The New Commodity Shock: Geopolitics, Gold & Critical Minerals

From record gold prices and geopolitical conflict to the global race for critical minerals, the world is entering a new era of resource competition. Jose Martinez Sanguinetti examines the forces reshaping commodity markets, the growing importance of resource security and the opportunities—and risks—emerging for investors, governments and the mining industry.

Host: Lyndsay Malchuk

Guest: Jose Martinez Sanguinetti - CEO Sothys Capital

Transcript

SPEAKER_00 0:00

You're listening to the ASTAE podcast, where mining meets capital, powered by one-to-one mining investment. Today we are coming live from our event in New York City. Please note this podcast is for information only and isn't financial advice or recommendation to invest. As always, the views you'll hear are those of the speakers.

SPEAKER_01 0:18

Welcome back to Assay TV. I'm your host, Lindsay Milchik with Appeton Media, and it's my pleasure to be your guest host for today's Fireside Chat. Now, over the last several years, we've watched the world change in ways few could have predicted. Supply chains have fractured, wars and geopolitical tensions have intensified. Governments have become increasingly focused on resource security. And the energy transition, well, that's just accelerated beyond our control at this point. And investors have been forced to rethink what truly matters in an increasingly uncertain world. Now, at the same time, gold has surged to record highs. Copper has become one of the most strategically important metals on the planet, and nations are competing for access to the critical minerals that will power everything from A9 data centers to electric vehicles and national defense. The reality is, commodities are no longer just a mining story. They're now at the center of economic policy, global security, technology, technological advancements, and investment strategy. So the question is no longer whether resources matter, we know they matter. The question is who controls them, who needs them, and who stands to benefit from the enormous shift now underway. Today I'm fortunate to be joined by one individual who spends his entire career mentalizing exactly these forces and helping investors understand where the opportunities as well as the risks may lie. First with me, Jose Martinez Singuinetti. Am I saying this correct?

SPEAKER_02 1:45

Yes, it is Sanguinetti.

SPEAKER_01 1:47

Perfect. So Jose is the founder and CEO of Southeast Capital, a resource-focused investment and advisory firm with deep expertise across global commodity markets. Throughout his career, he has worked closely with mining companies, investors, and industry leaders around the world, developing a unique perspective on the intersection of capital markets, resource development, and long-term value creation. This is a really big topic, and I'm so happy to have you here with us. Absolutely. Let's dive right into it. Right out of the gate, I want to start with predictions. If we were sitting here three years from now, what commodity headlines do you think everyone in this room will wish they paid more attention to?

SPEAKER_02 2:32

Well, the first one is I mean, we have to be ready for a period of time where we're going to see uh demand for commodities grow substantially and sustain in at very high levels, while at the same time supply of commodities uh falls or falters because uh of a lot of factors that are combining into making production of commodities less abundant and more expensive.

SPEAKER_01 3:04

Fair enough, fair enough. So if we unpack that just a little bit further, are there specific commodities that people should be more aware of that are maybe just coming on the scene, you think?

SPEAKER_02 3:14

Well, the ones that you mentioned, I mean, copper is likely to remain in the spotlight for for quite some time. Uh gold, uh, because of a fragmented financial system. Right. Uh rare earths, because uh even though I mean their their production is well spread around the world, there is very little refining capacity in the West for rare earths, lithium, because it is a basic component of batteries, uh we're seeing a process of complete transformation where I mean the idea that over the last 10 years, what we have seen is that the code, I mean, the software, was at the center of the economic activity and it was where alpha was created. But from now onwards, what we're going to see is that actually securing infrastructure to produce real assets is going to be the main source of alpha.

SPEAKER_01 4:19

Well, you know, there's a big there's a big sector right now that's, you know, who is leading the the industry? Is it geopolitics? Is it the actual market? Is it investors? There's so much confusion still on where to look to to grasp hold of what's coming up, what's coming down the pipeline. Do you think governments are becoming just as important as as markets when it comes to determining winners and losers in the resource sector specifically?

