Investment Themes - Precious Metals / Commodities

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April 22 2021

Commentary by Eoin Treacy

China Blasts Australia's Decision to Cancel Belt and Road Deal

This article by Jason Scott for Bloomberg may be of interest to subscribers. Here is a section:

The Australian federal government scrapped both the memorandum of understanding and framework agreement signed between Victoria and China’s National Development and Reform Commission, Beijing’s top economic planning body, Foreign Minister Marise Payne said in an emailed statement Wednesday. She described the deals as “inconsistent with Australia’s foreign policy or adverse to our foreign relations.”

The step “is another unreasonable and provocative move taken by the Australian side against China,” the Chinese embassy in Canberra said in an emailed statement. “It further shows that the Australian government has no sincerity in improving China-Australia relations -- it is bound to bring further damage to bilateral relations, and will only end up hurting itself.”

Australia “basically fired the first major shot against China in trade and investment” conflicts, Chen Hong, director of the Australian Studies Center at East China Normal University in Shanghai, told the Communist Party-backed Global Times. “China will surely respond accordingly.”

China has lodged stern representations with Australia over the issue and reserved the right to take more action, Foreign Ministry spokesman Wang Wenbin said at a regular press briefing Thursday in Beijing.

Eoin Treacy's view -

China may successfully be able to cow smaller countries into submission by following a carrot and stick approach to infrastructure and trade development. Australia is a different story.

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April 14 2021

Commentary by Eoin Treacy

Trafigura Sees Green Copper Supercycle Driving Prices to $15,000

This article from Bloomberg may be of interest to subscribers. Here is a section:

Trafigura expects the metal to breach $10,000 a ton this year, before entering a range of $12,000 to $15,000 a ton over the coming decade. Other ardent copper bulls including Goldman Sachs Group Inc., Bank of America Corp. and Citigroup Inc. have similarly strong near-term forecasts, but Trafigura has set itself apart with its lofty long-term target.

Goldman expects copper to hit $10,500 a ton within 12 months, while Citi sees it reaching $12,000 next year in its bull-case forecast. In the years to come, that’s likely to become the floor for prices as the industry revalues the metal, according to Trafigura.

“You can’t move to a green economic environment and not have the copper price moving significantly higher,” Bintas said. “How can you have one without the other?”

Eoin Treacy's view -

Every country wants its economy to recover from the ravages of the pandemic. They are all looking at the same playbook. They need to increase growth without raising taxes and need a quick way to get as many people back to work as possible which will hopefully kick start the velocity of money. Infrastructure development has been the preferred strategy to achieve those goals after every other recession and this one is now different. The only question was what kind of infrastructure would be approved.

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April 09 2021

Commentary by Eoin Treacy

Fragile Planet 2021

Thanks to a subscriber for this report from HSBC which may be of interest. Here is a section on renewable Energy materials availability:

Here we look at the 2019 share of global production and at the share of global reserves for countries around the world. We use data from the United States Geological Survey’s Mineral Resources Program, and the World Nuclear Association. While production data are considered relatively accurate, reserves data is imperfect, given lack of exploration is some areas. However, we take a view that if countries have reserves, but have zero production currently, then there are likely to be technical, financial and/or institutional factors to overcome to allow production in the near future. (Note that we were unable to access reserves data for the commodities Indium and Gallium, and only included production numbers). We create a blended metric for production and reserves values for these commodities (weighting them all equally), in order to score and rank countries in this area. South Africa is ranked first here, followed by China and Chile. Australia comes in fourth, making it the highest ranking DM country on this indicator.

Eoin Treacy's view -

Government policy, everywhere, is increasingly skewing towards the assumption that sea level rise, water insecurity, global warming and climate change are inevitable. Renewable Energy assets are increasingly also being priced on the assumption that a migration to carbon-free economies is also inevitable.

Trillions of Dollars are being committed to building out carbon-free infrastructure, whether than is solar, wind, geothermal, nuclear or hydrogen. As that buildout gets under way it will require massive fiscal support, regulatory bypasses for permitting and taxation supports in the form of carbon credits. It will also result in a significant near-term boost in demand for all manner of resources from copper to lithium and from coal to oil.

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February 12 2021

Commentary by Eoin Treacy

Vestas reveals offshore turbine with world's largest sweep

This article by Paul Ridden for may be of interest to subscribers. Here is a section: 

Each turbine is expected to deliver around 80 GWh of Energy per year, depending on site-specific conditions, which is said to work out as being enough to power 20,000 European homes.

The V236-15.0 MW also offers the potential to reduce the number of turbines deployed at offshore windfarm level – with Vestas calculating that the "offshore turbine offers 65 percent higher annual Energy production than the V173-9.5 MW, and for a 900-MW wind park it boosts production by five percent with 34 fewer turbines."

The company expects the first V236-15.0 MW prototype to be built in 2022, with serial production following two years later. It has a design lifetime of 25 years.

“With the V236-15.0 MW, we raise the bar in terms of technological innovation and industrialization in the wind Energy industry, in favor of building scale," says Anders Nielsen, Vestas CTO. "By leveraging Vestas’ extensive proven technology, the new platform combines innovation with certainty to offer industry-leading performance while reaping the benefits of building on the supply chain of our entire product portfolio. The new offshore platform forms a solid foundation for future products and upgrades.”

