally wrong. Like, you know, in a pinch with their straight like production can be ramped up. The, you know, the heavy oil in Canada, there's a bunch of places oil can come from relatively quickly offshore Africa, all these places. Whereas in the mining space it's just not that way. And I think everyone got that wrong, partially because they didn't care, partially because they're incompetent. But here we are now and it's really bullish for the sector. One we haven't talked about how about uranium? What do you think's happening in that space? I, I will which data reference point do you want around AI data centers? I mean they I think there's going to be riots in small towns in eastern Oregon and eastern Washington, in the Midwest, in America, like you're going to tell me that my energy bill is going to triple because, you know, people are counting ones and zeros on Claude. I think it's going to be absolutely infuriating to the average person if energy prices are going through the roof because of the demand at these data centers. So I don't know how you can really supply that demand without nuclear energy. I mean, coal, if you want to burn a hole in the atmosphere or whatever, or have acid rain or whatever happens when you have burned too much coal, I don't know, because you have to burn all of it. Whereas I think nuclear is really the only answer in this age of energy consumption for data centers. Well, the tech companies agree with you, right? I mean, they're restarting it, they're buying it up. But getting into small modular reactors, you know, they’re pouring billions into it. Yeah. And you know, like the funny thing about the market is it's so day to day like everything trades off of tweets now. But you know if you have any patience like a lot of these things are going to unfold like in months and years. And they have that really big tailwind. And so there's a lot of a lot of interesting investment ideas, investment opportunities especially with a little patience to like, sit through a cycle. All right. Well, that's what we're here for Anthony. Yeah. And everyone, thanks for joining. We're back. It's been a busy kind of month and a half here, but I think we're back on the regular. So Christian great to chat and we'll be back in a week or two