SPEAKER_02 4:47

Oh, yes, definitely. I mean, most governments in the world now have a critical materials strategy.

SPEAKER_00 4:55

They do.

SPEAKER_02 4:56

I mean, China does with the dust and built uh initiative uh the US has with the Inflation Reduction Act. Absolutely. Um the European Union has one, Canada has one, Australia has one, Israel has one. So critical materials have become a strategic issue for governments. Uh we've rarely seen a situation when uh industrial policy becomes a key element of economic policy in the world, and it focuses and centers on the provision of critical materials.

SPEAKER_01 5:35

Well, do you think that this is just a temporary cycle or are we witnessing something more permanent here?

SPEAKER_02 5:40

No, it's very permanent. It's it's likely to remain a key issue for a few decades, actually. Um we should expect demand for copper, for instance, to triple over the next 20 years. While at the same time, uh grades, mining rates are falling substantially. I mean, they used to be 1.2% on average. Now grades for copper are 0.55%, which means that mines have to move three times as much rock as they used to to produce the same metal content. That obviously raises uh costs, production costs, and opens possibilities for a lot of mines that in the past were considered uh non-economical in the sense that they would not be profitable at prices in the past.

SPEAKER_01 6:37

One of the big questions that keeps coming up with copper specifically is because copper is the price has taken such a run right now, that grade is become lower. And so there's a lot of people that are wondering are these mines just going to keep producing these lower grades because they're still making uh you know 10 mega or whatever just off low grade, or are we going to still be able to get that high grade copper? What do you see?

SPEAKER_02 7:02

Well, I don't see mines with grades as high as they used to be.

SPEAKER_01 7:07

Right.

SPEAKER_02 7:08

Um in general, I'm what we see is mines, the same mines producing with lower grades. I mean, and though there are a number of projects underway, A, they take time to get into production, yeah, and B, they don't get grades as high as they used to be. No.

SPEAKER_01 7:29

That's true. Why don't we flip over here to gold, to the fear and to the cr the capital flows in that sector? We've seen gold that keeps going higher and higher and higher. What's really driving this move, you think?

SPEAKER_02 7:41

Well, there's quite a few things, but probably the major one is the fact that central banks have been moving away their reserves from the US dollar towards gold. Not that the US dollar has lost its uh characteristic of being the reserve currency in the world, but slowly central banks are moving away from it uh in order to secure a uh source of value or a store of value in the new times. I mean, the new times are I mean, we've seen the swift transfer system being weaponized over the last few years, uh, meaning that uh governments feel they need to strategically diversify away from the US dollar. On the other hand, I mean, we see blockchain and cryptocurrencies taking over the financial system. And that allows emerging markets and the rest of the world to create clearing and settlement systems that do not really need the US dollar to function.

SPEAKER_01 8:49

Fair enough.

SPEAKER_02 8:50

From that point of view, I mean central banks uh have not only been accumulating gold, they've been accumulating gold in their own premises, which is which is weird. I mean, banks used to keep gold in London, in New York. That's true. Now they're bringing it bringing it back to their own countries. Uh I mean, you see the case of Poland, for instance, and central bank demand for gold uh reaches today, I mean, about 250 tons per quarter. I mean, that's a thousand tons per year, which is a lot.

SPEAKER_01 9:24

Do you think gold is then sending a message?

SPEAKER_02 9:28

Well, gold gold in a way is reflecting what is happening. I mean, the financial system has fragmented. 100% and uh the geopolitical situation has fragmented, and gold is reflecting that.

SPEAKER_01 9:42

Well, if we talk about the critical mineral sector, just that, where do you see the greatest disconnect happening right now between the market perception and the actual reality of what's happening?