Eoin Treacy's view -

Boosting production and needing to build fewer towers suggests there should be cost savings in construction. The big change in renewable Energy occurred in late 2019 when economies of scale improved enough that the wind and solar sectors could survive without subsidies. That has led to a complete reappraisal of the rationale for investing in the sector. More recently it has allowed the renewable Energy sector focus on the subsidies provided to fossil fuel companies across the Energy supply chain.

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February 02 2021

Commentary by Eoin Treacy

U.S. nuclear: delayed closures could add 26Mlbs to 2021-30 global uranium demand

Thanks to a subscriber for this report from BoA Securities. Here is a section:

Eoin Treacy's view -

A link to the full report is posted in the  Subscriber's Area. 

The uranium sector has had a number of false dawns over the last decades. The reason for an inability to reach escape trajectory from the lengthy base formations was KazAtom’s policy of flooding the market and driving high-cost producers out of business.

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December 30 2020

Commentary by Eoin Treacy

Email of the day on rising inflationary pressures and Ethereum

I hope you are enjoying the holidays and looking forward to a better year next year.

Here’s another one of Charles Gave's excellent articles-the oil price is on the move thus starting to bear out his fear of a 1970s-type repeat.

Secondly, regarding Ethereum, have you been able to quantify any price target and if so, what technical data/events have you chosen to use?

Eoin Treacy's view -

Thank you for this interesting report which repeats Gave’s earlier call for an inflationary boom with which I agree. However, I’m not sure we are in the same kind of bull market in oil that we had in the first decade of this century. The history of secular bull markets in oil points to rising prices lasting as long as it takes new sources of supply to reach market. That is followed by decades of ranging.

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December 04 2020

Commentary by Eoin Treacy

Secular Bull Market Investment Candidates Review

Eoin Treacy's view -

On November 24th I posted a review of candidates I believe likely to prosper in the emerging post-pandemic market. It was well received by subscribers so I will post an update on my views on the first Friday of the month going forward. That way subscribers can have an expectation that long-term themes will be covered in a systematic manner and will have a point of reference to look back on.

Media hysteria about the 2nd or 3rd waves has not led to new highs in the number of deaths. The success of biotech companies in deploying vaccines means there is going to be a substantial recovery in the economic activity in 2021 and going forward.

The stay-at-home champions saw their sales growth surge in 2020. It will be impossible to sustain that growth rate in 2021. That’s particularly true for mega-caps. One-way bets on the sector are likely to work less well in the FAANGs going forward.

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September 10 2020

Commentary by Eoin Treacy

Desert Mountain Energy Announces Significant Helium Percentages in Two New Wells In Arizona

This press release may be of interest to subscribers. Here is a section: 

Based on normal accepted industry operation procedures, the company at this time and prior to further engineering and flow testing, would entertain a possible daily flow rate of between 4,100 and 5,600 MCFGPD based on aggregated production from both wells. The Company has compared these wells to the closest established and documented helium production located approximately 35 miles NE in the Pinta Dome Field.  Note: Desert Mountain Energy’s wells have been completed in members of the Pennsylvanian-aged Formations which are lower in depth than the helium productive Permian-aged Coconino Formation found at Pinta Dome (AZOGCC archives).  Production comparisons with a number of wells from the prolific Pinta Dome Field, specifically the Kerr-McGee Barfoot State#1, clearly shows that large artificial formation stimulation was not required to exceed the original projected calculated reserves by over 500%, over a 13-year production life (Olukoga 2016, AZOGCC Barfoot #1 well files).

Eoin Treacy's view -

There have been a number of articles over the last couple of years about the lack of new supply for helium, against a background of continued strong demand growth. Here is a link to an article from Forbes, dated April 2019, making a number of points about supply inelasticity meets rising demand. 

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August 14 2020

Commentary by Eoin Treacy

Platinum Quarterly Presentation Q1 2020

This report carries a great deal of relevant information for the platinum market. Here is a section:

Automotive demand down only 17% (-132 koz) YoY despite a 24% fall in Q1 light global vehicle sales

Tightening global emissions standards, driving higher pgm loadings, partially counters lower auto sales/production

W. Europe diesel share decline slowed on increased diesel sales

Diesel vehicles still key for automakers to avoid or reduce heavy CO2 fines

German diesel car market share continued to recover (Q1’20 average 35%, up 1.3% over 2019 average)

Eoin Treacy's view -

A link to the full report is posted in the Subscriber's Area.

It’s easy to think that diesel is a dead fuel but sales still continue. The damage to consumer confidence may, however, be impossible to overcome. That is creating a new market for transportation alternatives. 

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July 27 2020

Commentary by Eoin Treacy

Three Gorges Dam deformed but safe, say operators

This article by Frank Chen for may be of interest to subscribers. Here is a section:

The deformation occurred last Saturday when the flood from western provinces including Sichuan and Chongqing along the upper reaches of the Yangtze River peaked at a record-setting 61,000 cubic meters per second, according to China Three Gorges Corporation, a state-owned enterprise that manages the dam and the sprawling power plant underneath it.

The company noted that parts of the dam had “deformed slightly,” displacing some external structures, and seepage into the main outlet walls had also been reported throughout the 18 hours on Saturday and Sunday when water was discharged though its outlets.

But the problem of water seeping out did not last long, as the dam reportedly deployed floodgates to hold as much water as possible in its 39.3 billion-cubic-meter reservoir to shield the cities downstream from the biggest Yangtze deluge so far this year.