SPEAKER_02 9:53

Well, the the case that I find most remarkable is the case for rare earths. I mean, they're though they can be produced around the world, there's very little capacity to refine them in the West. Most of like 90% of the refining capacity for rare earths is in China. I mean, creating a massive uh deficiency in the West, taking into account the fact that they are so strategic for what is coming. I mean, we're what comes next is the artificial intelligence era, is the robotization era, and they both need magnets and need uh rare errors to to to be built. Uh so I mean there's there should be a massive effort to invest and create new technologies to refine rare errors. In essence, I mean the technologies that are mostly used in the world as of today are uh quite toxic. And that leads Western countries to regulate them significantly. Whereas, I mean, you don't find that kind of regulation in Asia. I mean, it takes 15 years to set up a facility in the West, it takes three years to set up a facility in Asia.

SPEAKER_01 11:16

Do you think that we could ever in the West get to the point that we could be, you know, mining it, we could be smeltering it, we could be doing all the things right here in the West to keep up with the demand that we're going to need?

SPEAKER_02 11:29

I think so. I mean, what I see is a major trend to develop new clean technologies. And those new, I mean, those clean technologies do exist. I mean, they have not been used in the past, or they're not so well developed, and that makes them expensive at the moment. But we if we look at the past and and we see how technology evolves, we can see that uh costs come down very fast, very quickly, as the technologies are adopted. And I think that's the trend we're going to see over the next few decades in the West.

SPEAKER_01 12:03

You know, the big concern right now, too, though, is the geopolitical tensions happening around the world. Do you feel like governments are getting in the way of permitting of regulations? They're putting all of these things in place, and yet at the same time, the demand keeps going up for critical materials. Um, and it's just become a little bit more out of control where we need it, but you're stopping us from needing it. Do you think do you agree with this?

SPEAKER_02 12:28

Well, there's a natural tension between uh two different objectives. I mean, the first one is to keep up with the transformation of the production process around the world, which basically needs, I mean, we see one-third of the world is seeing population decline at the moment. The only way we can keep productivity growing is by adopting artificial intelligence and robotics. And those two technologies required intensive use of uh critical materials. Obviously, I mean there's another trend in exerting tension, which is basically climate change. Okay. And uh therefore, I mean, there's a tension to make technologies clean and usable in the developed world. Uh, but that is happening. I mean, it does happen. I mean, if you look at what's going on, I mean, you look at the meetings today in this conference, there's quite a few fields that are being developed in developed countries. I mean, we used to see like minerals were used to be produced in Latin America, in Africa, some in Australia, some in Canada, far away. But now you mean you see fields in Alaska, you see fields in Europe, you see fields in the Nordic countries, because there are technologies that allow for clean mining, and that's probably the future.

SPEAKER_01 13:54

What about investment opportunities and risk? We talked a little bit about this, but if we push that just a little bit further, if you were building a commodity-focused portfolio today, what themes would you be playing clo paying closest attention to right now?

SPEAKER_02 14:10

The first one is vertical integration. I mean, we just talked about the massive deficiency in refining capacity in the West.

SPEAKER_01 14:18

Yeah.

SPEAKER_02 14:18

So it's not only the field and the mineral, it's the ability to refine it. So whatever company has both fields and refining capacity, that's a very good investment alternative. Second, infrastructure. I mean, uh demand for electricity in the world is doubling every two years.

SPEAKER_01 14:42

Yes.

SPEAKER_02 14:43

And no power grids, no power grid is capable of supporting that growth. So there's going to be a massive amount of investment into data centers and the grids that need to fit them. And that are needed to fit them. So, so I mean, that's another investment opportunity that that can be taken advantage of. Infrastructure in general, I mean, infrastructure funds are a rather interesting opportunity at this time. I think that the next few years are the years to invest in real assets. Move away from nominal assets because I mean currencies are losing value, currencies are losing importance. Right. Now it's the time for real assets.

SPEAKER_01 15:27

What do you think one narrative is that investors should be actually questioning right now?