Meanwhile, Wang Hao, a member of the Chinese Academy of Engineering and an authority on hydraulics who sits on the Ministry of Water Resources’ Yangtze River Administration Commission, has also assured that the dam is sound enough to withstand the impact from floods twice the mass flow rate recorded on Saturday.

Eoin Treacy's view -

It is still raining in southwest China and that means the dam will be letting out more water to control the level behind the wall. Therefore, it is unlikely to be able to curtail the risk of flooding downriver.

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July 20 2020

Commentary by Eoin Treacy

Out to pasture!

This is potentially Edward Ballsdon’s final post for his Grey Fire Horse blog and may be of interest to subscribers. Here is a section:

Recently there has been discussion about yield curve control (YCC), and whether the FED will introduce a new policy on managing interest rates. Do not be fooled - this is a rather large red herring, as the debt is now too large in the US (as it is in most major economies) to raise rates without the increased interest cost having a debilitating effect on annual government budget figures.

There is no longer $ 1trn of outstanding US federal Bills - in June the outstanding amount surpassed $ 5trn. If rates rise from 0.2% to 2%, the ANNUAL interest cost just on that segment of the outstanding $19trn debt would rise from ~$ 8.5bn to ~$ 102bn. Naturally you would also need to also factor in the impact of higher interest rate costs on leveraged households and corporates.

This is the red herring - the size of the debt will force monetary policy. To think that the central bank can raise rates means ignoring the consequence from the debt stock. And this is the root of my lower for longer view, which is obviously influenced from years of studying Japan, and which is now almost completely priced in to rates markets. Remember that the YCC in Japan led to a severe reduction of the BOJ buying of JGBs - it just did not have to.

Eoin Treacy's view -

The Japanification of the developed world represents a massive challenge for investors in search of yield. 90% of all sovereign bonds have yields below 1% and the total of bonds with negative yields is back at $14 trillion and climbing.

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February 28 2020

Commentary by Eoin Treacy

Lead Indicators of Recession

Eoin Treacy's view -

After a week characterised by selling across the board, a great deal of profit taking has taken place and many overextensions relative to the trend mean have been unwound. The question I believe many people will be concerned with is whether the coronavirus is going to be the catalyst for an economic contraction? I thought it would therefore be worth monitoring the kinds of instruments that offer a lead indicator for that kind of concern.

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February 03 2020

Commentary by Eoin Treacy

Gas Rout Puts 60% of Output at Risk, Tudor Pickering Says

This article by Sayer Devlin for Bloomberg may be of interest to subscribers. Here it is in full:

Almost two-thirds of U.S. natural gas production is at risk of being cut as prices tumble, according to Tudor, Pickering, Holt & Co.

About 55 billion cubic feet a day of gas in basins from Texas to Appalachia could be curtailed, analysts at Tudor Pickering wrote Monday in a note to clients. That’s roughly 60% of current dry gas output, based on BloombergNEF estimates.

Mounting debt, a lack of access to capital markets and a drop in hedging will lead to a decline in drilling starting in the second half of this year, Tudor Pickering said. The Energy-focused investment bank says only two or three companies, including Cabot Oil & Gas Corp., can afford to keep output flat with prices below $2.25 per thousand cubic feet, or about $2.17 per million Btu.

“We do expect to see a significant number of bankruptcies if gas prices stay this low,” Matthew Portillo, managing director of upstream research at Tudor Pickering, said by phone. Producers have no gas hedges in place beyond 2021, he said.

Gas has lost about a third of its value since early November, sinking below $2 per million British thermal units for the first time in almost four years as production from shale basins overwhelms demand amid a mild winter.

“What you’re starting to see is the forward curve not only in 2020 but in 2021-plus has moved to such a low price that companies are not able to drill within cash flow to hold drilling steady,” Portillo said.

Drilling in the Haynesville shale in Louisiana is set for a “significant collapse” if prices remain low, he said.

Eoin Treacy's view -

Unconventional supply is prolific but expensive. The vast majority of companies rely on continued high prices to support their drilling activities. That ensures the cyclicality of prices. The higher prices are the more oil and gas can be produced but declines in prices mean drillers can no long source funding and some will inevitably go bankrupt. That will temporarily withdraw supply from the market which will support prices and open the way for new drilling to take place.

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June 13 2019

Commentary by Eoin Treacy

Email of the day - on the USA's oil advantage:

Quick thought, following your comment on America's oil glut, and Morgan Stanley's report you highlighted.

I have been watching the difference in price between the WTI and Brent Crude for a long time now. The difference seems to vary between 10 and almost 20% depending on the day, with WTI obviously being the cheaper. Is it too SIMPLISTIC to say?

1) that US factories, offices, homes etc enjoy an enormous advantage over their global competitors with Energy costs being so much cheaper, not forgetting it already enjoys a significant tax advantage over many as well.

2) when the US does become a significant oil exporter, it can make a lot of profit, even by offering only minor discounts to the Brent price to attract business. Possibly more profit than from its LNG exports.

Eoin Treacy's view -

Thank you for highlighting these points. I’ve always been a fan of Ockham’s Razor. There is no need to get over complicated. The USA has a massive advantage in terms of its oil and gas production capacity. That is reshaping global geopolitics, it will have a meaningful effect on the balance of payments and it has already had a meaningful effect on the chemical industry because of reduced input costs.  one.