SPEAKER_02 15:33

I think I think the first narrative that should be questioned is whether artificial intelligence is a bubble. I mean, I think it is not. I think that is it's a major force that is going to transform the world. And it's going to combine with robotization to create a compounding effect that is only going to make this situation more acute, more, more intense. We've seen China show off the robots uh recently. I mean, that's that's what's going to be happening over the next 10 years around the world. Right. And uh I mean robots just like large language models require an enormous amount of electricity and everything that comes along with electricity, like the facilities that are needed to transport electricity, to store electricity, to distribute electricity, to generate electricity.

SPEAKER_01 16:37

Okay, fair enough. So we're going to lighten it a little bit because we've delved into some pretty heavy things. We're gonna play a little game, and the game is called agree or disagree. So I'm going to throw out a statement. You can only answer agree or disagree first, and then at the end, you can give us your why. Okay. So here's the first one. Gold reaches 5,000 before 2030. Agree or disagree?

SPEAKER_02 17:02

Agree.

SPEAKER_01 17:03

Okay. Next one. Copper faces a structural shortage this decade. Agree or disagree?

SPEAKER_02 17:08

Totally agree.

SPEAKER_01 17:09

Totally agree. Okay. Governments will become more influential than markets in resource development.

SPEAKER_02 17:17

I disagree.

SPEAKER_01 17:18

Disagree. Okay. Critical minerals are currently overhyped.

SPEAKER_02 17:24

I disagree.

SPEAKER_01 17:25

I disagree. The biggest commodity opportunity hasn't been discovered yet.

SPEAKER_02 17:30

I fully agree.

SPEAKER_01 17:31

I fully agree. AI will increase commodity demand more than the energy transition.

SPEAKER_02 17:38

Totally agree.

SPEAKER_01 17:39

Totally agree. Um now I'm gonna go back. I'm gonna ask you why you disagreed with the one that you did disagree.

SPEAKER_02 17:47

First, because I mean, even no matter what the governments do, I mean the I mean the driving force for growth is always going to be private investment.

SPEAKER_01 18:01

Okay.

SPEAKER_02 18:02

And uh I mean that's what is going to lie behind the future of the mining industry and in general of the economy. So even though governments have become more important and have got themselves involved into this, they've only done so to promote private investment, I mean involvement in these sectors. So so I mean I don't see you know governments in the West uh running mines, but I do see them creating the conditions for mining firms to develop.

SPEAKER_01 18:41

Well, they are taking larger stakes within the mines sector, though, uh, which is you know it's a it's a questionable thing. Are we doing it for power, or are we doing it for stockpiling, or what are we doing it for? And so it's a it's a question that comes up for sure.

SPEAKER_02 18:55

I think they're doing it to make sure that to secure the supply chains that will be needed in the future. And in that sense, they are uh uh trying to solve a market failure that uh but but I don't think that uh I don't see that as as a permanent permanent uh practice.

SPEAKER_01 19:16

Well, this has been a spectacular conversation. Thank you so much for joining us, and I look forward to sitting down again with you soon.

SPEAKER_02 19:23

Thank you very much. It's been my pleasure.

SPEAKER_01 19:26

Absolutely. We've covered a lot today. Record record gold prices, critical minerals, geopolitical uncertainty, resources security. But maybe the biggest takeaway is this most people don't think about commodities until there's a shortage. Most investors don't pay attention until prices move. And by then the story is often already well underway. So perhaps the question isn't what's happening today, perhaps it's what we're missing right now that everyone will be talking about five years from now. Now remember, these are the opinions of our own with possible vested interests in any or all of the companies we may have spoken about. Always be sure to speak with a licensed financial advisor. Do not use this as financial advice. Know your own risk tolerances. I'm Lindsay Melchick, your guest host from Avaton Media, right here at one to one conference in New York. We'll see you next time.

SPEAKER_00 20:12

Thanks for listening to the Assay Podcast, where mining meets capital, powered by one to one mining investment. Subscribe for new episodes and visit theassay.com to stay close to the conversations shaping global mining and investment.