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December 13 2018

Commentary by Eoin Treacy

Uranium price: best performer of 2018 set for more gains

This article by Frik Els for may be of interest to subscribers. Here is a section: 

Struggling French nuclear giant Areva (rebranded as Orano this year) slashed production more than a year ago. In August Paladin put its Langer Heinrich mine in Namibia on care and maintenance, although this week the Sydney-based miner said it's working on a possible restart of operations with vanadium as a byproduct (vanadium is trading at record highs and the only metal outperforming uranium).

In a research note on Kazatomprom, BMO Capital Markets says the production discipline from top miners will break the trend of rising global uranium inventories following the Fukushima nuclear disaster in Japan in 2011 and prompt the first production deficit in more than a decade.


China has 42 operating nuclear reactors, 16 reactors under construction and a further 43 planned. At the end of November, the country's national uranium corporation bought control of the Rossing uranium mine in Namibia. China is also behind the only sizeable uranium mine to come into production in the past few years, the Husab mine in Namibia, although ramp there has been slow.

Eoin Treacy's view -

Japan is steadily firing up its shuttered nuclear plants and considering China’s demand for clean Energy it is unlikely to be deterred from continuing its construction program. Meanwhile when the world’s major producers find it more cost effective to buy in the spot market than produce the metal themselves then we know prices are depressed.

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October 09 2018

Commentary by Eoin Treacy

Rocketing vanadium price primed for 'Elon Musk moment'

This article by Frik Els for may be of interest to subscribers. Here is a section:

Vanadium pentoxide (V2O5) which makes its way into so-called vanadium redox flow batteries used in Energy storage systems breached $20 a pound for the first time since 2005 this month. That’s a four-fold increase from the start of 2017.

Simon Moores of Benchmark Mineral Intelligence, a battery materials research and price discovery provider based out of London, says the recent success of lithium ion batteries being deployed in increasing larger systems that are exceeding 1GWh has brought to light the huge potential of the market for all types of battery technologies.

Vanadium flow batteries have lifespans of over 20 years without capacity loss, are non-flammable and can operate at any temperature. Another advantage over lithium ion is that this type of battery can be charged and discharged simultaneously making it highly suitable for large-scale storage from renewable sources such as solar and wind when connected to an electricity grid. Main downside is low Energy density which means comparatively large installations needed.

“If a vanadium battery producer steps forward with bold plans to produce vanadium flow at mass scale, giving the industry its Elon Musk or lithium ion moment, the potential for the technology to be the second most deployed ESS battery in the world is there,” says Moores.

“Raw material self-sufficiency is a critical component to this. At least a third of the cost of a vanadium flow battery is vanadium pentoxide which makes up the liquid electrolyte.

“If companies are thinking of creating the Gigafactory of vanadium flow batteries, they will either need to own a mine or implement a new pricing system where the fully recyclable vanadium in the battery is leased."

Eoin Treacy's view -

Battery technology is improving all the time and a race is on to develop models which will be the foundation of an electric vehicle. Concurrently, efforts are underway to develop batteries that can perform at scale for utilities which are increasingly reliant on renewables are inherently intermittent sources of Energy. Those are two completely different growth trajectories and given the different priorities it is quite likely there will be a number of potential solutions that eventually make it to market. 

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December 19 2017

Commentary by Eoin Treacy

Supply cuts a 'step change' for uranium price

This article by Frik Els for may be of interest to subscribes. Here is a section:

The announcement made by uranium giant Cameco in November that it’s suspending operations at its flagship McArthur River mine in northern Saskatchewan and surprisingly deep three-year cuts by Kazakhstan’s state-owned Kazatomprom provide a "step change" for uranium prices says a new report on the sector from Cantor Fitzgerald equity research.

On Monday, the world largest producer of uranium, surprised the beleaguered market with a larger than expected cut to production of its own.

Two weeks ago, Kazakhstan’s state-owned Kazatomprom announced intentions to reduce its output of U3O8 by 20% or 11,000 tonnes (around 28.5m pounds) over the next three years beginning in January 2018. According to the company roughly 4,000 tonnes will be cut in 2018 alone "representing approximately 7.5% of global uranium production for 2018 as forecast by UxC."

Cameco's shuttering of McArthur River for ten months is expected to reduce production by 13.7m pounds in 2018 translating to a combined 42.3m pounds of expected production that has been removed from the market. In 2018 alone, the reduction will be about 24.1m pounds of U3O8 or about 15% of Cantor Fitzgerald's prior forecast of 158.4m pounds of output.

Eoin Treacy's view -

The price of commodities is set by the marginal cost of production and when two of the largest producers’ shutter facilities, it means prices have fallen to uneconomic levels. Uranium isn’t exactly fashionable but it is still required to fuel reactors all over the world. If supply is being curtailed prices will have to rise to attract producers back into the market. 

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September 28 2017

Commentary by Eoin Treacy

The World Is Creeping Toward De-Dollarization

Thanks to a subscriber for this article by Ronald-Peter Stöferle for the Mises Institute. Here is a section:

A clear signal that something is afoot would be the abolition of the Saudi riyal's peg to the US dollar. As recently as April of this year economist Nasser Saeedi advised Middle Eastern countries to prepare for a “new normal” — and specifically to review the dollar pegs of their currencies: “By 2025 it is clear that the center of global economic geography is very much in Asia. What we’ve been living in over the past two decades is a very big shift in the political, economic, and financial geography.”

While the role of oil-producing countries (and particularly Saudi Arabia) shouldn't be underestimated, at present the driving forces with regard to de-dollarization are primarily Moscow and Beijing. We want to take a closer look at this process.

There exist numerous political statements in this context which leave no room for doubt. The Russians and Chinese are quite open about their views regarding the role of gold in the current phase of the transition. Thus, Russian prime minister Dimitri Medvedev, at the time president of Russia, held a gold coin up to a camera on occasion of the 2008 G8 meeting in Aquila in Italy. Medvedev said that debates over the reserve currency question had become a permanent fixture of the meetings of government leaders.

Almost ten years later, the topic of currencies and gold is on the Sino-Russian agenda again. In March, Russia's central bank opened its first office in Beijing. Russia is preparing to place its first renminbi-denominated government bond. Both sides have intensified efforts in recent years to settle bilateral trade not in US dollars, but in rubles and yuan. Gold is considered important by both countries.


Eoin Treacy's view -

Oil and its derivative products are used in every country in the world so it is logical that the acquiescence of major suppliers to a Dollar standard is a necessary condition of the USA’s international currency hegemony. However, it is not the only consideration. 

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May 08 2017

Commentary by Eoin Treacy

Big Short in Loonie on Concern Over Oil, Trump, Housing

This note by Maciej Onoszko for Bloomberg may be of interest. Here it is in full:

Hedge funds and other speculators increased their short positions in the Canadian dollar to the highest level on record, according to data from the Commodity Futures Trading Commission. The loonie, which is the worst-performing major currency this year, has been under pressure in recent weeks amid concerns over a potential trade war with the U.S., a plunge in crude oil and financial woes of alternative mortgage lender Home Capital Group Inc.

Eoin Treacy's view -

The Canadian Dollar skirted the worst effects of the credit crisis by virtue of having a strongly regulated banking sector when just about everywhere else in the G7 had given into the worst excesses to deregulation. The rebound in oil allowed the Loonie to retest its 2008 peak in 2011 but the subsequent decline in commodity prices has taken its toll.

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February 14 2017

Commentary by Eoin Treacy

Bottom is in for Uranium; Gold & Silver Off to the Races in 2017

Thanks to a subscriber for this report from Cantor Fitzgerald which may be of interest. Here is a section on uranium

Kazatomprom that it plans to cut its annual uranium production by 10%, or by 5.2M lbs U3O8. This amount translates into roughly 3% of 2015 global production and marks an inflection point in the space. Since at least 2001, Kazatomprom has relentlessly increased production into an oversupplied market and is arguably the single biggest cause for the weakness in the commodity aside from the Fukushima disaster. In fact, we had long since given up on expecting Kazatomprom to exercise production restraint as its mines were the lowest cost operators in the world and constant production increases appeared to be a cultural focus in Kazakhstan.

While some skepticism exists on whether Kazatomprom will actually follow through with this cut (as opposed to OPEC style “cuts”), we suspect that at least some of the production reduction will occur among joint venture operations managed by western producers such as Cameco. Moreover, we believe the impact will be more than the announced cut amount because the market was likely factoring in a typical Kazatomprom increase as opposed to a cut. So instead of a 3-5% increase we are expecting a reduction of 10%, or a 13-15 percentage point swing.

Cameco’s announcement of Tokyo Electric Power Holdings’ (“TEPCO”) termination of its supply contract has cast some concern over what will happen with the U3O8 pounds that were earmarked for the Japanese utility. In total, the contract was for 9.3M lbs U3O8 to be delivered from 2017-2028, this works out to 775,000 lbs annually. TEPCO was selling some if not all of the material it was contractually obligated to purchase already. As such, we believe the worst case scenario arising from the cancellation is that Cameco does the exact same thing and sells the material into the spot market. However, we think there is room for potential positivity from this announcement, as Cameco could instead elect to not produce the pounds at all (and further cut costs by doing so) or it could elect to store them in inventory to await higher prices. Either of those two actions would effectively be removing some of the excess supply in the market. 

Eoin Treacy's view -

A link to the full report is posted in the Subscriber's Area.

azakhstan stamped its dominance on uranium market by engineering a multi-year decline and succeeded in driving a significant number of small explorers out of business.  Last week’s news Tokyo Electric cancelled a major Cameco contract highlights just how successful their policy of flooding the market with supply has been. Having achieve their goal, the decision to limit supply is an important catalyst for the uranium market. 

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January 06 2017

Commentary by Eoin Treacy

World's Worst Commodity Radioactive for Investor Portfolios

This article by Joe Deaux, Natalie Obiko Pearson and Klaus Wille for Bloomberg may be of interest to subscribers. Here is a section:

“It’s the world’s best asset in the world’s worst market,” said Leigh Curyer, chief executive officer of NexGen Energy Ltd., a Vancouver-based uranium producer. “I don’t think there’s a mine profitable at current spot prices. This short-term spot price isn’t reflective of the cost of producing a pound globally.”

The outlook isn’t entirely bleak. Losses are forcing uranium mines to cut production or close, which may eventually create a supply crunch, while accelerated building of nuclear plants in China and India could help revive demand. But it may take a while for those developments to take hold, according to a report last month from Morgan Stanley, which said it can’t identify any medium- or long-term driver for prices.

Uranium extended its fade last year even as most other raw materials recovered. The Bloomberg Commodity Index of 22 items posted its first annual gain since 2010, advancing 11 percent.


Eoin Treacy's view -

When Tata Motors bought Land Rover it held onto the name for obvious reasons. It knew it didn’t stand a chance of selling a luxury vehicle under the moniker Tata Motors. If nuclear Energy could do the same it would be in a much better position. Reactors being built today bear little resemblance to those which have garnered such a bad reputation over the last number of decades. However that is not the point. Public opinion is not yet in favour of uranium fuelled Energy and there is little evidence that is about to change not least because it simply does not have a high profile credible spokesperson to champion it. 

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August 16 2016

Commentary by Eoin Treacy

Gas Glut Upends Global Trade Flows as Buyers Find Leverage

This article by Tsuyoshi Inajima for Bloomberg may be of interest to subscribers. Here is a section:

Historically, LNG has been sold on long-term contracts that guaranteed buyers supply and helped producers finance liquefaction plants at a time when less of the product was shipped. Now, a gas glut is causing LNG importing countries to support renegotiating existing deals that can run 20 years or more while suppliers offer more flexible terms to lock up customers spoiled for choice.

India already is encouraging importers to rework long-term accords to better align costs with spot market prices. Japan, the world’s largest LNG importer, may soon join them. That country’s Fair Trade Commission is in the process of probing resale restrictions in longer deals in an effort that could mean the renegotiation of more than $600 billion in contracts and boost the number of shorter-term agreements.

“There will be 40 million to 50 million tons of homeless LNG by 2020, which can go anywhere or doesn’t have any fixed customers,” said Hiroki Sato, a senior executive vice president with Jera Co., a fuel buyer that plans to increase spot and short-term LNG deals. “Homeless LNG will provide a great opportunity to improve liquidity in Asian and global markets.”


Eoin Treacy's view -

The evolution of a global transportation network for natural gas is creating the impetus to divorce pricing from long-term oil contracts. While Russia floated the idea of creating a natural gas equivalent of OPEC a few years back, as a way of preserving it pricing power, it was unable to reach critical mass. 

The reality today is that a substantial number of new entrants to the market, not least Australia, the USA and developing east Africa, all have a vested interest in capturing market share. Meanwhile major consumers like Japan, India and China would understandably like to avail of lower prices. The expansion of the Panama Canal also boosts the viability of US exports to Asia. 


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February 29 2016

Commentary by Eoin Treacy

Electric car war sends lithium prices sky high

This article by James Stafford for Mineweb may be of interest to subscribers. Here is a section:

That’s why Goldman Sachs calls lithium the “new gasoline”. It’s also why The Economist calls it “the world’s hottest commodity”, and talks about a “global scramble to secure supplies of lithium by the world’s largest battery producers, and by end-users such as carmakers.”

In fact, as the Economist notes, the price of 99%-pure lithium carbonate imported to China more than doubled in the two months to the end of December—putting it at a whopping $13,000 per ton.

But what you might not know is that this playing field is fast becoming a battlefield that has huge names such as Apple, Google and start-up Faraday Future throwing down for electric car market share and even reportedly gaming to see who can steal the best engineers.

Apple has now come out of the closet with plans for its own electric car by 2019, putting it on a direct collision course with Tesla. And Google, too, is pushing fast into this arena with its self-driving car project through its Alphabet holding company.

Then we have the Faraday Future start-up—backed by Chinese billionaire Jia Yueting–which has charged onto this scene with plans for a new $1-billion factory in Las Vegas, and is hoping to produce its first car next year already.

Ensuring the best engineers for all these rival projects opens up a second front line in the war. They’ve all been at each other’s recruitment throats for months, stealing each other’s prized staff.

And when the wave of megafactories starts pumping out batteries—with the first slated to come online as soon as next year–we could need up to 100,000 tons of new lithium carbonate by 2021. It’s an amount of lithium we just don’t have right now.


Eoin Treacy's view -

Describing lithium as the “new gasoline” is an interesting take on the projected demand for electric cars. Last week’s Bloomberg article proclaiming batteries would cause the next oil crisis would appear to be in the same vein. These estimates are based on the fact that large battery factories are going to come on line in the next 18 months and not just Tesla’s giga-factory in Nevada. With additional supply, prices can be expected to decline and demand should rise. Home batteries and home charging stations are likely to become much more visible and utilities are already installing industrial scale batteries to tackle intermittency of renewables and to become more efficient with fossil fuel use. 

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January 04 2016

Commentary by Eoin Treacy

8 Tech Breakthroughs of 2015 That Could Help Power the World

Thanks to a subscriber for this article by Wendy Koch for National Geographic which may be of interest. Here is a section: 

7. Better Batteries
Solar and wind power have seemingly limitless potential, but since they're intermittent sources of Energy, they need to be stored. That’s why there’s a race to build a better battery. The lithium-ion standard bearer, introduced by Sony two-plus decades ago for personal electronics, can be pricey—especially for large uses—and flammable. So every few weeks comes an announcement of a new idea.

Harvard researchers unveiled a flow battery made with cheap, non-toxic, high-performance materials that they say won’t catch fire. “It is a huge step forward. It opens this up for anyone to use,” says Michael Aziz, Harvard University engineering professor and co-author of a study in the journal Science. (Find out how this flow battery works.) Also this year, MIT and DOE announced promising advances that could make batteries better and cheaper.

The battery push has gone beyond the lab. In May, Tesla’s Musk unveiled battery products that he plans to mass-produce in his $5 billion Gigafactory in Nevada. The products include the sleek, mountable Powerwall unit that SolarCity, a company he chairs, is putting in homes. This month, in the first such offering from a U.S. utility, Vermont’s Green Mountain Power began selling or leasing the Powerwall to customers. (Here are five reasons this battery is a big deal.)

Other companies are challenging Musk. Pittsburgh-based Aquion Energy, a spinoff from Carnegie Mellon University, began selling its saltwater battery stacks last year. German storage developer Sonnen said this month that it’s ramping up production of its lithium-ion battery at its facility in San Jose, California, for use in U.S. homes.


Eoin Treacy's view -

Symbiosis is popular in nature but it is becoming increasingly clear that it also has a role to play in sustaining the pace of technological innovation. Renewable Energy technologies such as wind and solar are progressing rapidly but they will always suffer from intermittency without corresponding innovation in storage for both consumer and industrial uses. This has been painfully slow to follow because it takes time for capital invested in research to deliver results and yet the signs are promising that the next really big enabler with occur among chemical companies. 

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September 17 2015

Commentary by Eoin Treacy

Pure Energy Minerals drops the next lithium bombshell As Tesla seeks supply for its Gigafactory

This article by Peter Epstein for Mineweb may be of interest to subscribers. Here is a section: 

Stepping back for a moment, on September 3rd, Tesla’s Founder Elon Musk reiterated his commitment to source materials from Nevada. However, that pledge did not necessarily mean another sourcing deal, announced so soon, or that it would be for lithium. Other materials besides lithium will be required. Cobalt and graphite, (among others), will also be needed to feed Tesla’s massive giga-factory in Nevada. I find this agreement to be highly noteworthy in the sense that Tesla’s growing need for lithium, perhaps more so than that for cobalt and graphite, represents the single most important raw material need. I imagine that other lithium agreements will be signed in coming months. Without question, Nevada wants further lithium deals to come from Nevada.

Eoin Treacy's view -

The fall in oil prices has had a knock-on effect on most Energy related sectors as the relative economics of various alternatives have changed. Lithium miners have been no exception and this has been despite the fact lithium prices have not fallen. Demand for lithium-ion batteries in everything from consumer goods to cars and planes has helped fuel major investment and a large number of explorers are now listed. However securing an agreement to supply Tesla’s factory is a major coup for Pure Energy.

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June 29 2015

Commentary by Eoin Treacy

Coal Shares Jump After Supreme Court Strikes Down Mercury Rule

This article by Tim Loh for Bloomberg may be of interest to subscribers. Here it is in full:

U.S. coal shares jumped after the Supreme Court struck down the Obama administration’s mercury and acid gases power plant rule, saying it hadn’t considered the billions of dollars in costs before issuing the rule.

Arch Coal Inc. jumped as much as 19 percent, Peabody Energy Corp. climbed 15 percent and Alpha Natural Resources Inc. was up 14 percent in intraday trading after the ruling was announced Monday.

The court’s decision calls into question an Environmental Protection Agency rule that targets mercury and acid gases. The rule has led to the closing of dozens of coal-fired power plants over the last two years.


Eoin Treacy's view -

It’s been a long time since coal caught a break and a great deal of bad news is already in the price. Coal is dirty, antiquarian, low tech and contributes to pollution but is cheap and abundant.  Over the last few years investors and regulators have concentrated on the former points and forgot the latter ones. Coal is the feed stock for a substantial portion of electricity production and today’s decision will mean that fewer power stations in the USA will need to be closed as a result of stringent regulations. 

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August 19 2014

Commentary by Eoin Treacy

Tony Abbott expected to sign uranium deal with India on visit next month

This article by Daniel Hurst for the Guardian may be of interest to subscribers. Here is a section:

Tony Abbott is expected to sign a deal to sell uranium to India during a visit to the country next month.

The Australian prime minister’s scheduled visit follows the completion of negotiations surrounding arrangements for the export of uranium, according to multiple news reports.

Indian officials convinced their Australian counterparts that the uranium would not be used for nuclear weapons, the Australian Broadcasting Corporation reported on Monday.

The Times of India reported earlier this month that negotiations between the two countries had concluded and the deal was likely to be signed during Abbott’s visit to India in early September.

The Australian government would not confirm the reports on Monday, but the assistant minister for infrastructure, Jamie Briggs, told the ABC it would be a welcome development if true.


Eoin Treacy's view -

Despite the fact Australia has the world’s largest deposits of uranium, it has no nuclear power stations and has often had a difficult relationship with its uranium mining sector; with the result that some states and territories permit mining while others don’t. Signing a deal with India for exports is a welcome development for the sector which has been languishing in the aftermath of the Fukushima disaster.

Uranium prices collapsed from their 2007 peak near $140 and, following a relatively brief rally in 2010, extended the downtrend to fresh lows. The recent three-week rally has closed the overextension relative to the 200-day MA but a sustained move above it will be required to begin to suggest a return to demand dominance beyond the short term. 

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June 25 2014

Commentary by Eoin Treacy

Australia lowers 2015 iron ore price forecast to $94.60/t

This article by James Regan for Reuters may be of interest to subscribers. Here is a section

BREE's forecast iron ore price for 2015 is just above the current price of 93.30 .IO62-CNI=SI, following a 30 percent price drop this year. However, exports in fiscal 2014/15 were forecast to rise 13 percent to 720.7 million tonnes, BREE said, just below its previous estimate.

Jefferies has cut its earnings estimates for iron ore miners by 5-9 percent below consensus between 2014 and 2016, owing to expectations ore prices will continue to weaken as supply swells.

"This tsunami of supply is still rolling in, and supply growth is likely to be substantial until 2016," it said in a client note.

BREE also forecast a sharp dip in metallurgical coal prices to $118.90 a tonne in 2015, well down on its March forecast of $134.60. It slightly increased its forecast for exports to 180.5 million tonnes in 2014/15, just up on a year earlier.

Commissioning of new coal mines has more than offset lost production from ones that have closed, BREE said, but many producers were unprofitable at prevailing prices.

"This demonstrates the business of mining bulk commodities like coal and iron ore is almost exclusively the domain of big producers, which can benefit from their large economies of scale," said Minelife analyst Gavin Wendt in Sydney.

Eoin Treacy's view -

Over the last week iron-ore prices have stabilised near the 2012 low at $90. A short-term oversold condition is evident so even in a bearish scenario there is scope for a bounce from these levels. However investors are probably going to require some evidence of steadying before concluding a meaningful floor has been reached.

Coking Coal prices have fallen even further and are currently trading below their 2008 lows. A sustained move back above the 200-day MA would be required to begin to suggest more than a short-term low has been reached.

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May 07 2014

Commentary by Eoin Treacy

BlackRock World Mining boosts income

This article from the Investors Chronicle dated February 5th may be of interest to subscribers. Here is a section:

About half the trust's income comes from ordinary dividends, which Mr Hambro says are on the rise, but it has also boosted its income by investing in royalties. This is where in exchange for putting money into a company the trust, for example, receives a percentage of the revenue from the company's mine over its life. The trust holds three royalties, though can invest up to 20 per cent of its portfolio in these and is looking to increase exposure.

It entered into its first royalty agreement in 2012 with London Mining (LOND). For a consideration of $110m, the trust gets a 2 per cent revenue related royalty calculated from iron ore sales over the life of the mine from London Mining's Marampa licence in Sierra Leone. This is paid quarterly.


Eoin Treacy's view -

Over the last month we have highlighted a number of Energy and resources companies which have returned to positions of relative outperformance. As part of my search for suitable vehicles likely to benefit from this theme, I took a look at the Blackrock World Mining Trust’s constituents. 

While Rio Tinto and BHP Billiton remain its largest weighting, London Mining is its four largest at 6.7% of the portfolio. The trust may hold a royalty in the company’s production but the share remains in a medium-term downtrend and its market cap has declined to a mere £80 million. This underperformance may be contributing to the trusts inability to sustain a rally. 


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April 30 2014

Commentary by Eoin Treacy

Supreme Court upholds EPA rule limiting cross-state pollution

This article from the Washington Post may be of interest to subscribers. Here is a section:

EPA Administrator Gina McCarthy called the ruling “a resounding victory for public health and a key component” of the agency’s effort to “make sure all Americans have clean air to breathe.” She said the court’s decision underscored the importance of basing clean air rules “on strong legal foundations and sound science,” declaring it a big win and “a proud day for the agency.”

Richard Lazarus, an environmental law professor at Harvard, called the cross-state pollution rule “one of the most significant rules ever” promulgated by the EPA, and supporters said the cost of carrying it out would be more than offset by health benefits.


Eoin Treacy's view -

The last few years have represented a perfect storm for coal companies. Low natural gas prices took over market share among utilities. Stricter environmental standards have also increased the cost of using coal for the same utilities which has further bolstered the allure of natural gas. As a result a number of coal miners have run into financial difficulties. For example, James River Coal defaulted on its debt two weeks ago. 

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March 05 2014

Commentary by Eoin Treacy

Australian Growth Beats Estimates as Rebalancing Begins

This article by Michael Heath for Bloomberg may be of interest to subscribers. Here is a section: 

“The Coalition’s plan to reduce regulation and abolish taxes will help smooth the transition in the economy away from resource investment and toward growth in the non-mining sectors,” Treasurer Joe Hockey said in a statement today.

“That will be key to boosting annual growth to more than 3 percent, which is what’s needed to bring unemployment down.”

The nation’s unemployment rate climbed to a 10-year high of 6 percent in January. February jobs data is due on March 13.

“Some indicators of business conditions and confidence have shown improvement and exports are rising,” central bank Governor Glenn Stevens said in a statement accompanying yesterday’s decision to leave rates unchanged. “At the same time, resources sector investment spending is set to decline significantly and, at this stage, signs of improvement in investment intentions in other sectors are only tentative.”

Eoin Treacy's view -

The RBA has made its intentions clear by reducing short-term rates to historic lows and repeatedly earmarking the currency for additional declines. This has had the twin effects of boosting the allure of Australia’s high yielding shares and enhancing the export sector’s competitiveness.

While a great deal of commentary has focused on the slowing pace of investment in the resources sector, the equity markets have already priced in the fact that massive write-downs have already been announced and that miners are now running much more cost-efficient operations. 

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